Default Service

The Massachusetts Electric Industry Restructuring Act established three generation service options that would be available to consumers: (1) competitive generation service, provided by competitive suppliers; (2) standard offer service, provided by distribution companies (which expired February, 2005) and (3) default service, also provided by distribution companies. (customers receiving standard offer service as of February 28, 2005 were transferred to default service) It is important to remember that a customer that is connected to a distribution company's system will receive electric service, regardless of the option under which the customer is receiving generation service. However, the price that the customer pays for generation service is dependent on the type of service the customer is receiving.

As of March 1, 2005, default service is the generation service that is provided by distribution companies to those customers who are not receiving service from a competitive supplier. As such default service acts as a "generation service of last resort."

The Department initially established policy guidelines on the pricing and procurement of default service in DTE 99-60-B Order, issued 6/30/00 . The Department directed each distribution company to procure supply for its default service customers through competitive solicitations for terms of six to twelve months, with the prices for default service based on the results of these solicitations. The Department established two pricing options for default service customers: (1) a variable pricing option in which the price changes monthly; and (2) a fixed pricing option in which the variable monthly prices are averaged and remain constant for six-month periods. The Department required each distribution company to submit its proposed default service prices for our review

In June 2002, the Department revised our default service pricing and procurement policies, to ensure that the manner in which distribution companies provide default service is compatible with the development of an efficient competitive market. D.T.E. 02-40 (Default Service NOI) For residential and small commercial and industrial customers, the Department directed each distribution company to procure 50 percent of its default service supply semi-annually, for 12-month terms. As a result, default service prices for these smaller customers (for both the monthly and the six-month pricing options)are now based on an average of the results of two separate procurements. D.T.E. 02-40-B

For medium and large commercial and industrial customers, the Department directed each distribution company to procure 100 percent of its default service supply requirement quarterly, for three-month terms. As a result, the fixed price option for these larger customers remains constant for a three-month period. D.T.E. 02-40-C .

The Department currently is investigating the costs that should be included in distribution companies' default service rates. D.T.E. 03-88

 


This information is provided by the Department of Public Utilities