Why is your energy bill so high? Blame natural gas volatility and utility profits

This winter, New England residents were battered by persistently high energy bills, especially for natural gas service. In Massachusetts, the state’s energy efficiency program, Mass Save, unfortunately emerged as a convenient scapegoat, despite saving the Commonwealth and ratepayers billions of dollars.

The real culprit for high bills this winter? The cost of natural gas infrastructure, generous utility profits, and the region’s continued fossil fuel investments – which left us ill-equipped to deal with an exceptionally cold winter.

In response to complaints about energy affordability, utilities like Eversource and National Grid have pointed to increased funding of the state’s cost-effective energy efficiency program. This is no small source of irony – Mass Save is a relatively small fraction of bills, but it is the most potent tool available to empower consumers to control their energy costs and protect them from fossil fuel price spikes.

The vast majority of the bill, around 70-75 percent, goes toward natural gas costs – relating to gas supply, distribution, and maintenance – compared to just 15-25 percent going toward energy efficiency. Unlike other energy costs, efficiency is the only investment that is required to pass cost-effectiveness testing. In fact, overall energy system costs would be billions of dollars higher without the cost reductions secured with efficiency. Not nearly enough scrutiny has been given to the investments on which gas utility companies make money.

One of the primary ways an investor-owned gas utility makes a profit is by making a return on investment at a specific rate, approved by the state, on capital investments in gas infrastructure projects: the extensive, multi-billion-dollar pipeline network in place under our streets.

In Eversource territory, for example, this healthy rate of return ranges from around 9.5 percent to 9.9 percent. This generous profit structure incentivizes utilities to pursue costly system upgrades and expansions, which are well-compensated, and to add more customers onto the system despite the misalignment with state goals. The more utilities spend on outdated infrastructure, the more money they make, and the national numbers bear this out: Over the last three years, residential electric rates for investor-owned utilities have risen 49 percent more than inflation. Meanwhile, the rates at publicly-owned electric utilities have increased 44 percent less than inflation.

It should also be noted that existing gas customers pay a disproportionate share of the costs for bringing new gas customers online. Since 2018, existing gas customers have footed the bill for 80 percent of all new gas customer connections. And these subsidies – known as line extension allowances – are driving up gas bills for everyone.

In 2023 alone, Massachusetts gas customers were charged $160 million to add new customers to the gas system, to the tune of $9,000 per new customer, which is reflected on ratepayer gas bills.

The cost of adding new customers is rising as well. The average cost of adding new customers rose 50 percent between 2020-2021 and again in 2022-2023. In fact, despite an acknowledgement by the state and by utilities that we should be winding the gas system down – not expanding it – the growth of the sprawling pipe network shows no signs of stopping.

According to a recent earnings report from Eversource, for example, the company projects that its gas distribution costs across New England will increase 83 percent between 2023 and 2029, faster than either their electric transmission or distribution subsidiaries. Given the rapid pace of electrification and related system needs, this discrepancy between what utilities have committed to, and what’s actually happening, is noteworthy.

A separate analysis commissioned by the Massachusetts attorney general’s office corroborated that a potentially vast and rapid gas system build-out – and associated impacts to ratepayer bills – could occur without state intervention. According to the AG’s analysis, the path we’re currently on could see the state’s gas rate base – the total value of gas system assets on which utilities are allowed to earn a rate of return – jump from $10 to $20 billion in a short span of roughly 10 years.

In multiple sectors of the economy, Massachusetts and the rest of the region remain frustratingly over-reliant on natural gas. In 2023, about half of Massachusetts households used natural gas for home heating, and the Commonwealth – as part of ISO-New England’s regional grid – relied on gas for roughly 55 percent of the power produced in 2024.

What this means is that when it gets cold in the winter, costs can shoot up dramatically due to the volatility of natural gas prices. And, as America exports more liquefied natural gas (LNG) abroad, domestic gas prices are increasingly tied to the unpredictability of global gas markets.

It was very, very cold this winter; the coldest winter since 2014-2015, in fact. According to data compiled by Acadia Center, the average temperature in December 2024 was a full 10°F colder than December 2023. Further, from December 2024 through February 2025, Massachusetts saw 23 days colder than 20°F, compared to only nine such days the year prior.

These colder temperatures generally mean that residents are using more energy, driving up bills. However, due to the Commonwealth’s overreliance on natural gas and other fossil fuels, it also means higher costs for the supply of energy. For example, the region endured a whopping $4 billion in wholesale electricity market costs this winter, per ISO-New England (a roughly $2 billion increase from last year), making it the costliest winter since 2014-2015.

One small ISO-New England program giving payments to dual-fuel (gas-oil) power plants, the inventoried energy program (IEP), cost almost $80 million over just five days. Can anyone really look at the region’s exposure to such volatile, concentrated costs and conclude that the region should invest less in energy efficiency, rather than more? Other barriers to offshore wind and local clean energy will only increase this unhealthy reliance on natural gas further.

If Massachusetts wants to take steps to lower energy bills in the long-term, we should not shy away from renewables and energy efficiency. Instead, we should embrace those clean resources, take steps to end our overreliance on natural gas and fossil fuels, and reduce business-as-usual utility profits.

Kyle Murray is director of state program implementation at Acadia Center, a nonprofit climate advocacy organization. 

To read the full article in Commonwealth Beacon, click here.