United Illuminating’s plan to increase electricity prices drastically may be a headache for permanent residents of New Haven, but Yale students may have equal reason to be concerned.

Yale officials said Thursday that rents for students living off-campus in Yale-owned buildings may increase following United Illuminating’s announcement that it would seek state approval for a large increase in electricity rates. Meanwhile, amid speculation that the corporation may leave the Elm City in the coming year, a state lawmaker has filed legislation to restrict UI’s ability to seek future rate increases.

Director of University Properties David Newton said that while he tries to accommodate its tenants’ financial needs, University Properties will have to pass on some part of the increased energy cost to them to maintain the integrity of the market. If University Properties chose to shoulder the cost themselves, it would cause rent prices to decrease in the downtown area, he said.

“We are mindful that we are part of the Yale community and we crank that into the equation,” he said. “[But] we want to be sensible to and equivalent to the other owners on the market [and] we look to pass those [increased] costs on, or at least part of them, to the people who are using those spaces.”

University Properties owns residential buildings downtown and near Science Hill that house both undergraduate and graduate students.

Though there was a general consensus of opposition to the rate increase among off-campus students, some will be affected more than others.

Frank Newman ’08 will not be affected by the rising electricity costs because his current lease prevents his landlord from increasing rates mid-lease. As a result, his landlord comes to his apartment more often to make sure energy is used efficiently, he said.

But Mark Havel ’07 is not as lucky. Though he does not regret his decision to move off campus, he said, the new rates will be an additional burden.

“I wish I had known about this [before I moved off campus],” he said. “My roommate pays for the electricity, [but] maybe I will have to start chipping into that too.”

In response to rising electricity costs and to electricity congestion in the local power grid network, Yale Director of Utilities Joseph Nadolny said, the University built a power generating plant seven years ago that uses natural gas to satisfy part of the central campus’s needs. The University now generates 90 percent of the electricity consumed on the Central Campus and Science Hill, and 60 percent of the University’s total electricity needs.

Nadolny said the University has a contract with UI until June and will be unaffected by any rate changes until its expiration. But he said the University is looking at different ways to cut energy costs after the expiration of the contract, which might include an expansion of the self-generating facilities.

While state officials consider measures to fight soaring energy prices, local retail and restaurants are trying to avoid passing off costs to customers. Jeff Horton, the general manager at Scoozi Trattoria and Wine Bar on Chapel Street, said his restaurant has managed to absorb the overhead cost without increasing prices or lowering staffing by becoming more cost-effective when purchasing supplies. Unlike most other business, he said, restaurants can rarely afford to raise dining prices.

“You really can’t [raise prices] without alienating the clientele, so we just try to look for ways to control the expenses in other areas that won’t affect our guests,” he said.

New Haven State Representative and Associate Majority Leader Patricia Dillon EPH ’98 said her proposed legislation would prevent UI from increasing rates in the future to fund a possible move out of New Haven, which she and other government officials said would negatively impact the local community. But UI officials said that moving to a centralized facility — which would consolidate their corporate headquarters and physical operations — would cut long-term costs and benefit customers, including New Haven residents.

“[UI] would be vacating a building, they would be taking jobs with them, they would be taking middle class office workers who frequent local restaurants and would be part of the economy,” Dillon said. “If they are going to move operations out of New Haven … then I want them to absorb the cost themselves.”

Although the company has not officially announced that it will move out of New Haven, company officials have been considering possible sites for a new headquarters in neighboring cities including West Haven, Milford and Orange.

UI Spokeswoman Anita Steeves downplayed the impact a potential move could have on the city’s economy, saying that even if the company does move its headquarters, it would pay the same amount of property tax on infrastructure buildings it will continue to maintain in New Haven. These property taxes, she said, are UI’s biggest financial contribution to the city.

The state legislature deregulated the electricity market in 1998, but the decision was criticized intensely by New Haven Mayor John DeStefano Jr.

Rising energy prices and regulation of the electricity market were issues that dominated this year’s gubernatorial campaign between DeStefano and Gov. M. Jodi Rell. During the campaign, he warned that electricity prices would rise in the months following the election.

UI announced on Nov. 22 that it would seek the state’s approval for increases in electricity rates that would translate to a 38 percent increase in household bills and a 50 percent average increase in business electricity costs. For it to come into effect, UI needs the Department of Public Utilities’s approval when it meets on Dec. 8.