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About MMA MunEnergy Three factors keep energy costs high in Mass.
High energy costs in Massachusetts constrain municipal spending, are a burden to residents, and make it difficult to attract new businesses to the region.
A recent report by the Pioneer Institute emphasizes the competitive disadvantage energy costs pose to the Bay State: average industrial electricity rates in Massachusetts are 59 percent above the national average, and commercial electricity rates are 48 percent above the national average.
Electricity rates in New England have historically been among the highest in the country. Deregulation of the industry in the late 1990s was intended to address these high costs. Although there has been progress, three region-specific circumstances defy an easy fix.
Natural gas
Fuel costs are the main driver of electricity prices, according to the New England Independent System Operator. This puts New England – a region with no indigenous fuel sources – in a tight situation. Without a ready supply of coal or natural gas, the Northeast states have to choose between the cost of importing fuel and the expensive upfront costs of nuclear or renewable facilities.
Relatively low natural gas prices over the past decade led the region’s energy market to build new gas-fired power plants. Now more than 60 percent reliant on natural gas and oil, the New England power supply is disproportionately vulnerable to swings in the prices of these fuels. Recently, large increases in the price of natural gas and oil have driven up electricity prices in New England.
Making matters worse is that New England is at the end of the country’s natural gas pipeline network. Natural gas is more expensive the further it must travel.
Infrastructure
According to a recent report by the New England Energy Alliance (a coalition of energy providers, business and trade organizations and others concerned about future energy supplies), insufficient transmission capacity is causing bottlenecks that cost ratepayers hundreds of millions of dollars. Congestion costs are imposed when inadequate transmission capacity restricts the flow of electric power from areas of lower-cost generation (in central Massachusetts) to consumers in high-density load pockets (Greater Boston). At high-usage times, when the system is “congested,” higher cost resources must be used to generate electricity for areas with tight supply.
Massachusetts is also served by an aging fleet of electricity generators. As a result, New England electricity customers recently started to pay capacity charges, as part of a plan to boost power plant development in the region.
Regulations
Massachusetts has been a leader in energy efficiency and renewable energy programs. The state came in fourth in recent efficiency rankings by the American Council for an Energy-Efficient Economy. There are, of course, costs and benefits to a proactive energy efficiency policy. New England ratepayers contribute about $240 million each year to fund state-run energy efficiency programs. The resulting reduction in annual electricity is enough to meet the needs of about 125,000 homes.
The New England region also has some of the most stringent environmental regulations in the country. Massachusetts recently rejoined the Regional Greenhouse Gas Initiative, participating with nine other states in the cap-and-trade program. This means that 32 of Massachusetts’ existing power plants will be subject to a cap on greenhouse gases.
The impact on electricity costs is uncertain at this point, but the continued high standards for environmental protection have produced results. While electricity generation in the region increased 25 percent between 1998 and 2004, associated sulfur dioxide emission rates decreased by 56 percent, nitrogen oxide by 57 percent and carbon dioxide by 22 percent, according to the New England Energy Alliance.
Constellation NewEnergy, the endorsed supplier to the MMA’s MunEnergy program, can help municipalities take steps to manage their energy costs. For more information, contact MunEnergy Program Manager Emily Neill at (617) 772-7513 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
About MMA MunEnergy Three factors keep energy costs high in Mass.
Three factors keep energy costs high in Mass.
High energy costs in Massachusetts constrain municipal spending, are a burden to residents, and make it difficult to attract new businesses to the region.
A recent report by the Pioneer Institute emphasizes the competitive disadvantage energy costs pose to the Bay State: average industrial electricity rates in Massachusetts are 59 percent above the national average, and commercial electricity rates are 48 percent above the national average.
Electricity rates in New England have historically been among the highest in the country. Deregulation of the industry in the late 1990s was intended to address these high costs. Although there has been progress, three region-specific circumstances defy an easy fix.
Natural gas
Fuel costs are the main driver of electricity prices, according to the New England Independent System Operator. This puts New England – a region with no indigenous fuel sources – in a tight situation. Without a ready supply of coal or natural gas, the Northeast states have to choose between the cost of importing fuel and the expensive upfront costs of nuclear or renewable facilities.
Relatively low natural gas prices over the past decade led the region’s energy market to build new gas-fired power plants. Now more than 60 percent reliant on natural gas and oil, the New England power supply is disproportionately vulnerable to swings in the prices of these fuels. Recently, large increases in the price of natural gas and oil have driven up electricity prices in New England.
Making matters worse is that New England is at the end of the country’s natural gas pipeline network. Natural gas is more expensive the further it must travel.
Infrastructure
According to a recent report by the New England Energy Alliance (a coalition of energy providers, business and trade organizations and others concerned about future energy supplies), insufficient transmission capacity is causing bottlenecks that cost ratepayers hundreds of millions of dollars. Congestion costs are imposed when inadequate transmission capacity restricts the flow of electric power from areas of lower-cost generation (in central Massachusetts) to consumers in high-density load pockets (Greater Boston). At high-usage times, when the system is “congested,” higher cost resources must be used to generate electricity for areas with tight supply.
Massachusetts is also served by an aging fleet of electricity generators. As a result, New England electricity customers recently started to pay capacity charges, as part of a plan to boost power plant development in the region.
Regulations
Massachusetts has been a leader in energy efficiency and renewable energy programs. The state came in fourth in recent efficiency rankings by the American Council for an Energy-Efficient Economy. There are, of course, costs and benefits to a proactive energy efficiency policy. New England ratepayers contribute about $240 million each year to fund state-run energy efficiency programs. The resulting reduction in annual electricity is enough to meet the needs of about 125,000 homes.
The New England region also has some of the most stringent environmental regulations in the country. Massachusetts recently rejoined the Regional Greenhouse Gas Initiative, participating with nine other states in the cap-and-trade program. This means that 32 of Massachusetts’ existing power plants will be subject to a cap on greenhouse gases.
The impact on electricity costs is uncertain at this point, but the continued high standards for environmental protection have produced results. While electricity generation in the region increased 25 percent between 1998 and 2004, associated sulfur dioxide emission rates decreased by 56 percent, nitrogen oxide by 57 percent and carbon dioxide by 22 percent, according to the New England Energy Alliance.
Constellation NewEnergy, the endorsed supplier to the MMA’s MunEnergy program, can help municipalities take steps to manage their energy costs. For more information, contact MunEnergy Program Manager Emily Neill at (617) 772-7513 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
Written by MunEnergy Program Manager Emily Neill
