Vermont vs. the Rest of New England: A Case Study to Watch this Winter
New England’s electricity rates have long been among the highest in the nation. To a certain degree, it is the result of geography. The region is not home to strong wind resources like the Great Plains, ample solar resources like the Southwest, or plentiful shale gas like the Marcellus. But in other respects, the region’s chronically high electricity rates are the result of public policy choices. Among those choices is the fact that 5 of the 6 New England states deregulated their utilities and have now exposed their residents to the vicissitudes of electricity markets that aren’t working for the benefit of consumers.
Don’t be surprised if citizens and policy makers begin to take notice. In succeeding months, it will likely be hard to ignore the contrast between Vermont – which retained utility regulation – and the rest of New England. Some in the mainstream media are already noticing. Take, for example, this recent story about increasing electricity prices in New England. In it, reporters note that Vermont is simply different than the other 5 states:
“Five of the New England states have “deregulated” energy markets, meaning power generation is separate from power distribution. But in Vermont, utilities can own power plants or solar farms and sell their customers the electricity they produce.
Additionally, Vermont utilities meet the vast majority of their electricity needs through long-term contracts, like those with Hydro-Québec. These factors make comparing price changes in Vermont to the other states a bit of an apples to oranges situation.
That said, Vermont still gets about 10% of its power from the regional grid, and in part due to that, ratepayers in Vermont can expect to see their rates go up somewhat in the coming months – though likely not as much as in other New England states.”
The key takeaway is the last point: because of Vermont’s public policy decisions, the state’s electricity rates – while still high compared to the national average – are likely to not rise as much as its regional peers. By building a diverse portfolio of assets, including long-term contracts for renewables that the markets will not support, Vermonters have built-in certain customer rate protections. Not surpassingly, data from the Energy Information Administration bears this out. The most recent monthly electricity price data show an emerging price spread between Vermont electricity rates and the other 5 New England states. One month doesn’t make a trend, but common sense tells us that Vermont – by maintaining appropriate state-level oversight of its utilities – will be better positioned for the challenging energy prices that are expected this upcoming winter.