Why Is Electricity So Expensive in Massachusetts?

If you live in Massachusetts, you know the state is notorious for expensive energy bills. MA's rates consistently rank among the highest in the USA. In 2024, the average rate in Massachusetts was 30.73 cents per kilowatt-hour, ranking as the 7th highest in the nation.

The rising cost of electricity has become a major concern for homeowners, renters, and business owners across the state, especially in the cooler months. But what are the reasons behind these high rates, and what can consumers do to save money on electricity?

This article dives deep into the Massachusetts electricity market. We'll start with the history of deregulation, known as Energy Choice, and the role of the state's largest utility companies. We also go over the factors that have led to these sky-high rates. We also cover what programs are available to help those facing financial hardship and how residents and businesses can take control of their electricity bills today.

A Historical Overview: Massachusetts’ Electricity Deregulation

To understand why electricity is so expensive in Massachusetts, we first need to look at the state’s journey toward electricity deregulation. In the 1990s, the Massachusetts legislature made a significant decision to overhaul its electricity market. Before deregulation, electricity generation, transmission, and distribution were handled by a single utility company in any area. This left consumers like you with no choice but to pay the rates set by their utility company.

In 1997, Massachusetts passed the Electric Restructuring Act to increase competition by allowing consumers to choose their electricity supplier. The expectation was that competition would lower prices. However, while deregulation did offer consumers more choices and introduced competition among suppliers, it didn’t lead to the price reductions that many had hoped for. Instead, electricity prices in Massachusetts continued to rise due to various other unforeseen factors.

The Impact of Deregulation on Massachusetts Electric Rates

Deregulation separated electricity generation from transmission and distribution. Utilities like Eversource and National Grid now manage the delivery of electricity, while customers can choose their supplier for the generation portion.

The ability to shop around for electric suppliers has led to more competitive pricing and given consumers more energy plan options. However, while many consumers benefit from deregulation, some still face rising costs due to outside factors. These include infrastructure limitations, seasonal energy demand spikes, and external market conditions.

Key Factors Driving High Electricity Costs in Massachusetts

Several factors contribute to Massachusetts' high electricity rates:

Limited Natural Gas Infrastructure

One of Massachusetts’s biggest drivers of high electricity costs is the state's dependence on natural gas. Nearly two-thirds of New England's electricity is generated from natural gas, but the region's infrastructure for transporting natural gas is severely limited. Massachusetts has only a few supply pipelines, and during peak demand periodsespecially in winter when heating needs surgethere is not enough capacity to meet the region's growing demands.

This supply bottleneck causes natural gas prices to spike, which in turn raises electricity prices. Without sufficient pipeline capacity to bring in enough natural gas, power plants face higher fuel costs, which are passed on to consumers in the form of higher electricity rates.

Seasonal Demand Fluctuations

New England's brutal winters create a dramatic increase in electricity demand. Massachusetts residents rely on electricity and natural gas to heat their homes, and when demand surges, so do prices. This volatility is compounded by the region's limited energy supply, which causes energy prices to fluctuate during periods of peak demand.

Renewable Energy Transition

The people of Massachusetts have been leaders in the transition to renewable energy. The state legislature has set admirable goals for reducing carbon emissions and increasing the use of clean energy – well above the federally-required greenhouse gas removal requirements. While this is a big step forward for protecting the environment, it has also led to higher electricity rates in the short run. The costs of building and maintaining renewable energy infrastructure, such as wind and solar farms, are significant, and these costs are often passed on to consumers through their utility bills.

For instance, Massachusetts has committed to sourcing 100% of its electricity from renewable energy by 2050. In the meantime, the state has implemented programs like the Renewable Portfolio Standard (RPS), which requires utilities to purchase a certain percentage of their electricity from renewable sources. While this policy supports the growth of clean energy, it also raises the cost of electricity in the short term as utilities make the necessary investments to meet these mandates. Fortunately, in the long run, these investments should lead to more energy security and cost stability.

Energy Importation and Transmission Costs

Massachusetts is part of the New England energy grid but relies heavily on importing energy from outside the region. This dependence on imported electricity means the state is subject to fluctuations in external energy markets outside of MA's control. The costs of maintaining and upgrading the state’s aging energy transmission infrastructure also contribute to above-average rates.

Eversource and National Grid: The State’s Largest Utilities

Massachusetts’ electricity landscape is dominated by two major utility companies: Eversource and National Grid. These utilities are responsible for delivering electricity to most of the state's residents and play a significant role in shaping electricity rates.

Eversource Massachusetts

Eversource is the largest energy provider in Massachusetts, serving over 1.4 million electricity customers statewide. The company has faced multiple rate increases in recent years, driven by factors like infrastructure upgrades, increased natural gas prices, and investments in renewable energy.

In 2023, Eversource announced that customers could expect a significant increase in electricity rates, with average bills rising by nearly 30% in some areas. This increase was primarily due to the rising cost of natural gas, which powers much of the state’s electricity grid. Despite these rate hikes, Eversource offers several programs to help customers manage their bills, including energy efficiency programs and budget billing options.

National Grid Massachusetts

National Grid is another major player in the Massachusetts electricity market, serving around 1.3 million customers. Like Eversource, National Grid has faced its share of rate increases due to rising energy costs and investments in renewable energy. National Grid has also been proactive in offering programs to help customers struggling with high bills, including payment assistance plans and energy-saving programs.

Both Eversource and National Grid face significant challenges as they work to modernize their infrastructure and meet the state's renewable energy goals, but these efforts come at a cost to consumers.

Programs for Massachusetts Residents Facing Financial Hardship

High electricity rates are painful for everyone in The Bay State. However, they are particularly challenging for low-income households in Massachusetts. In Boston, for example, electricity bills account for 13.4% of the household income each month. Thankfully, several programs are available to help residents manage their bills:

State Assistance Programs

• Low-Income Home Energy Assistance Program (LIHEAP): This federally funded program provides financial assistance to low-income households to help cover heating and electricity costs during the winter months.
• Residential Assistance for Families in Transition (RAFT): This state-funded program offers short-term financial assistance to families facing utility shutoffs or eviction due to unpaid utility bills.

Utility Programs

Both Eversource and National Grid offer financial assistance programs, including:

• Discount Rate Programs: These programs give low-income customers who qualify a discount on their monthly electricity bills.
• Budget Billing: This program helps customers manage their bills by spreading out electricity costs evenly over the course of the year, reducing the impact of seasonal price spikes.
• Energy Efficiency Programs: Both utilities offer energy efficiency programs that help residents reduce their electricity consumption, such as rebates for energy-efficient appliances and free home energy assessments.

Bill Payment Programs

Please contact your local utility if you or a loved one struggle to pay your monthly energy bill. They can help you find a solution to keep the lights on in your home and answer any questions regarding the above programs.

Strategies for Reducing Electricity Bills

Although Massachusetts residents face the 7th highest electricity rates in the nation, there are steps you can take to reduce your bills right away:

Compare Electricity Suppliers

Thanks to deregulation, Massachusetts residents can shop around for their electricity supplier. By comparing rates from different suppliers, you can find lower rates and save money on your electricity bills. Simply enter your zip code to compare rates from the top local suppliers and find the best deal.

Increase Energy Efficiency

Reducing electricity consumption is one of the most effective ways to lower your bill. Some simple strategies include:

• Installing a smart thermostat better manages your home's heating and cooling.
• Replacing old appliances with energy-efficient models that use less electricity.
• Sealing drafts and improving insulation to reduce the need for heating in winter.
• Use LED lighting instead of incandescent bulbs to save.
• Unplug devices when not in use to prevent phantom energy drain.
• Wash clothes in cold water to reduce heating costs from hot water usage.

See our Energy Savings Tips for more easy ways to save. Both Eversource and National Grid offer rebates and incentives for energy-efficient upgrades, making it easier for homeowners to invest in these upgrades.

How Businesses Can Manage Electricity Costs

Businesses in Massachusetts are also feeling the pinch of high electricity rates. Fortunately, there are several strategies that business owners can use to control their energy costs:

• Energy Audits: Many utilities offer free or low-cost energy audits for businesses, which can identify opportunities to improve energy efficiency and reduce consumption.
• Demand Response Programs: Some utilities offer programs that offer businesses financial incentives for reducing electricity use during peak demand periods.
• Implement energy-efficient office equipment to lower electricity consumption.
• Conduct regular energy audits to identify inefficiencies and areas for improvement.
• Encourage telecommuting to reduce energy usage in the office space.

Businesses can significantly reduce their electricity costs over time by making energy-efficient upgrades and using these programs.

Conclusion

Electricity in Massachusetts is expensive due to a combination of factors, including limited natural gas infrastructure, seasonal demand fluctuations, and the costs associated with transitioning to renewable energy.

While these challenges are unlikely to disappear overnight, both residents and businesses can take steps to manage their electricity costs, from comparing suppliers to taking advantage of energy efficiency programs. By staying informed and proactive, Massachusetts consumers can navigate the state's complex electricity market and find ways to reduce their bills to a manageable level.