Northeast's Natural Gas Shortage, Not Reliance, Drives Electricity Prices

New England's electricity prices are among the highest in the country, and some media outlets have suggested that they're high because of the region's reliance on natural gas. However, this claim is misleading.

Natural gas now makes up 55% of New England's energy mix, up from just 15% in 2000. This shift has actually led to lower wholesale electricity prices, as natural gas plants have displaced older oil and coal plants. The U.S. Energy Information Administration has documented this trend, noting that favorable natural gas prices have contributed to increased use by the electric power sector.

The shale boom cut natural gas prices in half, generating $74 billion a year in consumer welfare benefits. However, the Northeast is struggling with a lack of pipeline capacity, which has kept it reliant on oil. The largest oil fields are far from New England, while the largest natural gas reserve is right next door.

Politicians have restricted supply to cater to environmental activists, resulting in higher electricity prices. If natural gas were as abundant as water, electricity prices would likely be lower.