On November 25, 1997, the Massachusetts legislature enacted legislation to restructure the electric industry in Massachusetts. The restructuring act established a comprehensive framework for the structuring of the electric utility industry and directed the Department to promulgate rules and regulations to implement the framework. On January 19, 1998, the Department issued its proposed regulations.
The regulations provide that each distribution company must provide standard offer and default service to its retail customers who are not receiving energy from a competitive supplier. Standard offer service shall begin on March 1, 1998 and continue for seven years. Customers who have not selected a competitive supplier and customers who receive energy from competitive power suppliers but notify the distribution company by July 1, 1998 that they wish to receive energy under the standard offer, are eligible for this service. Under the standard offer service, customers will initially receive a ten percent (10%) rate decrease from their average 1997 rates. Starting September 1, 1999, the customers average rates under the standard offer service will be reduced by fifteen percent (15%) from the average 1997 rates. The regulations provide that customers who are not receiving energy from competitive suppliers or through the standard offer service are eligible for the default service. The rates for the default service will be established through a competitive bidding process, but the rates for this service cannot exceed the average monthly market price for energy as determined by the Department. In procuring energy for both the default service and standard offer service, the distribution company shall purchase energy through a competitive bidding process subject to Department review.
The regulations provide that all competitive suppliers must obtain a license from the Department prior to engaging in retail transactions. The license process requires that the supplier disclose whether it or any of its affiliates have power purchase agreements with existing public utilities whose rates are above the current market price and whether such contracts must be renegotiated. The restructuring act requires the utility and the seller to renegotiate the contract in good faith.
The regulations require that each person that will provide energy to retail customers, whether as a competitive supplier or the distribution company through the standard offer or default service, must prepare an information sheet containing price, fuel mix, environmental emissions, and union-labor information associated with the resources used to provide the energy. Regarding the price information, the regulations require that the average energy price must be provided for specific levels of use. For example, the regulations state that the average price for residential consumers must be shown using levels of 250, 500, 1000 and 2000 kWh per month and that for commercial customers, the average price must be broken down showing 1000, 10,000, 20,000 and 40,000 kWh per month. In addition, the regulations state that if the average price for energy is based on the spot market or other variable prices, the price must indicate what the price would have been in the last month of the prior quarter.
The regulations require the persons serving retail load must also disclose the fuel mix, emissions, and labor characteristics from specific generating facilities, and if applicable, from system energy. Regarding fuel mix, the regulations provide that the supplier must identify specific fuels used and each fuels percentage in the suppliers overall resource portfolio. In addition, the regulations state that the supplier must identify certain emission characteristics including carbon dioxide, nitrogen oxides and sulfur dioxides for its resource portfolio. The regulations also state that the supplier must disclose whether a majority of the employees operating the generating plants are union employees and whether replacement workers were used at the facility during the prior calendar year.
Comments on the regulations were filed on January 30, 1998 and it is anticipated that the Department will issue final regulations in the near future.