Overview of Markets

Electric Markets

Connecticut consumers currently pay the highest electricity prices in the contiguous United States and the second highest prices in the entire country. In fact, the average consumer in Connecticut currently pays nearly $0.18 per kWh for electricity – $0.08 per kWh, or 75%, more than the national average. Even more alarming is the disparity in prices paid by the State’s industrial consumers. Industrial consumers in Connecticut pay more than double the national average price for electricity.

In general, the wholesale electric commodity price of electricity is established by market rules established by ISO New England, Inc. (ISO-NE). Wholesale commodity prices are not regulated by the State and are subject to significant volatility. Such volatility is passed on to consumers with ISO-NE Energy and Ancillary Services tied closely to the price of natural gas.

Delivery service is provided by traditionally regulated utilities. Utilities charge for monopoly delivery service based on Cost of Service rates set by Connecticut Department of Public Utility Control (DPUC).

Natural Gas Markets

Natural gas usage is increasingly important to the Northeast. Though traditionally the Northeast has been a winter peaking region, increased reliance on natural-gas fired generation has evened out annual gas use and further constrained interstate pipeline capacity. Increased dual requirements for natural gas as a space heat fuel and utilization of gas-fired plants has imposed greater challenges on the Northeast, compared to other regions, in aligning commercial and operating conditions between the gas and power industries. The Northeast has little indigenous production (mainly in the Appalachian basin) and none in New England although this trend could begin to change with the successful exploitation of the Marcellus Shale play located in the heart of Appalachia.

An increasing percentage of large commercial and industrial customers purchase their natural gas supply through competitive marketers. Delivery rates are established by the Local Distribution Companies (i.e., traditional utilities).

Under the current regulatory environment, only pipelines and Local Distribution Companies (LDCs) are directly regulated by the DPUC with respect to the services they provide. Natural gas producers and marketers are not directly regulated. This is not to say that there are no rules governing their conduct, but instead there is no government agency charged with the direct oversight of their day to day business. Production and marketing companies must still operate within the confines of the law; for instance, producers are required to obtain the proper authorization and permitting before beginning to drill, particularly on federally-owned land. However the prices they charged are a function of competitive markets, and are no longer regulated by the government.