Energy Affordability, Rate Increases, and Regulatory Solutions in Connecticut

Ratepayers in Connecticut pay among the highest electricity rates in the country, and many low- and moderate-income (LMI) residents struggle to pay their energy bills. According to a 2023 report from Operation Fuel, which, among other services, provides emergency utility bill assistance to households across Connecticut, over 400,000 households in the state face unaffordable home energy costs.¹ Energy burden—the percentage of household income spent on energy costs—is generally considered high when energy expenditures account for 6% of household income. Energy burden is severe when 10% or more is allocated to energy costs. Urban and rural households in Connecticut with an income of 0-30% of the state median income (SMI) experience a 19% energy burden on average. LMI households in Connecticut are currently paying hundreds of millions of dollars more for energy than they would if their energy burden was reduced to 6% of household income.

This past summer, Connecticut residents experienced two significant rate increases, including an $800 million increase for Eversource customers in July. The Connecticut Office of Consumer Counsel (“OCC”) published a Frequently Asked Questions document² that provides detailed, evidence-based information explaining what is behind the rate changes. 80% of the $800M rate increase was the result of expenses related to the Millstone nuclear power plant, expenses that the Connecticut state legislature—not the Public Utilities Regulatory Authority (“PURA”)—voted to approve. The remaining 20% was set to recover the cost of unpaid electric bills during the state’s COVID-era moratorium on shutoffs. The shut-off moratorium was in place for four years for customers with a financial or medical hardship designation on their accounts, which are income-based or for people with life-threatening or serious medical conditions. The OCC shared that only half of the residents eligible for a financial hardship designation actually benefited from it. The second rate increase Connecticut residents experienced took place in September and stemmed cost recovery on programs such as the Innovative Energy Solutions program and the Connecticut Electric Vehicle Charging Program.

Unfortunately, these costs are categorized on utility bills under the label of Public Benefits Charges, a large catch-all category that helps to fund a wide range of beneficial programs for Connecticut ratepayers, including energy efficiency, renewable energy, and bill assistance programs. These programs provide significant benefits to Connecticut residents. Although these programs have been pointed to as the cause of the recent rate increase, they are not the true reason why rates have gone up. Because the Millstone plant costs and the COVID-related uncollectible expenses are included in Public Benefits Charges, opponents have unfairly attacked all Public Benefit Charges as harmful and overly expensive for Connecticut ratepayers. Moreover, Eversource requested recovery for the expenses over a 10-month period despite recommendations by stakeholders, including PURA Chair Marissa Gillett, to extend the cost recovery period to reduce the risk of near-term rate shock.

In light of the recent rate increases, energy burden and affordability are increasingly important issues for Connecticut to address. Energy equity and affordability means avoiding, mitigating, and remediating social, economic, and health burdens stemming from the energy system, while ensuring equitable participation in—and an opportunity to benefit from—the clean energy transition. As Connecticut moves to a decarbonized, increasingly electrified energy system, PURA should strengthen its focus on energy equity and justice in their proceedings, including through updates to the agency’s statutory mandate. To fully consider energy burden in the context of Connecticut’s clean energy transition, PURA should also holistically review and plan for the future of the state’s gas sector.

PURA, under the direction of Chairman Gillett, is already starting to make progress on this front. For example, PURA’s Performance-Based Regulation proceeding could help to create a new framework for regulating utilities that more explicitly centers equity and affordability, among other issues. PURA recently established a low-income discount rate which should be helpful for residents dealing with high energy burdens. PURA also established a Stakeholder Group Compensation Program³ to support underrepresented organizations who might have not had access or legal support to adequately participate in PURA proceedings.

To further strengthen Connecticut’s focus on energy justice and affordability, Acadia Center recommends the following additional activities:

1. Open an Energy Equity and Justice Proceeding: Despite PURA’s critical role and impact on environmental justice communities, accessibility of regulatory processes is limited. A dedicated Energy Equity and Justice Proceeding should be established to fully address these important, interrelated issues, which would include:

1. Review and analysis of existing energy burdens;
2. Consideration of contributing factors such as housing quality, pre-weatherization needs;
3. Review of and improvements to income-eligible utility discount programs;
4. Optimal rate design to promote affordability and electrification in LMI households; and
5. Other avenues for operationalizing procedural, distributive, contextual, and corrective equity⁴ in PURA proceedings and other forums in Connecticut’s acceleration towards renewable energy in alignment with the Global Warming Solutions Act⁵ (“GWSA”).

2. Open a Proceeding on the Future of Gas and Affordable Heat: As Connecticut seeks to meet the emissions reductions targets of the GWSA. a Future of Gas and Affordable Heat considering the role of gas distribution companies should (1) examine the gas distribution industry and regulatory and policy changes needed to support the achievement of Connecticut’s mandated GHG emission limits; (2) implement lesson learned from other Future of Gas proceedings around the region, including but not limited to Massachusetts and Rhode Island, so as to promote regional consistency and minimize rework and inefficiencies for Connecticut; and (3) determine what near- and long-term adjustments are necessary to maintain a safe and reliable gas distribution system, minimize stranded costs, conduct joint electric- and gas-system planning, and protect consumer interests as the state transitions from fossil fuels to a clean, increasingly electrified, and decarbonized energy future by 2050.

3. Review and update PURA’s mandate to include emissions, equity, and environmental justice responsibilities: Legislators should amend PURA’s statutory mandate to include climate and equity responsibilities and add a requirement to reduce greenhouse gas emissions in line with the GWSA. PURA and other agencies should have a legislative mandate not only to do all that it can to reduce greenhouse gas emissions, but also to prioritize the reduction of greenhouse gases and other pollutants in environmental justice communities, as well as to alleviate disproportionate environmental burdens. These new responsibilities would allow for targeted reforms that are not considered today. Instead of choosing the cheapest solution in the moment, PURA can be empowered to choose the best solution for both today and tomorrow’s ratepayers.

Current and upcoming Dockets to watch:

• Performance-Based Regulation Framework for the Electric Distribution Companies (Docket No. 21-05-15)
• Equity, Accessibility, and Stakeholder engagement (Docket No. 24-09-07)

1 Mapping Household Cost Burdens: A Study of Energy, Transportation, Water, and Housing Affordability In Connecticut. By Justine Sears and Leslie Badger (VEIC), produced for Operation Fuel (2023). https://operationfuel.org/wp-content/uploads/2023/11/VEIC-affordability-study-May-2023.pdf

2 Office of Consumer Counsel Frequently Asked Questions: https://portal.ct.gov/-/media/occ/occ-ram-qa-final-09042024.pdf

3 PURA Stakeholder Compensation Program: https://portal.ct.gov/pura/public-participation/stakeholder-group-compensation-program#:~:text=The%20Stakeholder%20Group%20Compensation%20Program,cases%2C%20or%20small%20business%20customers.

4 ACEEE’s Energy Equity Topic Page: https://www.aceee.org/topic/energy-equity

5 An Act Concerning Connecticut Global Warming Solutions: https://www.cga.ct.gov/2008/act/pa/2008pa-00098-r00hb-05600-pa.htm