The moratorium will end July 1, but Murphy said he will leave in place a "grace period" until Dec. 31. That means there will be no shut-offs before then.
Murphy also said the extra time will give people a chance to enroll in a payment plan, if needed.
The announcement is the latest relaxation of coronavirus measures.
Murphy signed legislation earlier this month ending the public health emergency and most of the COVID-19 executive orders. The utility shutoff moratorium was one of the dozen orders that he had kept in place.
About 65% of the state's adult population is fully vaccinated, or 4.5 million people, according to the Centers for Disease Control and Prevention. Murphy has set a goal of reaching 70% by June 30.
The virus is increasingly just affected unvaccinated people, Murphy said alongside state Health Department officials.