“Why do I have to pay so much for other people’s stuff on my electric bill?”

I knew these were unusual times when my 27-year-old son made that comment as he asked about the public benefits charge on his bill. While I’m proud that, during my tenure as Connecticut’s Consumer Counsel, my office led an effort to clarify the electric bill from the state’s regulated utilities, Eversource and United Illuminating, recent attention to bill components has understandably raised public concern about the particulars of each.

As people feel a growing crunch on  the cost of housing, food, health insurance, and just about everything else, they are increasingly worried and frustrated about the cost of energy in the state. To understand why Connecticut has some of the highest electric bills in the country, we need to understand more about each component.

The bill is broken down into supply, transmission, local delivery, and public benefits.

Supply

The supply charge is the actual cost of the electricity you consume.  The utilities do not make a profit on the supply; it is a pass-through of the cost of buying electricity from third party generators. 

Our electric utilities do not own any generation, because Connecticut “deregulated” in 1998.  This means that under state law, the utilities were forced to sell off their generation facilities, which included the Millstone nuclear power plant and other generation assets. 

Prior to that time, our utilities were vertically integrated, meaning they owned the plants that generate electricity, and also the infrastructure that delivered the electricity to our homes and businesses.  Deregulation occurred based on the theory that separating the generation of electricity from its delivery would result in competition from generation sources and lower prices for consumers.

The regulated versus deregulated structure varies by state.  Seventeen states and the District of Columbia have deregulated electricity.  The rest, which include New England’s Vermont, have retained that traditional vertically integrated system, where the utility owns, and the state regulates all components of the electric system.

Since Connecticut has deregulated, our electric utilities are essentially poles and wires companies that manage the infrastructure that delivers the electrons (i.e., electricity)  to your house.  They purchase electricity on behalf of their customers and then pass that cost on without mark-up to consumers.  That process of buying electricity occurs through a regulated procurement overseen by PURA that includes representatives from the Office of Consumer Counsel and utilities.  This procurement process is designed to ensure that electric customers pay a fair rate for supply that included regulatory oversight.

The “supply” portion of the bill thus reflects the cost to purchase the electricity that you use each month.  It is the most volatile portion of the bill, as in periods of extreme heat or cold, people and businesses tend to use more electricity.  In addition, in the winter, the many power plants that use natural gas to generate electricity  compete with home heating for access to gas, which means prices rise along with demand.  

If you purchase your supply of electricity from Eversource or United Illuminating, as the majority of residential customers do, the cost for every unit of electricity you use, which is measured in kilowatt-hours or “kWh,” is set every six months.  The current supply cost  or “Standard Service” supply rate from Eversource for residential customers is  12.641 cents per kWh, and for United Illuminating residential customers is 13.69 cents per kWh.  The more electricity you use, the higher the supply portion of your bill.

Transmission

Transmission charges represent the cost of transporting electricity over the high-voltage transmission network.

Electricity travels from the generator to the region through these high-voltage lines. After reaching the region, your utility delivers the electricity to homes, businesses, schools, and other locations using a network of local poles and wires.

The transmission system can be compared to interstate highways that carry large volumes of traffic throughout the state, and the transmission charges function much like the tolls paid to use those highways. The Federal Energy Regulatory Commission, known as FERC, regulates transmission and determines the transmission fees. These charges also include costs incurred by ISO-New England, the nonprofit organization responsible for operating the New England electric grid and coordinating the delivery of electricity both from outside and within the New England states.

Local delivery

Local delivery refers to the charge for the poles and wires that run through your neighborhood. These are owned by your local electric company, known in the industry as the electric distribution company (EDC), which provides service to your home.

You can think of local delivery costs as similar to the local streets and roads that connect your home to the larger interstate highway system. These costs represent what you pay to your EDC for bringing electricity directly to your residence. They cover the expense of maintaining poles, wires, and equipment, as well as paying the line workers, customer service agents, managers, executives, and other staff who keep the system running. The Public Utility Regulatory Authority sets these costs, and when you hear about your utility requesting a rate increase, it is usually these expenses that are included.

Public benefits

The public benefits charge on your bill covers your utility’s costs for public policy initiatives. These charges have raised questions, with some consumers asking why they must pay more for seemingly optional programs when electric bills are already high.

This is an important discussion to have, and as a former consumer advocate and someone who believes knowledge is power, I welcome the questions around the public benefits charge.  Consumers should understand exactly what’s included, so they can understand the programs they are supporting through the public benefits charge and potentially opine to their state legislators and other decision-makers as to policies or practices they would like to change.

The discussion of the public benefit  charge is quite nuanced, however.  The Mirror had two extremely useful charts in a recent article on the Public Benefits charge.

The largest charges for both Eversource and United Illuminating related to hardship programs and unpaid (and presumably uncollectable) bills.  Connecticut has some of the most generous hardship programs in the nation.  For example, residential consumers with a demonstrated financial hardship can apply for a discounted electric rate known as the Low-Income Discount Rate, which has tiers tied to income.  There is also a matching payment program, for hardship customers with a significant overdue balance.  These customers can receive a dollar-for-dollar matching payment from their utility equal to the amount paid on their balance.

In addition, Connecticut offers hardship residential customers and those who receive certain government benefits “Winter Protection,” which prevent their electric service from being shut off between November 1 through May 1, with no late payment charges.  There also programs that support direct payments for heating assistance and balance forgiveness programs.

Most other states are not so generous.  In Wyoming, for example, between November 1 and April 30, the utility must give seven days’ notice before disconnecting service, and “try to personally contact the Customer before disconnecting service.”  The utility also cannot disconnect service during that time period if the temperature is forecasted to be below 32 degrees Fahrenheit in the impending 48 hours or if conditions are otherwise especially dangerous to health, and the customer is seeking available government assistance or is only able to pay in installments.  There are also additional disconnection protections for the elderly and the medically vulnerable, providing another 30 days’ notice.  There is, however, no blanket period where no disconnections are allowed as there is in Connecticut.

Florida, one of the hottest states in the nation with one of the highest percentages of senior citizens,  has no statewide shut-off protections.   Last summer, a proposed law that would have prohibited disconnections during periods of extreme heat (above 90 degrees), extreme cold (below 32 degrees), or during periods of emergency died in committee.

Hardship programs

Connecticut’s hardship programs mean that we are spending millions of dollars supporting our less fortunate neighbors, dollars that are collected through the public benefit charge.  Personally, I am okay with that.  Our residents should be able to stay warm and safe during cold weather.  I have a vivid memory growing up in Albany, New York, of a news story about an elderly couple that froze to death in the winter because they were confused, didn’t pay their utility bills, and had their heat and electric shut off.  I am proud to live in a state that protects our most vulnerable citizens.  (To be fair to New York, shutoff policies have changed since the 70’s as well and are as generous as Connecticut’s.)

That does not mean we should not ask whether these programs are designed as well as they could be, whether safeguards are adequate, or whether the November-to-May protection period is exactly right. In my experience, even raising such questions can be politically difficult. But thoughtful, transparent conversations ultimately strengthen public trust and support.

Another major portion of the public benefit charge, over 19 percent for both utilities, funds energy efficiency programs. These are designed to help all customers lower their usage and bills. Other charges support clean energy initiatives like rooftop solar, electric vehicles, battery storage, and contracts with zero-emission resources.

People understandably have different views about these policies. Some say they cannot afford to pay for these programs. Others question why they are funded through electric bills at all.

Funding policies through electric bills

That last question is, in my view, an important one. Funding public policy through electric bills is one of the most regressive ways to do it. Because lower-income households spend a larger share of their income on energy, these charges hit them hardest. This is likely why we are seeing such strong public reaction to the size of the public benefit charge.

The legislature appears to recognize this problem. Last year it passed Senate Bill 4, which used borrowing to reduce some of these charges, including costs associated with pandemic arrearages and EV programs.

There is a great deal of discussion today about affordability. The reality is that many families are living at or near the financial edge. The challenge is to protect our most vulnerable neighbors without overburdening those who are also struggling, while still meeting our energy needs and long-term goals.

We may not all agree on the right balance. But we should all be able to agree on this: people deserve transparency, clarity, and an honest explanation of what is in their electric bill and why.

In my experience, people are far more willing to support what they can see and understand.

Elin Swanson Katz is the founder of Blue Swan Energy Strategies, LLC. She has also served as Connecticut’s Consumer Counsel, as Chair of the Connecticut Siting Council, as the founding Director of the Office of Public Participation at the Federal Energy Regulatory Commission, and as a consumer protection expert at the U.S. Department of Energy.