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A study released last month by a Cambridge, Mass.-based think tank has found that Connecticut residential electric customers who were on standard service plans paid $1.8 billion more than they should have between 2016 and 2025.
That translates into residential standard service customers of Eversource Energy and The United Illuminating Co. paid an $11 per month premium during the entire review period of the study done by Synapse Energy Economics. Synapse does work for governmental organizations as well as non-governmental organizations like environmental and consumer groups, according to Patrick Knight, the organization's director of analysis.
Synapse defines the term "premium" as the difference between what it costs electric power producers to generate the power and what Eversource and Ui customers pay for that electricity. Because of the way Connecticut law is structured, the two electric distribution companies are not allowed to mark up the price of the power they procure for their standard service customers.
The Synapse report found that "the median monthly retail price premium in Connecticut was 31% above the market cost of supply."
"In other words, while the average actual cost of electricity supply was 10 cents per kilowatt hour, standard service customers paid 13 cents per kilowatt hour," the report said in part.
Connecticut allows electric utility customers to purchase power on their own from a third-party provider. But the vast majority residential electric customers that Eversource and UI have in Connecticut opt to allow the two utilities to purchase the electricity they use, an option known as the standard service offer.
Massachusetts standard service electric customers paid the largest premium - $2.7 billion - of the five New England states included in the Synapse study, followed by New Hampshire at $2.5 billion. Vermont was the only state in the region not included in the study.
Eversource also is a electric distribution company in parts of Massachusetts and New Hampshire.
Eversource and UI procure electricity every six months for their residential standard service customers, with the cost per kilowatt hour that those consumers pay changing every January 1 and July 1. Eversource has a total of four procurement solicitations, two during the first half of the year and two during the second half, said William Hinkle, the company's director of external communications.
"This is ultimately a public policy issue to address, but we do not believe that customers should have to bear the burden of higher electric supply prices," Hinkle said.
Knight said that while Connecticut "has one of the most comprehensive (electricity) procurement programs" for standard service customers in New England, consumers in this state might benefit from a tweak to the effort. He suggested that creating an independent, quasi-public entity to handle the energy procurement effort, either in concert with one or more states in the region or done by Connecticut officials alone might drive down prices.
Another recommendation that Knight had for electric procurement in Connecticut was to make the terms of the agreement with the power producers less all encompassing. Currently terms for the procurement of electricity for standard service customers to provide as much electricity as is needed for the period of the contract.
Knight said Connecticut officials should consider setting a ceiling on how much electricity the power producers would be contractually obligated to provide. During periods of peak usage of electricity, the state would purchase additional electricity from the spot market, he said.
"If you ask the supplier to come in with a more precise amount of electricity, rather than require them to have enough to meet all of the need, it's going to costs less because the risk to the supplier is less," Knight said.
Hinkle disagreed, saying that spot electric prices are notoriously volatile, subject to a variety of factors such as weather conditions and events on the global stage, Hinkle said Eversource has been working with public policy makers in Connecticut to make changes to the procurement process that could make the supply portion of customers bills more affordable.
"Energy supply is by far the most volatile portion of any customer's bill," he said. "Of course, the best way to reduce that cost is to get mo0re supply into the region. But I'm not going to say it is something that is easy to fix."
Officials with UI were not immediately available for comment on Tuesday regarding the Synapse report.
Claire Coleman, who is Connecticut's Consumer Counsel, said that while the Synapse report "raises important considerations about procuring energy," some of its conclusion need additional context. Coleman's office represents the interests of Connecticut utility rate payers in cases that come before the state's utility regulatory agency.
"Procurement decisions are made prospectively without knowing where the market is going," Coleman said in a written statement. "It would be misleading to suggest that the entire $1.8 billion identified through hindsight analysis represents money Connecticut customers would have saved without assuming any of the market risk."