Connecticut Should Put Electric Ratepayers First

For nearly two decades, Connecticut has participated in a regional effort to reduce carbon emissions from power plants known as the Regional Greenhouse Gas Initiative, or RGGI.

As state officials consider significant changes to the program, they must ensure that any additional costs imposed on electricity customers are matched by meaningful benefits for the businesses and families who ultimately pay the bill. 

RGGI was created in 2005 by a coalition of Northeastern states seeking to address greenhouse gas emissions from the electric power sector.

The program operates through a cap-and-trade framework, setting a regional limit on carbon dioxide emissions from large fossil fuel-fired power plants.

Power generators must purchase allowances for their emissions, and those allowances are sold through quarterly auctions.

As the emissions cap declines over time, fewer allowances are available, driving emissions reductions and, in theory, encouraging cleaner energy investments. 

Value Questions

Connecticut joined RGGI as a founding participant under former Gov. Jodi Rell, with the state’s first compliance obligations beginning in 2009.

Since then, every New England state has become a participant, creating a regional approach to carbon regulation across the electric grid that serves Connecticut consumers. 

Supporters of RGGI point to billions of dollars in auction proceeds generated for participating states and reductions in power-sector emissions across the region.

Yet as policymakers consider tightening the emissions cap even further, a fundamental question remains: are Connecticut ratepayers receiving sufficient value for the costs they are bearing? 

Are Connecticut ratepayers receiving sufficient value for the costs they are bearing?

That question is especially important today. 

Connecticut residents and employers face some of the highest electricity prices in the nation—residents pay 33% more than the national average, commercial costs are 38% higher, and industrial customers pay 82% more.

Manufacturers, small businesses, retailers, hospitals, and nonprofit organizations all are grappling with energy costs that make it more difficult to grow, hire workers, and compete.

Households are experiencing the same challenge, with electric bills consuming an increasingly larger share of monthly budgets. 

Compliance Costs

While RGGI is only one factor affecting energy prices, allowance prices have risen significantly since the program’s inception, increasing costs throughout the regional electricity market.

If the participating states move forward with a more aggressive emissions cap, those compliance costs are expected to increase further. 

Those compliance costs are expected to increase further. 

Because all New England states participate in RGGI, Connecticut cannot simply insulate itself from the costs by withdrawing from the program.

Connecticut ratepayers would likely continue to experience the regional market impacts. Participation at least allows the state to retain and reinvest auction proceeds generated from those costs. 

That reality should guide the debate over RGGI’s future. 

Affordability Challenges

If Connecticut residents and employers are being asked to fund a more stringent program through higher electricity costs, then ratepayer relief should be the highest priority for any additional revenues generated.

A greater share of auction proceeds should be directed toward reducing electric bills, particularly for small businesses, manufacturers, and households struggling with affordability challenges. 

Connecticut should dedicate a meaningful portion of RGGI revenues to electric grid modernization.

At the same time, Connecticut should dedicate a meaningful portion of RGGI revenues to electric grid modernization and transmission infrastructure.

The state faces enormous costs associated with upgrading its electric system to accommodate changing generation resources, improve reliability, and meet future demand.

Utilizing RGGI proceeds for these investments can help offset costs that otherwise will be passed directly to ratepayers. 

Policy Disconnect

Connecticut policymakers should also recognize an increasing disconnect in energy policy.

The state and federal governments continue to pursue ambitious electrification and emissions-reduction goals, but they are simultaneously creating new obstacles to the siting and construction of the infrastructure necessary to achieve them.

Whether the resource is renewable generation, transmission lines, energy storage, or other critical assets, successful decarbonization requires the ability to build projects efficiently, predictably, and affordably. 

Most importantly, the state should require clear and transparent evidence demonstrating the direct impact of proposed RGGI changes on emissions reductions within Connecticut.

Policymakers should understand not only the environmental benefits expected from a tighter cap, but also how those benefits compare to the costs imposed on households and employers. 

Policymakers must ensure that affordability and competitiveness remain central considerations.

Connecticut’s business community supports efforts to improve environmental outcomes and reduce emissions.

Economic growth and environmental stewardship are not mutually exclusive objectives. But in a state already struggling with high energy costs, policymakers must ensure that affordability and competitiveness remain central considerations. 

The success of future RGGI reforms should not be measured solely by emissions targets.

It should also be measured by whether Connecticut residents and employers see tangible value from the program they are funding.

If changes to RGGI result in higher costs, ratepayers deserve to be first in line for the benefits. 

---

 For more information, contact CBIA’s Chris Davis (860.244.1931).