Changes Coming to the Electric Supply Market in Massachusetts

By: ElectricChoice.com |

In 1997, the state of Massachusetts passed several laws that required public utilities to open up the electricity market to competition within the state. Retail energy suppliers at this time had the opportunity to provide the supply of electricity to customers, while utilities still maintained control over delivery and maintenance.

In December of 2014, the Department of Public Utilities in Massachusetts announced an open investigation on the retail electric competitive supply market.  In particular, the investigation would look into two initiatives that would help to bring about significant improvements to the existing regulations.

Overall, this Department of Public Utilities investigation (identified as D.P.U. 14-140) proposed several changes including:

  1. Development of a website – “Shopping for Competitive Supply”
  2. Changing the Current Information Disclosure Label
  3. Residential and Small C&I Customers – remove the basic service bill recalculation provision
  4. Door-to-Door Marketing – define reporting requirements
  5. Assigning Customers to Competitive Supplier – define reporting requirements and rules

1. Development of a Website – “Shopping for Competitive Supply”

The investigation outlined the fact that customers have to contact individual suppliers by visiting their website or by speaking with a representative over the phone. Competitive supplier websites display general licensing and business information however, they don’t include other important details like, pricing for different products or plans from different competitors. Therefore, a customer needs to contact several different suppliers individually in order to compare prices and contracts.

It is through this investigation that the Department of Public Utilities of Massachusetts determined that customers require a much simpler way to compare products between competing suppliers. To solve this problem, the Department of Public Utilities agreed to work with different organizations or stakeholders to create a website. The Department of Public Utilities determined that it will host the website, and that it will also help customers to quickly search for competitive electricity supply products.

In a document identified as, D.P.U. 14-140, The Department of Public Utilities outlined three problems that require resolution in order to bring this change into the retail energy supply market. These three issues include:

  1. Pricing: the website must display the price, terms, and types of pricing structure for the supply competitors.
  2. Renewable Energy Characteristics: the website must clearly identify whether or not the product exceeds the state’s renewable standards.
  3. Fees: the website must clearly display any applicable fees such as, early termination or cancellation.

When it comes to hosting the website, D.P.U. 14-140 also outlined several rules. These rules include:

  • A standard display or presentation of the products that apply to all suppliers.
  • The products must appear for a similar and standard period of the time on the website.
  • The website must request a standard set of information from customers such as, rate class, monthly usage, distribution company service territory, etc.
  • Products to be listed in a well defined order.

The result of this investigation is that the Department of Public Utilities determined that it would require some feedback from the public and retail energy suppliers. Their primary goal however, is to use and build upon what other states have done in the past regarding similar websites. This feedback includes information on the website design such as:

  • How product information is displayed.
  • What options are given to customers to make comparing products easy or simple.
  • Offer suppliers the ability to list their products on the website.
  • Ensure that the website information is transparent.

2. Changing The Current Information Disclosure Label

As part of the changes made in 1997 to the supply of energy, in 1998, the Department of Public Utilities added a few new regulations. These regulations pertained to the basic service that competitive distribution and supplier companies in regards to information disclosure requirements.

These new changes made it clear that customers need to have standard information provided by electric supply services offered by distribution and supplier companies in order to evaluate their options effectively. Through these regulations, suppliers were required to provide information including,

  • Price
  • Price Variability
  • Customer Service
  • Labor Characteristics
  • Fuel Source
  • Air Emissions

When it comes to D.P.U. 14-140, the Department of Public Utilities indicates that they will change or reform the information disclosure labels to ensure that the information is presented clearly to help increase customer satisfaction. However, at the same time, they do indicate that it is the customer’s responsibility to make sure that they understand their agreement terms thoroughly before signing. These changes will have the greatest impact on residential and small C&I customers and include items such as,

  • Term of Contract: does the contract expire on a particular date, or does the customer have to call or contact the supplier to terminate the contract?
  • Pricing Structure: are the charges fixed or variable price? Do the prices remain the same for the length of the contract?
  • Changes: when (and if) are customers informed of any changes in contract rates?
  • Applicable Fees: are there any cancellation, or other fees?
  • Historical Pricing: do variable priced products have additional information to compare past prices?

3. Residential and small C&I Customers

The Department of Public Utilities came up with two pricing options for customers signed up for basic service with a retail energy provider. These two pricing options include,

  1. Fixed Price Option: where prices remain the same for a period of 6 months.
  2. Variable Price Option: where prices change monthly.

The Department of Public Utilities has determined that small C&I customers are automatically put on the Fixed Price Option. However, they do have the ability to request the Variable Price Option. They also decided that if the C&I customer if medium and large C&I organizations sign-up, they should automatically receive the Variable Price Option unless requested otherwise. The reason for this is because those classes of organizations are often more informed about their energy consumption and other options compared to small C&I companies.

4. Door-To-Door Marketing

Due to the fact that the supply market is open to competition in Massachusetts due to energy deregulation laws, the Department of Public Utilities has determined that the marketing strategies from competitive suppliers will increase. This has caused some concern for the Department of Public Utilities, especially in the area of door-to-door marketing because this kind of marketing technique can cause significant customer dissatisfaction.

It is because of this concert that they have outlined new improvements within D.P.U. 14-140 regarding competitive supplier use of door-to-door marketing. These new improvements include:

  • Providing notice to the Department of Public Utilities before the door-to-door campaign takes place. This notice is called, “Notice of Door-To-Door Marketing” and it must be filed 7 days before the campaign starts. The supplier must provide the following:
    • Names of the city and towns where the campaign will take place.
    • The start and end date of the campaign.
    • A list of all permits and licenses required.
    • Certification for all obtaining all permits and licenses.
    • Number of employees participating in the door-to-door campaign.
    • Certification that each employee has completed a background check.
    • Employee contact information.
  • Providing information to the Department of Public Utilities should there be customer complaint.

5. Assigning Customers to Competitive Supplier

The Department of Public Utilities has recently started to receive information from several suppliers regarding plans to move or assign some of their current customer contracts to a different supplier. In order to ensure that this process remains transparent and that the correct entities are informed, D.P.U. 14-140 outlines a new initiative, one that requires the supplier to file a “Notice of Assignment” with the Department of Public Utilities at least 60 days prior to the start date of the assignment. The “Notice of Assignment” must include:

  • Proof that the supplier’s contracts allow them to assign their customers to another supplier.
  • Total number of customers the supplier wants to transfer by: distribution company service territory and customer type (industrial, commercial, or residential).
  • Assignment start date(s).
  • The Massachusetts license number and name of the supplier that will receive the assigned customers.
  • Proof that all terms and conditions from the initial contract (pricing included) will follow through the remaining duration of the contract.
  • Total number of contracts with automatic renewal provision or early termination fee provision.
  • Copy of the “Notice of Assignment” envelope and letter being sent to the customers being assigned to the new supplier
  • Reason for the transfer or assignment of customers to the new supplier.
  • When the supplier plans to remove its license from the Department (if applicable).

The Department of Public Utilities also suggests via D.P.U. 14-140 that the supplier looking to transfer or assign customer contracts is required to send a notification to customers through both mail and e-mail (if obtained) 30 days before the assignment date. For customers who have automatic renewal contracts, the new supplier must inform them via a notification letter 30 days before the renewal date. If the customer contract includes an early termination fee, the supplier receiving the contracts are encouraged to wave the fee and allow those customers to cancel their contract without penalty at any time.

Revised Proposed Rules – Shopping For Competitive Supply Website

As a result of D.P.U. 14.140, the Department of Public Utilities updated the list of proposed rules (regarding the website initiative) on June 14 of this year. These revised rules are specific to suppliers and some of these rules include,

General Rules

  1. It is voluntary to list supply products on the website.
  2. Only fixed-price products will be listed on the website (at first).
  3. The term of the product must be at least 6 months or longer in order to be listed on the website as a fixed-price product.
  4. The term of the product must be at least 12 months or longer in order to be listed on the website as an automatic renewal fixed-price product.
  5. Renewable energy products must be made up of a combination of at least 50% renewable energy resources in order to be listed on the website.
  6. A unique hyperlink is required for every product added to the website. This link should take customers to the related page on the website.
  7. Products added are available to small industrial and commercial (under 100 kilowatts), and residential customers.
  8. All customers in a customer class within a Distribution Company service territory must have access to the products listed on the website.
  9. The supplier can update product information on a daily basis.
  10. Every day, all updates will be updated by the website at 5:00 a.m..
  11. Every product must indicate a start date, with the option of an end date. If no end date is indicated, the website will list the product until one is specified by the supplier.
  12. All products listed on the website by the supplier must be honored.

Product Information Rules

  1. A unique product name must be included for each product listed by the supplier.
  2. The Distribution Company’s services territory for the product and the applicable customer type or class must be clearly indicated by the supplier on the website.
  3. Fixed-price products must be listed correctly, as dollars per month or/and cents per kWh.
  4. Fixed-price product contract terms must be listed in “months”.
  5. If the product has an early termination fee, the fee must be displayed at a single dollar amount or a dollar amount per month for the early termination.

User Preference Options

On the website, the customer will be able to complete the following actions:

  1. Filter for products that meet their eligibility or customer class.
  2. Initial listing of products will show the user a random selection of products until they filter for specific results.
  3. Sorting for specific items such as, contract terms, renewable energy content, and average monthly cost.
  4. Product comparison.
  5. Calculate the average monthly cost for each product listed.

Retail Energy Supplier Feedback and Comments

Based on the updated rules provided by the Department of Public Utilities, retail energy suppliers were encouraged to provide feedback and comments to assist in the development of the state of Massachusetts website initiative. These comments include:

“One aspect we noted was missing was consumer education. There should be a spot where terms such as “automatic renewal,” “fixed price,” “variable price,” “competitive supplier,” “Class I renewable energy,” “Massachusetts Renewable Portfolio Standard” etc. are defined and explained to the customer. This can be done via a short and sweet “Education” page, or by creating pop-up definitions that can be accessed by hovering over these terms wherever they appear on the website.” – Mass Energy Consumer Alliance

“With respect to the inclusion of energy- and non-energy-related services, which are not supply, the Company does not object to the inclusion of these items on the Competitive Electric Supply Website, provided that these types of services are not included in the calculation of the Company’s Purchase of Receivables (“POR”) from a competitive supplier. The calculation of POR payments to competitive suppliers is governed by the Company’s approved POR tariff and includes only charges for supply.” – National Grid

Due to the fact that these retail energy suppliers provided their support and feedback within the indicated timeframe, it is now up to the Department of Public Utilities to review and determine which elements they will incorporate into the website initiative.

Changes Coming to the Electric Supply Market in Massachusetts