History of Energy Deregulation in the USA: Massachusetts
Before energy deregulation, public utility companies had monopolistic control over the production, processing, and distribution of energy. Consumers, on the other hand, had no control. This lack of competition provided no incentive for utility companies to improve efficiency, price, or service. In 1997, the Massachusetts Legislature enacted a comprehensive electric restructuring law which removed legal barriers to competition in the energy market, allowing alternative energy suppliers to enter the market.
A Brief Explanation of Energy Deregulation
If you're an energy consumer in Massachusetts, you've most likely noticed your energy bill contains two assessments, one from the supplier and one from the utility. If you've chosen the supplier, you are benefitting from energy deregulation. Energy deregulation affects the first step of the process for getting energy to your home--generation or exploitation. During this stage, energy is generated from a variety of renewable and non-renewable sources and sold to retail suppliers. For gas customers, selling, supplying, or marketing can take place further along in the process. This is the step open to competition. The second and third steps--transmission and distribution--are still taken care of by your utility and is regulated, regardless of the provider. For electricity, transmission refers to sending power from the generating plant, via high voltage lines. Distribution refers to transferring power from a distribution network to your home, via wires. For natural gas customers, transmission refers to gas transportation, via pipelines, normally above ground and under high pressure. Distribution involves getting natural gas to your home through underground pipes.
Massachusetts electric suppliers Boston Edison, Massachusetts Electric and Commonwealth electric started on the path to deregulation in 1996 by offering pilot programs that allowed consumer choice in their service areas. In November 1997, the Massachusetts Legislature passed a comprehensive law for restructuring the electric power industry. Because your utility continues delivering electricity to your home, regardless of supplier, switching suppliers does not cause an interruption in service. Most areas of Massachusetts are open to alternative energy suppliers. To find out if you qualify, checkout deregulatedenergy.com's list of market participants.
Timeline of Energy Deregulation in Massachusetts
1996 - Boston Edison, Massachusetts Electric, and Commonwealth Electric institute a pilot program to offer consumer choice in selected areas.
1997 - The Department of Telecommunications and Energy decides to open the retail electricity market to competition by March 1, 1998.
1997 - House Bill 5117 is enacted, requiring the restructuring of the electric power industry in Massachusetts. The law requires retail access by March 1998, rate cuts of 10 percent by March 1998, and the selling off of electricity generating assets by utilities.
1999 - By early 1999, just a little over one percent of electricity is supplied by alternative suppliers, mostly to large industrial consumers.
2002 - Approximately 25,000 customers have switched to alternative suppliers of electricity.
2002-present - Energy customers in Massachusetts enjoy retail benefits from competition in the energy market.
An Overview of Competitive Supply in Massachusetts
Competitive suppliers offer two types of price structure.
Fixed - With a fixed plan, consumers choose to pay the same rate for power for the length of their contract, regardless of wholesale energy price fluctuations. Fixed price plans offer price certainty for the term of the contract. Penalties usually apply to customers who break the contract early.
Variable - With a variable plan, the cost of energy fluctuates with the price of energy. Variable plans do not require a contract and the consumer can, therefore, switch suppliers without penalty.
Suppliers may also offer energy related products, such as smart thermostats or solar related products in addition to basic service. The DeregulatedEnergy.Com directory contains the information you need for energy choices in Massachusetts. The directory includes the following.
The names of retail energy providers in the state
The regulatory office overseeing utilities
The regional transmission organization or independent system operator for gas