Electric service in Massachusetts consists of two components: (1) supply service, associated with the electricity used to power our homes and businesses; and (2) delivery service, associated with the transport of electricity from where it is generated to our homes and businesses. Historically, consumers received both supply and delivery services from their electric utility. The Electric Industry Restructuring Act of 1997 (“Electric Restructuring Act”) introduced competition into electric supply service, and allowed consumers to choose their electric supplier. Now, most consumers (the exception are those electricity consumers of municipal light departments) can purchase supply products from competitive suppliers (competitive supply products) licensed by the Department or from their electric distribution company (basic service).
In contrast, delivery service continues to be a monopoly service provided by the electric distribution companies. It is important to know that the electric distribution companies provide the same quality of delivery service to all electricity consumers, regardless of the source of the consumer‘s supply service.
The supply service component of our electric service has both a wholesale and a retail component.
The wholesale component is associated with the electric power plants in the region that generate the electricity we use to power our homes and businesses. Since 1998, the vast majority of power plants in New England are owned and operated by “non-utility generation” companies and not electric distribution companies. These power plants are part of a regional electric “grid” overseen by the Independent System Operator of New England (“ISO-NE”). In particular, ISO-NE oversees (1) the day-to-day operation of the regional power grid, (2) the regional power system planning process, and (3) the region’s competitive wholesale electricity markets. The wholesale supply component of our electric service is regulated at the federal level by the Federal Energy Regulatory Commission (“FERC”).
The retail component of our electric supply service involves the sale of electricity to consumers. Electricity consumers have the opportunity to purchase supply products from competitive suppliers (competitive supply products) licensed by the Department or from their electric distribution company (basic service). The Department oversees the retail supply component of our electric service.
Service composed of:
Electric Power Plants
Electric Supply Products offered by:
Department of Public Utilities
Delivery service remains a monopoly service provided by our electric distribution companies, meaning that consumers have no choice but to purchase this service from their electric distribution company. As with supply service, delivery service has both a wholesale and a retail component.
The wholesale component is associated with high-voltage transmission facilities that transport electricity from the power plants located through the region to the service territories of our electric distribution companies. These facilities, along with the electric power plants, are part of the regional power grid overseen by ISO-NE, and regulated at the federal level by FERC.
The retail component of delivery service is associated with the lower-voltage distribution facilities that transport electricity within the electric distribution company service territories to our homes and businesses. This retail service includes metering equipment that measures the amount of electricity we use. The Department regulates retail delivery service provided by the electric distribution companies.
Service composed of:
Electric Transmission Facilities
Electric Distribution/Metering Facilities
Department of Public Utilities
Electricity consumers seeking alternatives to basic service may find value in products offered by competitive suppliers. These products may include (1) prices that remain fixed for a certain length of time, (2) products that include a level of the renewable energy resources that exceeds the minimum required by law, and (3) other products and services.
The Department has developed a tool to assist residential electricity consumers in shopping for competitive supply products. The Department notes that, while we license all competitive suppliers and oversee their performance to protect consumers, we play no role in how they set their supply product prices.
Competitive Supply Products
Pricing structure - Competitive suppliers offer electric supply products with two types of pricing structures, fixed-price and variable‑price. A fixed-price product is one in which the price remains constant for a specified period of time, ranging from multiple months to multiple years. These products provide price certainty (and protection against variations in wholesale market prices) over the term of the product. Fixed price products may contain an early termination fee, where consumers that cancel their contract prior to the end of the product term may be charged an extra fee.
A variable‑price product is one in which the price changes frequently (e.g., monthly), either at the discretion of the competitive supplier or based on a specified market indicator (e.g., prices in the regional wholesale electricity market administered by the Independent System Operator of New England (“ISO-NE”), or electricity futures prices published by the New York Mercantile Exchange). Because most products of this type do not have specified contract terms, consumers typically can cancel their contracts at any time without penalty.
Renewable energy content – Competitive suppliers may offer renewable energy products for which the renewable energy content exceeds the Commonwealth’s minimum requirement established in the renewable portfolio standards (“RPS”). There are two key characteristics that distinguish the renewable energy products available to consumers: (1) the percentage of the product that is composed of renewable energy resources; and (2) the location and characteristics of those renewable energy resources (e.g., renewable resources that are designated as RPS Class I eligible are located in New England and were built after 2008).
Other products and services – Competitive suppliers may offer supply products that include: (1) other energy-related products (i.e., products and services that are directly related to consumers’ electricity usage, such as “smart thermostats,” or solar-related products); and/or (2) non‑energy related product and services (e.g., rewards programs or gift cards).
Billing for Competitive Supply Products
Competitive suppliers have two options regarding how they bill consumers for their electric supply products: (1) a consolidated-bill option, in which competitive suppliers use the monthly bill sent by the electric distribution companies; and (2) a dual-bill option, in which competitive suppliers send a separate bill for supply products.
Under the consolidated-bill option (which is the option most commonly used by competitive suppliers for all but the largest electricity consumers), consumers receive a single bill from, and submit a single payment to, their electric distribution company for both delivery and supply services. The distribution companies forward the supply component of a consumer’s payment to the competitive supplier.
Under the dual-bill option, consumers receive two monthly bills related to their electric service – one bill from their electric distribution company for delivery service, and a second bill from their competitive supplier for the electric supply service.
Before purchasing a competitive electric supply product, consumers should inquire which billing option(s) the competitive supplier offers.
Basic service is the electric supply product that distribution companies provide to those consumers in their service territories that do not purchase a product from the competitive market.
Basic Service Pricing
Residential and small commercial and industrial (“C&I”) basic service customers have two pricing options: (1) a six-month fixed‑price option, in which the price remains constant for six months, and (2) a monthly pricing option, in which the price changes each month. The electric distribution companies automatically place their residential and small C&I basic service customers on the six-month fixed-price option. Customers who would like to be placed on the monthly pricing option can contact their electric distribution company.
Medium and large C&I basic service customers have two pricing options: (1) a monthly pricing option, in which the price changes each month, and (2) a three-month fixed‑price option, in which the price remains constant for three months. The electric distribution companies automatically place their medium and large C&I customers on the monthly pricing option. Customers who would like to be placed on the three-month fixed price option can contact their electric distribution company.
Basic Service Costs
Basic service prices have three cost components: (1) supply costs; (2) renewable portfolio standards (“RPS”) compliance costs; and (3) administrative costs. The electric distribution companies collect all the costs they incur in providing basic service through their basic service prices.
The largest component of basic service costs is associated with the procurement of basic service supply. For their residential and small C&I basic service customers, each electric distribution company procures supply through competitive solicitations held twice per year -- in each solicitation, the company procures 50 percent of the required supply for a twelve-month period. Electricity suppliers that seek to provide basic service supply submit bid prices for each month of the applicable supply contract term. The six-month fixed price provided to residential and small C&I consumers is the weighted average of the monthly prices over the six month pricing term.
For their medium and large C&I basic service customers, each electric distribution company procures supply through competitive solicitations held four times per year -- in each solicitation, the company procures 100 percent of the required supply for a three-month period. Electric suppliers that seek to provide basic service supply submit bid prices for each month of the three‑month term. The three-month fixed price provided to medium and large C&I consumers is the weighted average of the monthly prices over the three month pricing term.
As a general rule, the electric distribution company selects the supplier(s) who submits the lowest bids in each solicitation. The Department reviews the results of each basic service solicitation to ensure that they were the product of a sufficiently competitive process.
RPS Compliance Costs
By law, all electric supply products (both competitive supply products and basic service) must comply with the Commonwealth’s RPS, which establishes the minimum amount of renewable energy resources that must comprise each electric supply product. Basic service includes a level of renewable energy resources that meets, but does not exceed, the RPS requirement. For more information about the RPS, and the RPS compliance costs included in basic service prices, click here.
A small component of each electric distribution company’s basic service prices include the administrative costs it incurs in procuring supply for its basic service customers.
Basic Service Proceedings
To see all document filings, please visit the file room and type the case’s docket number using the following format: XX-XX
The first two digits in a docket number represent the year the case was opened. The following digits are assigned sequentially for all cases opened in that year.
Investigation into the Provision of Basic Service
Request for Comments on the Procurement of Default Service Power Supply for Residential and Small Commercial and Industrial Customers
Investigation into the costs that should be included in Default Service Rates
Investigation into the Provision of Default Service.
Investigation into the Pricing and Procurement of Default Service