Massachusetts Retail Electricity Market

Beginning in March 1998 all Massachusetts consumers, residential, commercial, and industrial could choose to buy electricity from a competitive retail supplier or continue to receive generation from their distribution company. The delivery of electricity remained with the distribution companies.

From March 1998 through December 2001, the competitive market developed slowly. Customers were offered a generation Standard Offer Service from their utility that provided them with a 10% and then 15% discount. Retail suppliers could not offer generation at a price below this rate and make money. In addition, customers and retail suppliers were unfamiliar with the ISO-NE wholesale market rules. The competitive market electric load made some progress, reaching 1.3% in Dec 1999, 5% in December 2000, and 14.4% in December of 2001. Large commercial and industrial customers far outpaced all other customers in switching to competitive supply in the period.

From 2002 through 2007 the market continued to develop and at differing speeds for various customer groups, as shown in the Competitive Market Electric Load chart below. Clearly larger customers are buying more electricity from competitive suppliers. Residential customers are trailing well behind. The pace of development for these consumers can be attributed to the more extensive supplier resources to enroll, service, and supply electricity to smaller customers. There is also less room for suppliers to make money and for the customers to save money.


Source: MA DOE

What was the retail electricity market like for consumers in 2007?

Large Commercial and Industrial customers find many suppliers offering competitive prices and are the most likely to buy competitive service with a monthly average of 86% of this groups load bought from suppliers in 2007.

Medium Commercial and Industrial customers have shown great interest in competitive products with a monthly average of 31% of the load of this group coming from competitive suppliers in 2007.

Small Commercial and Industrial customers purchase less energy and are thus less attractive to competitive suppliers. A monthly average of 31% of this group load was competitively supplied in 2007.

Residential customers are clearly the last group to enter the competitive market. Few suppliers offer products and the cost for suppliers to enroll, bill, and service large numbers of small customers is often seen as a barrier to the development of a competitive residential electricity market. In 2007 10% of the monthly load was purchased competitively. A large percentage of that can be attributed to the Cape Light Compact, a municipal aggregation, and was not the result of individual customer choice.

Competitive Market Load 2007
% of Total in each customer group per month
ResidentialSmall
C&I
Medium
C&I
Large
C&I
Jan-078%27%43%84%
Feb-079%28%45%85%
Mar-079%29%46%85%
Apr-0710%30%46%86%
May-0711%31%47%85%
Jun-0711%32%47%86%
Jul-0710%32%46%86%
Aug-0712%34%47%87%
Sep-0712%34%48%88%
Oct-0711%34%49%88%
Nov-0711%34%49%88%
Dec-0711%32%50%87%
Source: MA DOER

The record for other states in the development of competitive markets is mixed. According to the Nov/Dec/2007 edition of Retail Energy Foresight published by KEMA Energy, Massachusetts certainly has done well with 51.7% of the total load coming from competitive suppliers. Only Texas with 63.4% of the load competitive surpasses Massachusetts. Other states like Illinois (48.9%), New York (44.2%), Connecticut (37.5%) and Maine with 31.7% have enjoyed similar success.

Percent Competitive Load in Other States
StateResidentialCommercialIndustrialTotal
CA0.30.8*/12.3#26.29.6
CT5.864.764.737.5
IL038.488.248.9
MA11.333.8*/49.4#88.251.7
MD3.271.771.737.5
ME0.939.488.431.7
NH016.716.722.5
NJn/an/an/a13.7
NY13.650.873.544.2
PA Duq2149.988.248.9
PA7.152.697.536.1
RI0.221.9013.8
TX45.579.1063.4
*small commercial #large commercial

Source: KEMA Energy (4th quarter 2007)

Outlook for Competition in 2008

KEMA sees the most promising markets in 2008 will be those already functioning fairly well, Texas, New York, Connecticut, MASSACHUSETTS, and the Duquesne and Penn Power territories of Pennsylvania.

MA, with movement from a January 8% of residential load on competitive to supply to 11% of load on competitive supply in December is viewed by KEMA as "one of three states showing the most significant residential activity in the year (TX, MA, NY)."


This information is provided by the Department of Energy Resources.