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State Regulators: Driven By Reliability

Can natural gas supply keep up with demand for power?
Fortnightly Magazine - November 2004

has approved twelve suppliers and 10 retail agents to provide retail service in Massachusetts. Approximately 40 percent of the C&I customer load is acquired through competitive suppliers. This year, the department opened an investigation () wherein we will review the status of competition in the gas industry to determine if any modifications to the existing rules are needed in order to further enhance competition.

As for competition within the electric industry, the Department is operating under The Massachusetts Electric Industry Restructuring Act of 1997 wherein the legislature established a seven-year transition period during which distribution companies have been providing standard offer generation service to their "existing" customers (i.e., customers of record as of March 1, 1998) at below-market rates. This transition period ends on Feb. 28, 2005. Subsequently, standard offer customers who do not switch to a competitive supplier will be placed on default service, provided by distribution companies at market-based rates.

To date, approximately 50 percent of the large C&I customer load is acquired through competitive suppliers; the percentage of load acquired through competitive suppliers, for medium and small C&I customers, is approximately 20 and 10 percent, respectively. The department anticipates that, for larger customers, the elimination of below-market standard offer service, along with recent revisions to the department's default service procurement policies, will significantly increase the number of customers switching to competitive supply. Similar to the residential gas market, the residential electric market has been slow to develop.

Q: Does Massachusetts have in place a quota for renewable energy? If so, how is it working, or if not, do you expect to implement one?

A: By statute (), an [RPS] was established for all retail suppliers selling electricity to end-use customers in the Commonwealth. Pursuant to the law, there is a minimum percentage of new renewable resources that each retail electricity supplier must include in its resource portfolio. The minimum percentage ranged from one percent for calendar year 2003, and increases one-half percent each succeeding year until 2009 (at which point the minimum would be four percent) and by one percent per year thereafter until our sister state agency, the Division of Energy Resources, elects to suspend the annual increase. Retail suppliers can satisfy their RPS requirements by either purchasing the required number of renewable energy certificates through the New England Generation Information System or making alternate compliance payments to the Massachusetts Technology Council (which administers the state's Renewable Trust Fund) at an inflation-adjusted rate of $50/MWh.

Q: What is the issue of greatest importance in Massachusetts?

A: Massachusetts strives hard to ensure the public that facilities that provide us with electricity, gas, and water operate in a reliable, safe, and cost-effective manner. To that end, the department, at the request of the governor, reviewed events from the Aug. 14, 2003, blackout. The Massachusetts Task Force on Electric Reliability and Outage Preparedness concluded that several factors worked to protect the New England area from more extensive blackouts experienced elsewhere in the Northeast. First, automatic relays shut down the lines between New York and New England to protect individual transmission lines