Massachusetts residential and small-business electricity customers paid approximately $12.3 billion above wholesale market prices over the past decade because utilities locked in fixed-rate supply contracts that carried a median 43 percent premium over real-time spot prices, according to a Synapse Energy Economics analysis of basic-service rates from 2015 through 2024. The markup translates to roughly $22 per month for the typical household on default service, a cost embedded in bills long before recent rate spikes drew public attention.
The structure of the market explains the persistence of the gap. Distribution utilities such as Eversource and National Grid do not generate power; they procure it from competitive suppliers through semi-annual fixed-price solicitations and pass the cost through to customers without markup. Suppliers, in turn, build risk premiums into those bids to hedge against New England’s extreme winter gas-price volatility and the obligation to serve a fixed load regardless of market conditions.
Utility and supplier responses highlight the tension at the heart of the debate. NRG Energy pointed to the state’s renewable portfolio standards as a cost driver, while Eversource argued that fixed-rate contracts inherently carry insurance value against events like the 2014 polar vortex or Winter Storm Elliott, when spot prices would have devastated unprotected customers. Both arguments have merit, but neither addresses whether the current procurement cadence and risk-allocation framework still serve a decarbonizing grid.
Synapse’s proposed hybrid model — locking in a portion of forecast load through fixed contracts while purchasing the remainder on the spot market — attempts to capture the benefits of both approaches. The risk, as Eversource correctly notes, is asymmetric: a single severe winter can erase years of spot-market savings, and the region’s pipeline constraints make such events a structural feature, not a bug. Any redesign must account for the fact that gas-fired generation still sets marginal prices in ISO-NE far more often than policymakers assume.
The deeper issue is that Massachusetts continues to price gas-risk exposure using a procurement playbook designed for a different resource mix. As offshore wind, solar, and storage enter the queue, the correlation between gas prices and wholesale electricity costs will weaken — but only if procurement rules evolve to let those resources compete on equal footing. Until then, basic-service customers are effectively overpaying for a hedge against a fuel mix that the state’s own mandates are trying to retire.
Read the full report at Energy Central.