Note: For a detailed yearly (and in some cases, monthly) breakdown by utility, see the
Department of Telecommunications and
Energy website at:
http://www.state.ma.us/dpu/restruct/competition/standardoffer.htm
or
http://www.state.ma.us/dpu/restruct/competition/index.htm#DEFAULT
A new flexible tariff
Two major utilities, Keyspan Energy Delivery and NSTAR, have
recently sought permission to add a new charge – the "flexible tariff"
– to customer bills in order to raise money to help their pension funds recover from
stock market losses. NSTAR is asking DTE to approve a $72.8 million rate increase, which
would take effect on January 1 and affect 193,000 Cape Cod and Martha’s Vineyard
customers. KeySpan, a natural gas provider with an estimated 573,000 customers, is
requesting a $61 million increase. Under the proposal, the tariff would be adjusted
annually.
On August 29, 2003, Massachusetts Attorney General Tom Reilly
submitted a 123-page brief to DTE regarding the proposed rate increases of the two
utilities. He urged DTE not to pass on unnecessary costs to ratepayers under the guise of
rate recovery. "Last year, NSTAR and KeySpan experienced an extremely profitable
winter when utility costs reached all-time highs. Now both companies are asking ratepayers
to pay for pension fund losses when neither utility passed on gains to consumers when the
stock market was thriving during the last decade," he wrote.
The tariff proposal is still under consideration by the DTE. In
June, it postponed its decision until October.
Default service
The issues of default service and the lack of a competitive market
continue to occupy the DTE, which has held a series of ongoing investigations into these
two over-lapping topics.
In June 2002, DTE opened an investigation (Order 02-40) into the
issue of how to utilize default service to foster a competitive environment for
residential and small commercial customers. Filings from the DTE’s ongoing
investigation into the issues of default can be found by searching its website.
DTE 02-40 contains the original order launching an investigation into the provision
of default service and subsequent orders, as well as filings by key stakeholders such as
the Massachusetts Attorney General, the Massachusetts Community Action Program Directors
Association (MASSCAPDA) and distribution utilities and marketers. Included is a statement of principles to govern default service submitted jointly by the Attorney General, NSTAR, a distribution company,
and MASSCAPDA.
DTE 01-54 contains filings reflecting the contrasting positions of DTE and the
various stakeholders during the Department’s year-long investigation of Competitive
Market Initiatives, the objective of which was to "minimize or eliminate any barriers
to competitive choice," and to "identify and implement initiatives that [will]
expand the range of competitive options available to consumers."
DTE orders in this investigation dealt with release of customer
names to competitive suppliers, the process by which marketers could enroll customers, and
the use of electronic transactions in the enrollment process.
In April 2003, DTE issued Order 02-40-B to govern the pricing and purpose of default service in the future and
after the expiration of SOS in 2005. According to Alexander, DTE based its decision on its
overall intent to adopt policies that do not prevent the "most efficient market
structure from developing." Regarding procurement and pricing of default
service, DTE expressed a concern about bidding out 100 percent of each distribution
utility’s default service supply every six month, recognizing that prices in the
wholesale market can change quickly. As a result, DTE adopted the proposal by NSTAR to
procure 50 percent of its default service supply semi-annually for 12-month terms.
DTE also required the utilities to include information in its
default service and standard offer service filing to describe the manner in which it has
complied or intends to comply with its Renewable Portfolio Service obligation, but
declined to set forth any minimum standards for a compliance strategy and specifically
declined to require the utilities to enter into long-term contracts with renewable
resources, even though comments in the proceeding made clear that such long-term contracts
were required to support investments in such resources. DTE also refused proposals to
require utilities to offer a "green" option for default service.
Alexander's conclusion reflects consumer advocate's concern about
the volatility of default service pricing. In the aforementioned June 2003 study on
default service volatility, Alexander pointed out, "The Massachusetts DTE’s
approach to the design and pricing method for default service is crucial since ALL
customers will be provided with this service at the end of the transition period in March
2005. While it characterized its change from 6-month to 12-month default service contracts
as one that will contribute to more stable prices for residential customers, the
significance of this change in preventing volatile wholesale market changes is not clear.
Rather, this approach continues the process of refusing to develop long-term procurement
options for default service supply and makes it very difficult to factor in cost-effective
energy management or renewable energy resources into the default service supply mix.
Massachusetts continues to rely on short-term wholesale market price changes."
Status of retail choice
As of July 2003, 59,733 residential customers, or 2.7 percent of
total residential customers, had signed on with competitive suppliers; 1,431,499 customers
remained on standard offer service, and 716,988 were on default service. (Click here to see migration data.)
In November 2001, Dominion Retail, Inc. announced it would be the
first residential competitive supplier in Massachusetts. Since then, migration statistics
have increased slightly. While the state’s choice website lists four residential
suppliers, Dominion is believed to be the only one actively marketing to this customer
class.
Raid on renewable trust fund
The 1997 restructuring law created a renewable energy trust funded
by a ratepayer charge of 0.075 cents per kWh, which was to be used to increase electricity
fuel diversity by funding renewable projects. However, during the 2003 legislative
session, the Renewable Energy Trust Fund, worth $164 million, was proposed as a solution
to help balance the state's budget deficit.
Governor Miles Romney proposed using $17million of the fund to
shore up the FY 2003 budget. When some legislators raised concerns about the
legality of diverting trust funds to state government, Governor Romney modified his plan
by agreeing to purchase $17 million worth of renewable energy in future years. He
said the state, which purchases about $100 million worth of electricity each year, would
strive to purchase the power from new renewable energy facilities that might be set up in
Massachusetts in coming years. That, in turn, could enhance the viability of
alternative energy projects being developed in the state.
After negotiations among the Governor's staff, legislative
leaders and the Massachusetts Technology Collaborative staff (who are charged with the
development of alternative energy in the state), the legislature passed a law allowing the
state to use the $17 million for this year's budget, but also requiring it to come up with
a detailed plan to purchase $17 million in power from renewable sources, probably
beginning in 2005.
The power outage and the grid
While the cascading blackout of August 14 hit mainly New York, several Midwestern states
and Ontario, some 10,000 homes in Springfield and Pittsfield also lost power. Most
of the state did not experieince a power supply interruption, but lawmakers and state
officials are moving to make sure the system is not at risk. Governor Romney is also
forming a task force of state and utility industry officials to strengthen the state's
power grid.
Industry observers attributed the survival of the major part of
the grid to the relatively modern condition of electric lines within the state and good
power management by the grid operator, the Independent System Operator of New Energy
(ISO). Rep. John Binienda, House chairman of the Energy Committee, maintained that a
major factor behind the state's relative success in weathering the massive outage is the
continued functioning of a set of aging power plants known as the "filthy five,"
which are coal-fired plants located in Everett, Salem, Holyoke, Somerset and
Sandwich. Closing down the plants would rob Massachusetts of a critical source of
power generation that some other states don't have, the lawmaker said. "It's
not necessarily clean generation, but at least we have ample generation," he .
Even before the blackout occurred, the state's Government
Regulations Committee, which has primary oversight of the utilities, was already planning
hearings to review the 1997 deregulation of the power industry. Now the committee will
incorporate some deregulation issues as it looks at what power transmission improvements
need to be made.
Natural gas issues
As of 2000, all customer classes have had choice of gas suppliers. However, according to
figures from the state Division of Energy Resources, only large industrial and commercial
customers have been active. DOER’s website reports that four companies are marketing
to residential consumers, but no migration statistics are available.
Other resources
Alexander, Barbara. Default Service: Can Residential and Low Income
Customers Be Protected When the Experiment Goes Awry?,
April 2002. This paper was originally published in April 2001 and updated in
October 2001. This version reflects the most recent information available for state
activities with respect to Default Service through 2001 and early 2002. However, readers
are cautioned that the states described in this paper routinely consider changes to state
restructuring policies that have a significant impact on the nature, price, and purpose of
Default Service.
Alexander, Barbara. Default Service: Can Residential and
Low Income Customers Be Protected When the Experiment Goes Awry?, April 2001, and an Update to the April paper issued in October 2001. These papers summarize and make
some preliminary conclusions about the development of a default or provider of last resort
service for residential and small commercial customers as part of the move to retail
electric competition. Both papers highlight the status of default rates and impacts of
restructuring-related developments on residential and low-income consumers in the states
of California, Massachusetts, New York, Pennsylvania, and Texas.
Associated Industries of Massachusetts Foundation, Inc. Electric Industry Restructuring in
Massachusetts: After the Revolution the Evolution, Winter
2003. Concludes that the state’s electric deregulation has been a success, having
brought cost savings to businesses and consumers, as well as new generation capacity, but
that changes in the law may be needed to promote more competition for residential and
small business customers.
National Center for Appropriate Technology. Managing Default Service to Provide Consumer Benefits
in Restructured States: Avoiding Short-Term Price Volatility,
June 2003. This paper, written by Barbara Alexander, examines recent developments
with respect to the design and pricing of Default Service in states that have adopted
retail electric competition and it identifies the key attributes of a model Default
Service policy. Six states including Massachusetts are examined.
National Center for Appropriate Technology. The Transition to Retail Competition in Energy Markets:
How Have Residential Consumers Fared?, September 2002. A
study of the impacts of electric and natural gas markets restructuring on low- and
moderate-income consumers in five states including Massachusetts. It is one of the
few states that passed through short-term wholesale electric rates to a substantial number
of residential customers during its transition to retail electric competition. For these
customers, referred to as default service customers, the average total bill has increased
over 30 percent since 1998, the onset of retail electric competition in Massachusetts, the
study shows.
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