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OLR Research Report


June 15, 2010

 

2010-R-0256

ELECTRIC RATES IN CONNECTICUT AND OTHER STATES

By: Kevin E. McCarthy, Principal Analyst

You asked that we update Table 1 of OLR report 2010-R-0015, regarding electric rates in Connecticut and other states.

Table 1 of our earlier report compared electric rates in Connecticut and the nation from 1999 (the year before the passage of the law that restructured the electric market to permit competition (PA 98-28)) to 2009. We calculated the rate by dividing total electric revenues earned by electric utilities and competitive suppliers by the total number of kilowatt-hours (kwh) sold. It thus reflected the customers' total bills, including the flat monthly customer service charge. The data covered all types of customers and similar trends appeared when customers were broken into residential, commercial, and industrial classes.

Our earlier report notes that historically, Connecticut's electric rates have been among the highest in the country. For the first nine months of 2009 Connecticut's average rate was 17. 5 cents per kilowatt-hour (kwh), second only to Hawaii, compared to the national average of 9.82 cents per kwh. The gap had grown over time; in 2004 Connecticut's average rate was 34.8% above the national average while in 2009 the gap had grown to 74.3%.

We update the table to incorporate the most recent data available, for January and February of 2010. These data indicate that rates in Connecticut increased slightly while rates for the nation as a whole decreased. As a result, Connecticut's average rate was 88.5% above the national average in January and 84.3% above the national average in February. Connecticut's average rate in February continued to be the second highest in the country (behind Hawaii), and was above the average in nearby states including New York (15.62 cents per kwh), Massachusetts (14.34 cents), and Rhode Island (14.40 cents).

Table 1: National and Connecticut Average Electric Rates

(Cents Per KWH)

Year

Nation

Connecticut
(% above national average)

1999

6. 64

9. 96 (50)

2000

6. 81

9. 53 (39. 9)

2001

7. 29

9. 62 (32. 0)

2002

7. 20

9. 71 (48. 6)

2003

7. 44

10. 16 (36. 6)

2004

7. 61

10. 26 (34. 8)

2005

8. 14

12. 06 (48. 2)

2006

8. 90

14. 83 (66. 6)

2007

9. 13

16. 45 (80)

2008

9. 82

16. 92 (72. 3)

2009
(first 9 months)

10. 04

17. 50 (79. 3)

January 2010

9.35

17.63 (88.5)

February 2010

9.52

17.55 (84.3)

Source: Energy Information Administration, U. S. Department of Energy

In our earlier report, we noted that several factors appear to be the primary causes of our high rates. These include policy choices made by the state and federal governments, rising fuel prices (notably for natural gas), Connecticut's lack of indigenous energy resources and the resulting fuel transportation costs, and congestion on the transmission system. Several of these factors interact. One example of this interaction is that: (1) the legislature effectively required the electric companies to sell their power plants and buy power on the wholesale market; (2) wholesale market rules approved by the federal government tend to tie the wholesale price of electricity to the wholesale price of natural gas, whether or not the power is generated from a plant that uses gas; and (3) gas has become more expensive over time due to market forces and policy decisions and is more expensive in Connecticut than elsewhere because it must be shipped here from regions with gas resources.

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