Looking for Relief: Connecticut’s Energy Headache

Connecticut’s energy costs are among the highest in the country, representing significant burdens for residents and businesses alike.

“The greatest existential threat to our continuing economic progress,” was how Department of Economic and Community Development commissioner Dan O’Keefe recently described the issue.

When O’Keefe talks with companies considering moving to Connecticut or relocating elsewhere, energy costs are always top of mind. 

“I can sell quality of life,” O’Keefe says. “We have a high-cost labor force, but they’re incredibly, really strong.

“So I can sell a product that’s high quality and high value. 

“What I can’t sell is a megawatt that’s over two-x as expensive as the rest.” 

What’s Driving Costs 

As of November 2025, Connecticut residential electricity rates ranked seventh highest in the country—52% higher than the national average.

Commercial and industrial electricity rates are the sixth highest, with commercial rates 61% above the U.S. average and industrial rates 110% higher.

The two fastest-growing components of Connecticut electricity bills are generation/supply and transmission—neither of which the state directly controls. 

The primary driver is New England’s constrained natural gas pipeline capacity. 

The two fastest-growing components of electricity bills are generation/supply and transmission.

Generation represents about 42% of the bill (up from 38% in 2021), with costs growing 50% from 2021 to 2026, outpacing the overall bill increase.

Natural gas fuels 60% of Connecticut’s electricity generation, but pipeline constraints mean New England pays roughly 45% more for natural gas than Pennsylvania—the same fuel, delivered through the same regional network, at a substantial premium.

Winter heating demand competes directly with power generation for the same limited supply, creating extreme price volatility.

The pipeline capacity problem has been known for decades, but proposals to expand capacity have faced sustained opposition on environmental and political grounds.

The result is a structural cost premium baked into every winter heating season without a near-term fix on the horizon. 

Transmission, Distribution

Transmission costs represent 15% of the average electricity bill, up from 12% in 2021.

Transmission charges on Eversource bills have risen 63% since 2018, driven by regional grid investment across ISO New England.

These costs are regulated by the Federal Energy Regulatory Commission, not Connecticut’s Public Utilities Regulatory Authority—the state has limited leverage over what gets built or what ratepayers are charged. 

The situation may get worse before it improves. As new renewable generation comes online—offshore wind, utility-scale solar—it will require new transmission infrastructure to connect it to the grid.

This is a much-needed bill. Our commercial electricity rates are 61% higher than the U.S. average, with industrial rates 110% higher. Commercial natural gas rates are 0.75% higher than the U.S. average, while industrial rates are 98% higher. https://t.co/hZYSEtMc9v

— Chris DiPentima (@ChrisDipentima) February 10, 2026

The clean energy transition Connecticut has committed to may increase fixed costs further before any generation savings materialize. 

What’s not driving rates? Local distribution costs—including the utility’s own grid improvements— have actually shrunk as a share of the bill, from 36% in 2021 to 30% in 2026.

This is the one area most directly under state regulatory control, and it is not the primary driver of the increases families and businesses are feeling.

This is not to say that total distribution costs have not grown, but handwringing over investments made in local grids diverts attention from much larger, structural problems. 

A Genuinely Hard Problem 

This is not a case of simple policy failure with an obvious fix.

The New England states made choices—and failed to make choices—about energy infrastructure over decades: 

• Pipeline expansion projects were blocked or delayed on environmental grounds 

• The region became heavily dependent on natural gas without securing adequate supply 

• Regional transmission investment proceeded with costs socialized across ratepayers 

Easy answers do not exist: 

• Pipeline expansion remains politically contentious 

• Transmission costs are federally regulated 

• The renewable transition may require significant new infrastructure investment 

• Generation prices are set by wholesale markets tied to global fuel costs 

Policy Picture 

So where do Connecticut policymakers stand?

Last year, lawmakers approved bipartisan legislation offering modest relief, expected to lower electric rates by one or two cents per kilowatt-hour—an average estimated savings of $100 annually for residential customers.

While Gov. Ned Lamont welcomed the bill’s passage, he noted that it was “one step in the effort to make energy rates more affordable and we should not stop here.”

A number of proposals are under review at the 2026 General Assembly session, including legislation exempting energy purchases by commercial and industrial customers with less than $10 million in annual gross income from the 6.35% state sales tax.

Residents deserve honesty about the problem—and a serious conversation about solving it.

Senate Republicans are again targeting the public benefits charge—used to fund energy efficiency initiatives, renewable energy contracts, and assistance programs for low-income residents—which totals about $1 billion annually.

And earlier this month, Lamont proposed a one-time, income-capped tax rebate—$200 for individuals, $400 for couples—to address overall affordability challenges, including high energy costs.

While temporary relief has some value, a rebate that covers two months of a years-long cost increase ultimately fails to address the underlying challenges.

Connecticut’s electricity costs are structurally high, driven by regional supply constraints and transmission investments that predate recent volatility—ongoing, structural cost growth that show no signs of abating. 

Residents deserve honesty about the scope of the problem—and a serious conversation about the difficult tradeoffs involved in actually solving it.

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About the author: Dustin Nord is the director of the CBIA Foundation for Economic Growth & Opportunity.