In proceedings involving proposed rate increases at the Federal or State level, whether related to power generation, transmission or distribution components of a rate, the AGO uses all available legal tools at its disposal to advocate on behalf of consumers. These actions by the AGO have saved Massachusetts consumers millions of dollars annually through utility refunds to customers and/or lower rates than those initially proposed by the utility.
Electric and natural gas prices in New England have risen sharply over the past decade. Although the AGO vigorously represents consumers to keep costs as low as possible, prices have increased due primarily to the higher cost of natural gas, which is set through world supply and demand. Natural gas is used by power plants in New England to produce over 40 percent of the region's electric power, meaning a significant increase in the price of natural gas also results in higher electric rates. Although petroleum and natural gas prices have fluctuated greatly in recent years, the long-term forecast is for high prices.
Residential electric rates have doubled in New England since 1990, with much of the increase occurring since 2004. Other areas of the country less dependent on natural gas for electricity generation have not seen rate increases comparable to this region. Massachusetts, along with the rest of New England, needs to better diversify its energy portfolio by expanding the resources used to produce power, improving transmission efficiencies and promoting renewable energy resources.
The primary government agencies that regulate electric and natural gas rates in the Commonwealth are the Massachusetts Department of Public Utilities (DPU) and the Federal Energy Regulatory Commission (FERC). When appropriate, the AGO intervenes in legal and administrative proceedings before these government agencies to protect consumer interests. In recent years, the AGO has represented the Commonwealth in hundreds of DPU and FERC cases, saving Massachusetts consumers more than a billion dollars.
Department of Public Utilities
In Massachusetts, electric and gas delivery rates charged by investor-owned public utilities are regulated by the DPU. The delivery rate is just one component of the charges contained in a customer's bill. Other elements, such as generation or transmission charges, are regulated by the federal government. Still other components, such as the renewable energy and demand side management charges, are mandated by state law. More information on the make-up of a typical electric or gas bill is available in the Utility Billing section of this website.
The DPU's many responsibilities include controlling the profits of utility companies, monitoring the quality of their services, mandating safety in natural gas transportation and siting new power-generating facilities. Municipally-owned electric utilities are an exception to DPU's regulatory authority. These utilities are generally operated by the electric departments of those municipal governments and administered by elected or appointed local boards.
When a public utility wishes to change the rates it charges Massachusetts consumers for delivering energy (electricity or gas) to customers, it first must file a plan with the DPU. After analyzing the proposal and considering input from interested individuals, businesses and organizations, the DPU can approve, modify or reject the proposed change. The DPU will conduct public hearings when required by law or when it determines a public hearing is warranted. Notices of a pending rate change are published in newspapers, as ordered by the DPU. Scheduled hearings are also posted on the DPU website.
An important goal of the Attorney General's Office (AGO) is to keep the utility rates charged to individuals and businesses just and reasonable. As the Commonwealth's principal consumer advocate, the AGO reviews all proposed gas and electric rate changes and intervenes in those proceedings where a utility's proposal does not appear to be in the best interests of consumers. The AGO may provide comments, engage in negotiations or use aggressive legal actions in these rate case proceedings.
The electric and natural gas ratemaking process is complicated. The following is an overview of the major steps included in this process:
- Public gas and electric utilities are required to file plans for proposed rate changes with the DPU.
- Public notification. The utility is required to print a legal notice about its rate plan in major newspapers in its service territory. That notice includes information about: the total amount of the proposed rate change for residential customers, the public comment period and public hearing information. The first notice must be placed 21 days before the public hearing and the second notice approximately seven days prior to the hearing. The utility also includes a notice with its monthly bill to customers. The notice must include the total dollar amount of the proposed rate change and its impact on typical residential customers. The DPU also has the authority to require additional forms of notification.
- Comment period. The DPU opens the public comment period and holds a public hearing. This is the opportunity for all interested parties including residents, resident advocacy groups, businesses and government officials to inform the DPU of their interests and concerns regarding rate change impacts.
- Adjudicatory action. The DPU may hold an adjudicatory hearing, a proceeding involving attorneys, the AGO (as the consumer advocate), witnesses and others with legal standing in the case.
- DPU staff review. DPU staff members thoroughly review all information and prepare recommendations for the DPU commissioners.
- Order issued. The DPU Commission considers the staff recommendations and public hearing comments and issues its decision (order) to accept, reject or modify the utility's proposed rate change.
- Customer notification. The utility is required to notify its customers of any changes in rates (usually via monthly bill mailings).
The Attorney General's Office may intervene in DPU proceedings on behalf of consumers and may negotiate settlements with utilities or take additional legal action when necessary to hold down rates for customers. The 2007 action taken in the Western Massachusetts Electric Case is an example of this work.
Federal Energy Regulatory Commission (FERC)
The AGO also participates in federal government proceedings that could impact Massachusetts consumers. The FERC is the independent agency that regulates the interstate transmission of natural gas, oil and electricity. It also reviews proposals to build liquefied natural gas (LNG) terminals and interstate gas pipelines, and it regulates the licensing of hydropower projects.
The FERC's responsibilities include the permitting of proposed natural gas pipelines and storage facilities. Before deciding on a project, the FERC typically consults with numerous stakeholders including business interests, government agencies, public officials and non-government organizations. The FERC identifies and analyzes environmental, economic and safety issues and holds public hearings.
In addition, the FERC oversees the "power generation" component of electric utility rates. The generation charge (also known as a supply charge) reflects the cost that a utility pays to the power generators that produce the electricity. These rates are established through private contracts and the wholesale electricity market. The FERC also has authority over the "transmission" component of a utility rate. Transmission rates refer to the costs associated with delivering electricity over high-power lines from generating facilities to the ultimate distribution system. The distribution rate, over which Massachusetts DPU has authority, reflects the costs associated with delivering electricity from the region's electric grid over power lines to individual residences and businesses.