Connecticut’s energy prices — 140% higher than the U.S. average — threaten the state’s economic competitiveness as neighboring states add gigawatts of new electricity demand while Connecticut lags with minimal load growth, state officials and industry executives said at an energy policy forum hosted by the Hartford Business Journal Thursday morning.
Daniel O’Keefe, commissioner of the Department of Economic and Community Development, said the state’s high energy costs pose an “existential threat” to its manufacturing-heavy economy, which represents 12% of Connecticut’s economic output — higher than any other state in the region.
“I can sell a lot of things about Connecticut. I can’t sell a megawatt that’s more expensive than anywhere else,” O’Keefe said. “That is a greater problem for Connecticut than it is for the region.”
High energy prices may be suppressing economic growth in Connecticut, particularly as data centers, artificial intelligence applications and advanced manufacturing drive explosive electricity demand nationwide, officials said.
To help lower costs, O’Keefe proposed that Connecticut and other New England states move away from individual state-level power purchase agreements toward coordinated regional energy procurement through the ISO-New England grid system. He compared the current approach to a “prisoner’s dilemma,” where states acting independently fail to optimize outcomes for the broader system.
“Decisions we make about procurement of energy should be done on a regional basis,” O’Keefe said. “We are part of a regional grid. We’ve got to recognize that dynamic.”
However, not all cost drivers stem from procurement decisions alone. Anne C. George, vice president and chief of external communications at ISO-New England, cautioned that while natural gas capacity expansion could reduce wholesale supply costs, consumers’ retail bills comprise four components: distribution rates, transmission costs, wholesale energy supply and public policy charges.
“We have to think about all of those pieces and try to make sure that we’re doing each bucket in the most cost-effective way,” George said.
O’Keefe acknowledged Connecticut’s structural challenges, including lack of local energy resources and limited natural gas infrastructure. But he said policy decisions made over the past two decades — aimed at meeting emissions reduction goals for 2040 and 2050 — have constrained natural gas development while the state invested in renewable energy.
“We’ve set goals, and the goals are laudable, but they’re dates,” O’Keefe said. “What we’ve done is we’ve let the system design start to drive towards those goals, even though they were goals. And now all of a sudden, we find ourselves in this incredibly challenging situation.”
Natural gas currently provides roughly 45% to 50% of electricity generation in the region, according to George.
For the long term, O’Keefe advocated for planning 10 to 15 years ahead to incorporate nuclear power, including small modular reactors expected to come online within a decade, and nuclear fusion technology, which could be viable in 15 to 20 years.
New England’s energy mix includes two nuclear facilities: Millstone in Connecticut and Seabrook in New Hampshire.
Connecticut’s manufacturing sector is growing while declining in nearby states, making the state’s economy particularly exposed to energy price impacts, O’Keefe said. He warned that without addressing the pricing challenge, the state faces significant economic consequences.
“If we can’t fix this over the next number of years, I think our economy is in trouble,” he said.
