Driving Up The Cost Of Energy While Claiming To Promote “Affordability”

From the MANHATTAN CONTRARIAN

Francis Menton

A fair criticism of politicians is that they all lie, at least to the extent of engaging in extreme levels of spin and/or exaggeration to put the best face on their proposals and programs. But some political lies are worse than others, in that they go far beyond mere spin or exaggeration and get into the blatantly counter-factual. In that category are the claims of many of the governors of the Northeastern states that they are promoting energy “affordability.” These lies are particularly consequential in that they involve very large economic effects and vast waste of resources.

In late 2025, the talking point of energy “affordability” became a major theme of the successful candidacies of Abigail Spanberger and Mikie Sherrill for the governorships of Virginia and New Jersey, respectively. Elsewhere in the region, the governors’ offices were not up for election in the off year, but the sitting governors have equally been talking up their energy “affordability” agendas. See for example, Governor Maura Healey of Massachusetts here on March 16 (“Governor Maura Healey today is setting strong new targets for bringing more energy into Massachusetts and lowering energy bills.”); and Governor Kathy Hochul of New York here on May 7 (“[Governor Hochul] Tackles Energy Costs With Sweeping Affordability Package.”).

And yet somehow, it’s hard not to notice that the electricity rates in the Northeastern states are among the highest in the country. The federal government’s Energy Information Administration puts out regular reports of state-by-state comparisons of “Average Price of Electricity to Ultimate Customers.” The latest such chart has data from February 2026. The national average rate for residential customers for that month (shown at the bottom of the chart) was 17.65 cents/kWh. Look through the list of average rates by state for residential customers, and it is readily apparent that the rates in the Northeastern states are uniformly above the national average, with many close to double: New York (29.99 cents/kWh); Connecticut (30.77 cents/kWh); Massachusetts (30.46 cents/kWh); Rhode Island (29.45 cents/kWh). Outside the Northeast, only a few outliers (California, Alaska, Hawaii) break the 25 cents/kWh level. Alaska and Hawaii have the excuse of being geographically remote. The Northeastern states and California do not have that excuse.

So what is the secret sauce of the Northeastern states that drives up their electricity rates even as their governors claim to be pursuing “affordability”? There are multiple factors, and I don’t mean to underemphasize the effects of the fantasy pursuit of the intermittent “renewables,” wind and solar. But there is a factor unique to the Northeast that stands out as being completely incompatible and irreconcilable with any claim of pursuing energy “affordability.” That factor is participation in something called the Regional Greenhouse Gas Initiative, or RGGI.

Have you heard of RGGI? Here is a link to their website. RGGI describes itself on the site as follows:

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont to cap and reduce power sector CO2 emissions. . . . RGGI is the first market-based, cap-and-invest regional initiative in the United States. Within the RGGI states, fossil-fuel-fired electric power generators with a capacity of 25 megawatts1 or greater (“regulated sources”) are required to hold allowances equal to their CO2 emissions over a three-year control period. 

Although the website has apparently not been updated to reflect it, Virginia just (April 2026) re-joined RGGI under new Governor Spanberger, after previous Republican Governor Glen Youngkin had withdrawn. Thus every state along the Atlantic coast from Maine to Virginia, with the sole exception of Pennsylvania, is now a member of this compact. Pennsylvania had been a member, but recently withdrew in late 2025 as a part of a budget deal pushed by the Republican-controlled legislature over the opposition of the Democratic Governor.

As the RGGI website frankly admits, the whole idea is to drive up the cost of electricity produced by fossil-fuel power plants. The fossil fuel power plants “are required to hold allowances equal to their CO2 emissions.” RGGI sets the amount of the allowances, and then they are auctioned off to the utilities (and others). Over time, the amount of allowances available intentionally decreases. The price that the utilities pay for the allowances then gets added into the consumer electricity bills.

Virginia’s rejoining the compact — under a new Governor supposedly promising “affordability” — has set off a market frenzy, apparently driven by the facts that the amount of CO2 allowances is limited, but Virginia is a main location for a large wave of new power-hungry data centers. From OPIS Insights, May 7 (OPIS is an affiliate of the WSJ):

Regional Greenhouse Gas Initiative (RGGI) carbon prices have rocketed to fresh record highs, as traders scramble to reassess compressed supply in the wake of Virginia’s decision to rejoin the program. During the week of April 27-May 4, V26 RGGI allowances for December 2026 delivery traded on ICE repeatedly above $40/short ton, with transactions reaching $58.50/st by midday Monday, May 4. On May 4, OPIS assessed RGGI V25/V26 December 2026 at $52.875/st. . . . By May 4, the OPIS RGGI V25/V26 December 2026 price had gained a total $24.115/st, or 83.85%, from an assessment of $28.876/st on Apr. 13.

So how much does the requirement to purchase RGGI CO2 allowances drive up the price of electricity for a residential consumer? Even though the whole idea is to drive the price up in order to force a decrease in consumption, the mechanism by which the additional cost gets included in your electric bill is structured to be as opaque as possible. You will not find a line item on your bill to tell you how much of what you must pay is attributable to the artificial added cost from RGGI. However, multiple people have done analyses to get a rough quantification of the cost impact at recent or current levels of price for RGGI allowances. Here is one done by my friend Roger Caiazza (the Pragmatic Environmentalist of New York) with the assistance of Perplexity AI. That analysis goes as recently as the RGGI auction of March 2025, at which point the allowance price was $19.76 per short ton.

Roger’s conclusion at that time was that the RGGI auctions were adding about $8-11/MWh to the wholesale cost of electricity, for electricity produced by natural gas. That would mean an addition of about 1 cent/kWh on a consumer’s bill. A penny may not seem like much, except when you realize that the average price in the country is less than 18 cents/kWh, so the penny is about 6%. And now the allowance price has gone from about $20/st to over $50/st, which means that the effect on a consumer’s bill goes from about a penny/kWh to more like 2.5 cents. Now we are talking about an intentional 10-15%+ increase in consumer electricity prices.

And remember that the structure of the program is that the amount of allowances goes down every year and the price is intentionally driven up. And data centers are going in all over the place. And the Northeastern states have refused to build new power plants for a couple of decades now in the midst of the climate hysteria. So the 10-15% extra cost being experienced now is only the beginning of much worse to come.

The worst part of the RGGI “cap and invest” scheme is that the consumers get absolutely nothing for the increased cost. It is just a gratuitously inflicted injury brought about by completely artificial scarcity.

Keep this in mid when you hear a politician from an RGGI state talking about how they care about energy “affordability.”