Overview
In 1997 the Massachusetts Legislature passed Act 164 deregulating the state’s electricity market, and since March 1998 customers in Massachusetts have been able to choose their electric supplier. Initially, utility customers that did not switch to an alternate supplier received the Standard Offer Service (SOS) rate based on 1996 rates.New customers or customers returning to utility service after being served by a competitive supplier were placed on Default Service which more closely reflected wholesale energy market conditions.Today, SOS service is no longer available and customers taking supply from the utilities pay Default Service (now called Basic Service) rates.

History
As part of Massachusetts’ deregulation legislation, “stranded costs” (those costs incurred by the utility for building generation and originally to be collected from ratepayers) were calculated to allow utilities to recover money spent on building generation infrastructure and at the same time utilities were required to divest those generation assets.

Since Standard Offer rates were low compared to energy market prices, a large percentage of customers initially remained with the utilities. Customers who had switched to an alternate supplier and then returned to the utility were no longer eligible for SOS and received Default Service. Default Service customers were served either on variable monthly rates or a fixed rate depending on customer rate class.Both SOS and default rates changed throughout the year with default pricing being set through a competitive bid process and SOS subject to adjustments for fuel cost increases.

In 2002, the New England Independent System Operator (ISO-NE) moved to a Locational Marginal Pricing (LMP) market structure that split Massachusetts into three separate wholesale electricity-pricing zones.

In January 2003, The Massachusetts Department of Telecommunications and Energy (DTE) issued an order directing Boston Edison Company and Massachusetts Electric Company to procure Default Service for Medium and Large C&I customers on a zone specific basis. The purpose was to have costs reflect zonal “congestion” (price differences caused by transmission constraints) in the retail prices for the respective zones. However, the order also directed the utilities to establish one averaged price across all zones for Residential and Small C&I customers.

Per state legislation, utility supplied Standard Offer Service was eliminated on February 28th, 2005.All customers remaining on SOS were migrated to Default Service pricing on March 1.Soon after, Default Service was renamed “Basic Service.”Electricity for Basic Service, like Default Service before it, is procured for 6-month periods for small customers and 3-month periods for medium and large commercial and industrial customers.This leads to prices that vary over the course of the year.The MA utilities are responsible for conducting the requests for bids for Basic Service electricity supply and for billing customers for transmission and distribution charges as well as Basic Service generation charges

Massachusetts’ electricity deregulation program has been a success by most measures.More than 40% of the medium commercial and industrial customers are now being served by competitive suppliers, as are more than 70% of the large commercial and industrial customers.The Department of Telecommunications and Energy is continuing to investigate options for bringing more competitive offers to residential customers.

Strategic Energy is a registered supplier in Massachusetts and offers several energy products with varying terms and pricing to non-residential customers in the following service territories:

• NSTAR Electric (Boston Edison, Cambridge Electric and Commonwealth Electric) — Boston Edison, serving the city of Boston, comprises much of the Northeast Massachusetts (NEMA) zone, as does Cambridge Electric.Commonwealth Electric’s territory encompasses much of southeastern Massachusetts (SEMA) and Cape Cod.
• Massachusetts Electric Company (Mass Elec) — A subsidiary of National Grid, Massachusetts Electric’s territory is spread throughout the state.
• Western Massachusetts Electric Company (WMECo) — WMECo is owned by Northeast Utilities and is primarily located in the western part of Massachusetts.
• Fitchburg Gas & Electric Light Company — FG&E is a small subsidiary of Unitil.

Regulatory Updates
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