Electricity Deregulation Sparks Debate in Massachusetts
By Erik Arvidson, The Sun, Lowell, Mass. -- Mar. 8
Six years after Massachusetts dissolved the electricity monopolies and opened it to the free market, few residential consumers have any choice about where they buy their power.
State Rep. Daniel E. Bosley, D-North Adams, the House chairman of the
Government Regulations Committee, hopes to change that this spring when he files
a bill to replace the controversial 1997 Electricity Deregulation Act.
Currently, nearly all residential power customers pay the "standard
offer price" for their electricity, a rate set by the state to save
customers from market fluctuations.
But that standard offer price is set to expire in March 2005, and customers
who don't have choices could end up paying sharply higher prices for power.
"I've been pushing back the deadline (for a new bill to be filed) so
that we can figure out where we are," Bosley said. "We're trying to do
something to jump-start competition for the 2.1 million residential
customers." Many of the changes Bosley is contemplating may be resisted by
some of the big power companies, such as NStar, Massachusetts Electric, and
Western Massachusetts Electric.
Bosley, who described his plan as a "radical change," wants to
group together blocks of electricity customers and auction them off to companies
with the lowest bid.
"It's caused quite a commotion, but we've gotten a lot of the
electricity customers back to the table," said Bosley, who has been working
on the bill for about two years.
Under the current system, Bosley said power suppliers have no incentive to
compete for individual customers. Not only has the standard offer price been
well below the free market, but suppliers say it's too costly to sign up widely
scattered individual customers. If competitive companies could bid on a chunk of
perhaps hundreds of thousands of residential customers, it would be worth it to
them, Bosley said.
But some consumer advocates worry about a system where customers are
auctioned off to suppliers. They say companies would sift out
"high-risk" customers, who could be lumped into one group and forced
to pay higher rates for their electricity.
"We need to take a closer look at that. There is a lot of debate to be
had," said Frank Gorke, an advocate for the Massachusetts Public Interest
Research Group.
Gorke said the most critical component of Bosley's bill should be consumer
protections, especially for low-income users.
"The large, industrial users have a staff of people who can watchdog the
budget and figure out the best energy deals. Residential customers don't,"
he said.
"Competition in the electricity industry was adopted to deliver benefits
to consumers, in particular lower rates, better customer service, and greater
efficiency through markets. If it doesn't deliver on those promises, competition
for competition's sake should not supplant the original goals."
Neal B. Costello, an attorney who represents competitive energy retailers
interested in the Massachusetts market, said one of the benefits of the 1997
legislation was it prodded electricity companies to better maintain their
transmission lines.
"The utilities have not invested in their transmission system over the
past 20 or 30 years, and that's just not acceptable," Costello said.
"Utilities have been encouraged to get out of the commodity business and
focus on the wires." Essentially, the deregulation law required utilities
to sell their generating plants and focus on the distribution of power as their
primary business. Costello believes the original deregulation law was a
"tremendous success."
He said Massachusetts would not have its new, cleaner, gas-fired power plants
-- which have enhanced the state's power supply -- without deregulation. In
addition, more than 40 percent of the state's industrial and commercial
customers -- and even many municipalities -- have been able to cut deals with a
competitive supplier.
Costello said companies such as NStar (the former Boston Edison and
Commonwealth Electric) are unlikely to welcome changes to promote competition.
"If you are an incumbent utility, it's like going through life without
any competition. It's like being tenured," he said. "They are of the
old time utility mindset." Reprinted with thanks from: www.energycentral.com/centers/news/daily/article.cfm?aid=4697127