HARTFORD, Conn. -- Connecticut pays the highest electricity rates in the continental United States. The only state that pays higher electricity rates is the island state of Hawaii.

Close to half the payments you make to Connecticut Light and Power or United Illuminating do not end up going to those companies. The payments go to wholesale electricity producers. And some state leaders said wholesalers are profiting handsomely from a system that is not working.

It’s hard to live without electric power. However, it seems to be getting harder and harder to pay for it here in Connecticut and the prices seem to skyrocket during certain months of the year.

Figures from the United States Energy Information said in 2007, the average retail price of electricity in Connecticut for residential customers was almost $150 a month.

The only places in the continental United States that come close to what Connecticut pays were Texas at $140 a month and Maryland at $129 a month.

Consumers like Robert Santerre are not sure how much more they can afford.

Santerre said, “You have to take a whole check, a whole paycheck, just to pay a month of heat."

State leaders, like Rep. Vickie Nardello, Chairwoman of Connecticut’s Energy and Technology Committee, admit that decade ago they supported the deregulation of the electricity industry as part of an effort to lower prices.

Deregulation meant ending the monopolies held by electric utilities.

Connecticut Light and Power and United Illuminating had to get out of the business of making electricity and sell off their power plants. That left them to only deliver electricity on their power lines.

The idea was that other companies would make the electricity, and people could choose where they bought it.

Connecticut Attorney General Richard Blumenthal, who admits 10 years ago he supported electric deregulation, believes prices skyrocketed because of the way power is now sold.

Part of the way that it’s done involves daily electricity auctions overseen by Independent System Operator New England.

Blumenthal said, “This system is so broken. The least efficient, most costly source of power is the one that sets the price for everyone."

The nonprofit corporation set up to make sure the region has an ample supply of power holds regular wholesale auctions. The real problem, critics added, was that in these auctions, the price of the electricity is often pegged to the bid offered by one of the most expensive power plants, which is usually fueled by natural gas, with coal and nuclear power plants costing a lot less.

Nardello said, "Nuclear plants are paid as if they're gas plants, coal plants are paid as if they're gas plants, and what happens is you create windfall profits for those particular owners of those plants because of the fact they're getting paid much more than the cost of producing the electricity."

So when natural gas costs were surging before the recession, Millstone, a producer of low-cost nuclear power, made an annual windfall profit in 2008 of more than $500 million, according to documents obtained from industry consultant Robert McCullough who has written research critical of ISO-New England pricing method.

Natural gas prices are down because of the global recession, so the profits are not big. Millstone owner Dominion Resources questioned McCullough’s figures and pointed out it is just working within the rules set up by ISO-New England.

Dominion said, “We are operating within the system that we didn't create, we had no say whatsoever when deregulation was passed.”

The attorney general placed most of the blame on ISO-New England, whom he said made the electricity auction rules.

Blumenthal said, "For consumers, this system has been a catastrophe."

Channel 3 Eyewitness News I-Team Reporter Len Besthoff asked ISO-New England why its auction pegs the wholesale price of power to the more expensive bids. Vice president of marketing development Bob Eithier said the profits electricity producers make give them an incentive to build even more power plants in the region.

Eithier said, “I think the bottom line in Connecticut is, they're in the best position they've been in as far as energy future for decades. They have a robust transmission system, they have adequate resources, they have a great deal of new resources entering the market that are much cleaner than the old resources."

Several moves were made at the Capitol to give the state more control over electricity markets. Nardello tried several times to get a bill passed that would end retail electric choice, set up a state power authority to buy wholesale power directly from power generators at minimal markup and tax any profit generators made over that amount. That is something she believed could reduce electric bills by as much as 20 percent in the short term.

Nardello said, “So the idea is you want to get out from under the ISO New England rules. We realize that they're skewed to benefit generators."

This would, in effect, turn back the clock on significant chunk of electric deregulation in Connecticut. The Energy Information Administration said that of the 22 states that deregulated their electricity markets and allowed retail choice, a third have backtracked and suspended their programs.

State Rep. Terry Backer, who used to be the chairman of the Energy and Technology Committee, said even if Connecticut suspended electric deregulation and lowered everyone’s bills, it would not solve anything because people will use more power.

Backer said, “In the end of it, we need to help people use less energy.”

Meanwhile, hundreds of Connecticut businesses are taking advantage of the choice electric deregulation has brought to Connecticut.

Prospect Machine Products participates in a bulk purchasing program that The Connecticut Business and Industry Association offers, getting Rich Laurenzi 10 to 20 percent off retail electric prices.

Nardello said that while her bill attempting to roll back electric deregulation failed during the last legislative session, it was the closest she has come so far, and she and others plan to try to introduce a similar bill soon.