By Maggie Molina | Wed, March 4, 26
Blaming energy efficiency for rising energy prices is a myth that is unfortunately gaining traction. It’s a convenient narrative, but the data simply doesn’t support it. The real drivers of rising prices are far more complex.
Across the Northeast and Mid-Atlantic, the urgency to address high energy bills is unfortunately leading to misguided attacks on energy efficiency fueled by this false narrative. Some states are proposing to raid efficiency funds for short-term bill credits or to plug annual budget gaps, while others are proposing cutting or capping efficiency budgets, as we recently summarized.
It is time to refocus the conversation on solutions that improve affordability and reliability. Energy efficiency and demand flexibility are such solutions, and they can be deployed quickly and cost-effectively to lower bills and meet rising energy demands.
What is Really Driving Rising Energy Prices
Recent research by the Lawrence Berkeley National Laboratory (LBNL) analyzed the potential factors most likely to influence state-level electricity price changes over the past five years. They analyzed factors such as age-based replacement and supply-chain constraints for transmission & distribution (T&D); gas price fluctuations and exposure to global LNG market prices; electricity load growth; and others.
Their findings are clear: the biggest contributors to rising prices are T&D infrastructure costs, extreme weather recovery and mitigation, and higher gas prices– not energy efficiency. Utilities are upgrading aging poles and wires and those costs increase rates. But unlike efficiency programs, T&D and extreme weather costs do not appear as a clear line item on bills, making it harder to see.
Regional analyses echo these cost drivers. Maine analyzed trends and found that rising prices stem from fossil fuel dependance, storm-related costs, aging infrastructure, and inflation. ISO New England recently reported how colder weather, higher demand, and spiking natural gas prices pushed January wholesale electricity prices to their highest levels since 2014. In PJM, prices are also rising due to record-setting capacity auctions, which are driven in large part by load growth from data centers.
LBNL found that efficiency programs were not significant drivers of retail price increases. My own analysis presented to New England regulators last spring reached the same conclusion: efficiency budgets are not correlated with recent electric bill increases.
The takeaway: energy efficiency is not the culprit.
Cutting Efficiency Budgets is Costly and Harmful
Despite this, some energy regulators and policymakers are attacking the energy efficiency line-item on bills. But cutting or capping these budgets would hurt households, workers, and businesses by reducing the very programs that help improve affordability by lowering customer bills. Cuts would also harm the local economy by disrupting local, small businesses and contractors who rely on regulatory certainty. Equity initiatives, which are designed to reach underserved communities, would also be undermined.
The Massachusetts House’s recent passage of H5151 is a stark example. The bill would cut at least $1 billion from the MassSave budget by July 1, 2026 – well into the approved 2025-2027 program cycle. It is the policy equivalent of slashing the budget for a wind farm halfway through construction. While the stated intent is to cut marketing and administrative budgets, these are only a fraction of the overall costs, making cuts of this magnitude unworkable. The ripple effects would hit contractors, businesses, and customers across the board.
And the equity impacts would be severe. MassSave has made major strides in equitable program design after years of efforts by community-based organizations and stakeholder engagement. Slashing budgets now would reverse that progress and leave high-burden households behind.
Energy efficiency is a core affordability solution– let’s treat it that way.
Once we move past the myths, we can focus on strengthening demand-side resources – including energy efficiency, demand flexibility, efficient electrification, and virtual power plants - to meet the region’s energy affordability and reliability goals. Here are four strategies that can strengthen demand-side programs for energy affordability:
Using advanced metering data and building data to target programs for affordability
Ratepayers have already invested in advanced metering infrastructure (AMI). Now it’s time to put the investment to work for energy efficiency and affordability, such as using that data to identify high-burden households, target efficiency upgrades, and improve program performance.
Prioritize equity
One in four households struggles to pay energy bills and most low-income households experience a high energy burden. This inequity is highest in the Northeast, with New England demonstrating the largest gap between low-income and median energy burdens.
Efficiency programs, combined with equitable rate design, are among the best tools to significantly lower costs for low-income households.
Modernizing rate design
Electricity systems are built to serve peak demand, which are the costliest times of the year to serve, but prices don’t typically reflect that reality. Smarter rate design can send clearer market signals for customers and businesses to save energy, lower costs, and improve grid utilization.
Aligning utility incentives with affordability
Utility business models should be aligned with outcomes like customer energy affordability and demand-side performance targets, not just building infrastructure.
Stay Focused on What Works
Energy efficiency has delivered billions of dollars in avoided infrastructure costs across the region – savings that don’t show up on bills but are very real. It is one of the strongest tools we have to lower energy bills and the demand on aging infrastructure. And it not only lowers bills for ratepayers but invests in a local workforce, uplifting the local economy.
As energy demand grows, we need demand-side programs that work smarter, not harder, and that meet the moment with solutions that lower costs. The myth that efficiency is driving high energy bills is a distraction. The real solutions are already in our hands.
