PROVIDENCE — It’s been three years since state regulators approved historic hikes in electric and natural gas rates, and as residents shiver through a lengthy spell of bone-chilling cold, the anger and frustration is becoming palpable.

Pick your social media of choice and every day residents share pictures of their utility bills with eye-popping totals and voice their resentment toward state leaders, and Rhode Island Energy, at letting costs skyrocket.

One Facebook group, Citizens Against Rhode Island Energy, has amassed 10,000 members in the 11 months since it was founded. Lawmakers report in committee that constituents are complaining they need to lower the price of electricity.

The issue went prime time earlier this month when Gov. Dan McKee, running for another term as governor and facing a tough primary challenge, rolled out cuts to renewable energy-related charges collected on utility bills in a bid to lower costs.

The governor’s office told reporters his cuts would save ratepayers $1 billion over the next five years, and ratepayers could expect to see a decrease of $180 annually from reduced charges. That’s around $15 less per month per utility bill.

McKee’s proposed cuts are only a small part of the overall cost of supplying and delivering energy to Rhode Islanders, and show just how hard it’s going to be to control energy costs.

New England runs on natural gas

Despite major investments in the region on renewables such as solar and wind, natural gas remains, fundamentally, the biggest fuel source for generating the electricity sent to homes and businesses in New England. More than 50% of electricity generated in New England comes from natural gas, with smaller sources coming from wind, oil, and imported energy from Canada or New York.

It’s a statistic that leaves the six-state region vulnerable to geopolitical events. Rhode Island Energy, back during the original rate hikes in 2022, pointed to both the Russian invasion of the Ukraine and growing global demand for natural gas as a reason for raising rates so drastically.

The Public Utilities Commission, the rate-setter for all state utilities, approved a 47% hike in the rates back then. Electricity that cost 10.88 cents per kilowatt-hour (kWh) in the winter of 2021-22 rose to 17.79 cents per kWh the following winter.

In the following years, prices for electricity have declined, but not to pre-2022 levels. The current cost of electricity this winter is 14.77 cents kWh. Rhode Island Energy officials, testifying in support of this winter’s rates before the PUC back in September, said New England’s natural gas costs had declined thanks to expanded natural gas in storage.

“The winter supply rate is always higher due to elevated natural gas costs,” said Jonathan Bausch, a senior energy procurement specialist at the PPL Corp., which owns Rhode Island Energy, during the September evidentiary proceedings. “January and February are always higher [because] natural gas transportation costs are driven by increased demand and limited pipeline capacity.”

PPL, which has owned Rhode Island Energy since 2022 when it bought it from National Grid, doesn’t make money on the supply rates it charges to customers. They’re called “pass-through costs” in PUC parlance: whatever the utility company pays is what ratepayers pay.

Rhode Island has only a single pipeline supplying natural gas, the Algonquin Gas Pipeline, and the state is at the end of the pipeline. While the main trunk of the line continues to Beverly, Mass., a smaller line branches in Mendon, Mass., to supply Cape Cod and Rhode Island with their natural gas needs.

Despite this the price remains high, even though the United States is both producing and exporting a record amount of natural gas, according to reporting from Reuters last November. Rhode Island, and the United States, is competing more with the rest of the world for the same fossil fuel.

“Electricity pricing is so high because it’s tied to the price of natural gas,” said Jamie Rhodes, an attorney with the Conservation Law Foundation, during an interview the day before the governor unveiled his budget. “If you want it to be tied to something else, you have to replace the gas plant. Then it’s going to be tied to whatever the very last generator was willing to turn on at a certain price that ISO-New England was willing to pay.”

ISO-New England is the entity responsible for keeping electricity flowing across New England and ensuring the region has reliable, competitively priced wholesale electricity.

Rhodes is one of the few experts in Rhode Island who studies the electric and gas utility cases and doesn’t work for a utility company in some way. The Conservation Law Foundation routinely applies to be an intervenor in most of the rate-setting cases decided by the PUC, and Rhodes has participated in them since 2018.

The larger electricity market — natural gas and all — is esoteric and convoluted to the most educated of laypeople, something that extends to the different charges that make up each person’s electric bill. It’s a big reason why Rhodes said he’s skeptical that anything will make electricity prices go down anytime soon.

“I don’t think electricity prices are going to go down unless the president believes his power extends to the point where he can dictate the prices of goods,” Rhodes said. “I don’t actually know how you get the curve to go down; it’s more of a can it go up more slowly than inflation is. Which is of no help or relief for the current electric rates.”

Stack ’em high

Any electric bill from Rhode Island Energy is divided into two main parts: supply charges and delivery charges. The bulk of the supply charges on any bill will represent the pass-through costs, how much electricity the household used during that month, and at what rate. Also included is a much smaller charge for the state’s Renewable Energy Standard, which dictates the state’s renewable energy supply goals.

The delivery side of the bill, meanwhile, is made up of several separate charges, usually smaller amounts that add up to an expensive bill.

Charges from Rhode Island Energy include a $6 customer charge and different charges for distribution and transmission — essentially the cost of all the poles, substations, and wires the company uses to deliver electricity.

Added to that are four charges to fund and operate state programs. There’s a renewable energy distribution charge and a Renewable Energy Growth charge, which is where the money for net metering and the RE Growth program comes from.

There’s a charge for energy efficiency programs, which are administered by Rhode Island Energy and encourage ratepayers to use less energy, and finally a small charge for enhancing LIHEAP payments in Rhode Island.

None of these charges are responsible alone for the expensive bills, said Rhodes, it’s a combination of all of them driving up cost. Rhodes compares it to a stack of pancakes. Reducing or eliminating one charge, like distribution or transmission charges, would be impossible; no substations or poles or wires? No electricity, the metaphorical pancake falls over.

“Even on the public policy items on here, if you get rid of one pancake or charge it’s going to be a very small reduction on utility bills,” he said. “If you really want to comprehensively reduce rates, you can’t target one pancake or one set of charges, you have to target 1,000 things and adjust them all in small amounts.”

Reforming the rates

McKee’s budget proposal takes a chainsaw to most of the state charges on monthly electric bills. The governor proposed pushing back the mandates of the Renewable Energy Standard, which requires the state’s retail electricity providers — including non-regulated power producers and distribution companies — to supply 100% of their retail electricity sales from renewable resources by 2033 to 2050, citing growing costs of procuring reliable and annual sources of electricity.

The standard is a key driver and plank of Rhode Island’s climate mandates. The scenarios laid out in the 2025 Climate Action Strategy, issued by the Executive Climate Change Coordinating Council (EC4), that outline what’s needed to reach net-zero by 2050 rely on the current Renewable Energy Standard remaining as law.

“The state of Rhode Island should be doing everything within its power to bring more local clean energy online and coordinate with neighboring states to unlock the most affordable clean energy resources. This will not only help achieve our Renewable Energy Standard and lower energy costs, but it will also support our clean energy economy and grow family-sustaining jobs across the state.” Emily Koo
Acadia Center Rhode Island program director

Also on McKee’s chopping block are the state’s energy efficiency programs. The suite of rebates and incentives, administered by Rhode Island Energy, allow Rhode Islanders, at a reduced cost, to receive energy audits of their homes, buy energy-saving appliances like stoves and refrigerators, and weatherproof places where energy escapes such as doors and windows.

That move is unpopular with environmental groups, which view the best way to tamp down electricity costs is by ensuring Rhode Islanders use less energy at home. The energy efficiency programs spend ratepayer dollars but come with a lot of benefits and savings in the long run.

According to a study from the Acadia Center, energy efficiency programs in Rhode Island have returned an estimated $5 billion in benefits back to Rhode Islanders over the lifetime of the programs. For every $1 spent in the programs, the state will see $1.97 in benefits.

The program also supports some 11,330 jobs in related industries, and has saved 18.8 years of electricity from the Manchester Street Power Station in Providence. Put another way, energy efficiency programs reduced carbon emissions equivalent to taking 1.65 million cars off the road for one year.

The governor’s budget would cap ratepayer funded charges to $75 million per year, and have it renewed every three years instead of annually. Budget officials estimated it would save $21 million next fiscal year, and a combined $105 million over the next five years.

Energy efficiency programs already got a cut last year, after Rhode Island Energy proposed to the PUC it was time to “right-size” the program. Regulators approved a $19 million cut to the program, over the opposition of the state’s Energy Efficiency Council, which allocates the funds and oversees the programs.

“True rate reform requires us to get into each program and ask, do we still need to do it? Can we do it more efficiently if we still need to do it? Is there any way to get the same results at a lower rate?” Rhodes said.

Rhodes gave Connecticut as an example. Last year lawmakers there took energy efficiency charges out of the monthly utility bills, instead choosing to fund the programs with state bond money. In July, Gov. Ned Lamont asked Connecticut’s State Bond Commission to release $155 million in bond funds to offset public benefit charges on utility bills after lawmakers passed an omnibus energy affordability bill.

Rhode Island is no stranger to bond funding for its environmental programs; a Green Bond borrowing money for environmental projects such as brownfield remediation and green space expansions or improvements appears on the ballot every statewide election day. McKee even proposed using $10 million of this year’s Green Bond to fund the energy efficiency programs in place of utility charges.

But as some open space programs have found out, getting onto the bond in the first place can be something of a political question. Just because one item was on the ballot in previous bond cycles doesn’t guarantee dedicated funding in every bond, as the state’s farm preservation program found out in recent years.

Rhodes acknowledged the programs have value, but he believes the state needs to have a larger conversation on how they want to pay for these programs.

“It’s a choice to pay for these programs on our utility bills,” Rhodes said. “But the conversation we should be having is, should we be paying for all of it through our bills? I would love to have that conversation today.”

Looking ahead

There’s at least one more charge that could increase this year on electric and gas bills: the base rate distribution charge. The PUC, for the first time since 2018, is considering an increase in the charge from Rhode Island Energy, about a $7 increase per bill.

The charge is meant to compensate Rhode Island Energy for the costs it incurs running the distribution system for gas and electricity. The money can pay for transformers, new natural gas hookups, power line replacements, and other infrastructure.

The utility company last year filed 20 books of testimony and thousands of pages of documents with the PUC, outlining how the company is going to use the extra money from the charge. Whether those investments are prudent will be up to the PUC to decide, which will likely issue a decision on the charge before Labor Day.

What will next winter look like? It’s tough to know how costs will shake out until Rhode Island Energy completes its procurement. Bausch, in his testimony to the PUC in September, noted thanks to strong natural gas storage supply, prices for New England were high, but relatively stable with little volatility.

But he also told commissioners the Energy Information Administration (EIA), which tracks price data and energy supply around the country, was projecting a tighter natural gas market in 2026, which could increase prices and electric rates, again.

“It’ll depend on the result for our next three auctions, next year’s winter rate could be higher, or it could be lower,” Bausch said. “I’d like to be able to provide more confidence one way or the other, but it’s difficult to predict market futures.”