Status: The State has unbundling programs
for its residential gas customers, but participation is quite limited.
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Overview: Massachusetts used a collaborative
effort to develop a program of unbundled retail natural gas service for
customers of the 10 investor-owned local distribution companies (LDCs) in
the State. Participants in the collaborative included the LDCs, marketers,
consumer groups, government agencies, and the State regulatory agency, the
Department of Telecommunications and Energy (DTE). In October 2000, the
DTE approved final rules governing unbundled services and model terms
regarding capacity assignment, default service, and peaking service. These
rules specify that LDCs will continue to be responsible for assuring
upstream capacity on interstate pipelines for the first 3 years of a
5-year transition period. In the mean time, DTE and the collaborative
participants will work out the details of capacity assignment and cost
recovery for LDCs as interstate pipeline capacity is shifted to marketers.
The DTE began an investigation in January 2004 to determine
whether retail markets are sufficiently competitive to allow LDCs to
assign interstate pipeline capacity voluntarily rather than on the
currently mandated basis. In June 2005, the DTE concluded that the natural
gas market is not yet competitive enough to change the current capacity
assignment system. It determined that the number of alternative contract
holders with firm rights to interstate pipeline capacity serving the State
is still limited, marketer participation has not increased, and the number
of customers moving to transportation service is stagnant or declining,
with essentially no participation by residential customers. The DTE
restated its commitment to an eventual transition to a competitive natural
gas market in the State and directed LDCs to improve performance or
implement procedures on: (1) the monthly recall and release of assigned
capacity; (2) marketer access to consumption algorithms; and (3) trueups
between forecast usage and billed usage. As part of its ongoing monitoring
of the State’s natural gas market, the DTE directed LDCs to provide
customer migration data to the DTE on May 31 and November 30 of each year.
As of February 2007, 13 suppliers and 20 retail agents had been approved to provide retail service in the State, but only one retail agent has expressed interest in serving the residential market. According to the DTE, 1,969 residential customers and approximately 13,553 small and medium-sized commercial customers were receiving unbundled service as of Summer 2006. These numbers are substantially higher than the 293 residential and 9,699 commercial customers particpating in 2005, but still accounted for less than 1 percent of eligible customers. According to the DTE, the residential participation increases were due to developers entering into agreements with alternative suppliers for multi-family dwellings, and the commercial increases were due to strong efforts on the part of commercial marketers to build their businesses. Industrial and large commercial customers have had a choice of gas suppliers since 1993.
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EIA State Data: In 2005, Massachusetts had 1,297,508 residential and 120,167 commercial customers. They consumed 119 and 57 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $15.43 and $14.29 per thousand cubic feet. |
Eligibility and Participation in Retail Choice
Programs: |
Estimated Eligibility and Participation by Customer Class, December 2006
Customer Type |
2005 Customer Total |
Eligible 2006 |
Participating
2006 |
Total |
Percent
of 2006 Customer Total |
Total |
Percent
of Eligible |
Percent
of 2005 Customer Total |
Residential |
1,297,508 |
1,545,835 |
100 |
1,969 |
0.1 |
0.2 |
Commercial/Industrial |
132,186 |
134,411 |
100 |
13,553 |
10.1 |
10.3 |
Total |
1,429,694 |
1,680,246 |
100 |
15,522 |
0.9 |
1.1 |
Sources:
2005 Customer Total: Energy Information Administration,
Natural Gas Annual 2005 (November 2006).
2006 Customer Total, Eligibility, and Participation: Massachusetts
Department of Telecommunications and Energy (February 2007).
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Regulatory and Legislative Actions on
Retail Unbundling |
Summary: Retail unbundling began on April 1,
2000, although participation was virtually nonexistent. On February 1,
1999, the Massachusetts Department of Telecommunications and Energy (DTE)
(formerly the Department of Public Utilities) issued Docket 98-32-B,
outlining many of the terms and conditions for the retail choice program,
including a 5-year transition period. Because DTE found that the upstream,
interstate capacity market is not competitive, local distribution
companies (LDCs) were to retain the responsibility for acquiring
interstate pipeline capacity, with the situation to be reviewed after 3
years. In June 2005, the DTE found that the market is not yet sufficiently
competitive to change the capacity assignment methodology. |
Regulatory and Legislative Actions
Regulatory
Actions |
06/05 |
DTE Decides To
Continue Mandatory Capacity Assignment (DTE 04-1). DTE concluded
that the upstream capacity market is not yet sufficiently
competitive to change the current mandatory capacity assignment
approach. It determined that the number of alternative contract
holders with firm rights to interstate pipeline capacity serving
Massachusetts is still limited, marketer participation has not
increased, and the number of customers moving to transportation
service is stagnant or declining. The DTE directed LDCs to improve
performance or implement procedures on: (1) the monthly recall and
release of assigned capacity; (2) marketer access to consumption
algorithms; and (3) trueups between forecast usage and billed usage.
LDCs were directed to provide customer migration data on May 31 and
November 30 of each year. |
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01/04 |
DTE Opens
Investigation Re Upstream Capacity (DTE 04-1). DTE began a
proceeding to determine whether the upstream capacity market is
competitive enough to change the current mandatory capacity
assignment approach. Currently capacity is assigned to others
through a mandatory assignment mechanism at maximum tariff rates
(LDCs annual cost) with LDCs having recall rights. The "migrating"
customer is assigned its pro rata share of upstream pipeline and
storage capacity based on its contribution to peak-day demand.
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10/02 |
DTE Approves Use
of Risk-Management (DTE 01-100-A). DTE will allow LDCs to
establish risk management plans that (1) allow voluntary
participation by customers, (2) have primary goal of reducing price
volatility, (3) ensure fair competition in gas supply, (4) allocate
costs only to participants, (5) demonstrate what effect plan has on
price transparency, and (6) have no incentive mechanisms. DTE
concluded that risk management programs would not adversely affect
customer choice if they give all customers the chance to obtain more
stable prices and costs are allocated only to those who participate
and “ensure efficient competition among all suppliers involved in
the merchant business.” |
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10/00 |
DTE Approves
Company-Specific Filings for Gas Transportation Service (DTE
98-32-E). These are business rules to govern the administration of
customer-choice programs to LDC customers. They also establish
procedures for the provision of supplier sales service and LDC
distribution and default service. |
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10/00 |
DTE Adopts Final
Rules Governing Natural Gas Unbundling (DTE 98-32-E). (Rules
found in section 220 C.M.R §§14.00 et seq.). LDCs are supplier of
last resort. Marketers must file articles of incorporation and
bylaws with DTE to become an approved supplier. Supplier must give
at least 10 days notice before terminating service. Signed and dated
request from customer is necessary before supplier can begin
service. Marketer cannot require security deposit from customers.
Terms of service are to be spelled out clearly, and eligibility for
discount rates are to be standardized. |
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02/00 |
DTE Approves
Model Tariff Terms and Conditions re/ Capacity Assignment, Default
Service, and Peaking Service (DTE 98-32-D). Companies must
submit tariffs within 21 days that comply with approved terms for
review by DTE or identify and justify differences. The Collaborative
is to file its customer education plan and electronic business
transaction report for DTE review. |
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12/99 |
Proposed
Regulations for Unbundled Market. On 12/17/99, DTE opened docket
DTE 98-32-E to consider regulations proposed by LDCs to govern
unbundled service. |
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11/99 |
Proposed Model
Terms and Conditions. On 11/15/99, DTE opened docket DTE 98-32-D
to consider Supplemental Model Terms and Conditions submitted by
LDCs. The proposal covers capacity assignment, default service, and
peaking service. |
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10/99 |
Portfolio
Auction Contracts. On 10/18/99, DTE approved the 3-year gas
supply portfolio auction contract by Boston Gas, Colonial Gas, and
Essex Gas. On 10/20/99, DTE approved the 1-year capacity auction of
its gas supply resources by Berkshire Gas. |
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04/99 |
Agreement on
Interim Capacity Assumptions. On 4/2/99, DTE approved a
settlement agreement concerning interim capacity assumptions. The
settlement was designed to facilitate the assignment of capacity
costs during the transition to an unbundled market, pending the
completion of model terms and conditions, regulations for the
unbundled market, interruptible transportation, and an initial
assignment of downstream capacity. |
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02/99 |
Retail
Unbundling Order, DTE 98-32-B. The Massachusetts DTE ordered
that unbundled gas services would begin Nov. 1, 1999, under a 5-year
transition period. LDCs will remain responsible for acquiring
upstream capacity with review after 3 years. Cost allocation issues
will also be reviewed.
Upstream Capacity Allocation. LDCs
must provide "default service" to any customer that does not choose
an alternative supplier or returns to the LDC for service. Capacity
will be assigned to others through a mandatory assignment mechanism
at maximum tariff rates (LDCs annual cost) with LDCs having recall
rights. The "migrating" customer will be assigned its pro rata share
of upstream pipeline and storage capacity based on its contribution
to peak-day demand. Once the capacity is assigned to an alternative
supplier, the supplier will have the ability to remarket the
capacity and serve its customers with any combination of resources
it has available.
Downstream Assets. LDCs must unbundle
downstream assets (storage facilities for propane or liquefied
natural gas) and make them available to competitors to the extent
that operations permit. DTE expects that eventually these assets
will be available to marketers on a fully competitive
basis.
Portfolio Auction. DTE approved the concept of a
portfolio auction whereby LDCs would transfer management of their
upstream pipeline capacity, storage, and gas supply commodity
contracts to marketers for 3 to 5 years. The auction is not
mandatory because DTE could not determine that it would benefit all
LDCs. However, any LDC that does not institute such a program must
justify its decision to DTE. The Massachusetts Gas Unbundling
Collaborative (formed in 1997) was asked to "develop standards
concerning wholesale and retail marketers' participation in the
market area in connection with the Portfolio Auction" and present
them to DTE for review. DTE will review any upstream capacity
management program auctioned by an LDC and must approve any auction
award prior to implementation. |
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11/98 |
LDC and Marketer
Agreement on Model Terms and Conditions for Unbundled Service.
DTE approved the settlement agreement concerning model terms and
conditions for unbundled gas distribution services proposed on
7/10/98 by the LDCs and the marketer group () The two groups agreed to
most sections of the document. By entering into the agreement, both
groups agreed that the settlement "shall serve as the basis for LDC
compliance filings" and that individual LDCs may propose, and must
fully support, any modifications to the settlement made in these
filings. |
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07/98 |
Proposed LDC and
Marketer Agreement.The LDCs and the marketer group proposed a
settlement agreement concerning model terms and conditions for
unbundled gas distribution services. The proposal was docketed as
DTE 98-32-A. |
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04/98 |
Notice of
Inquiry into Unresolved Issues of Collaborative. DTE issued a
Notice of Inquiry (NOI) (docket DTE 98-32) in response to unresolved
issues in the March 1998 report of the MA Gas Unbundling
Collaborative. The NOI encompassed all issues associated with
comprehensive unbundling of natural gas services in the state and
focused on (1) capacity disposition, both upstream and downstream
and (2) associated cost responsibility. |
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03/98 |
Collaborative
Report. The Massachusetts Gas Unbundling Collaborative reported
its progress in developing a common set of principles for the
comprehensive unbundling of natural gas services in the state
. While consensus was
reached on many points, there was no consensus on the disposition of
capacity and any associated cost responsibility, and DTE's guidance
was requested. |
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07/97 |
Massachusetts
Gas Unbundling Collaborative. The Department of Public
Utilities, now the Department of Telecommunications and Energy
(DTE), issued "Comprehensive Unbundling of Natural Gas Local
Distribution Companies' Services" (), which directed the state's 10 investor-owned LDCs to
initiate an industry-wide collaborative process to develop a common
set of principles for the comprehensive unbundling of natural gas
services in the state. The Department referred to the principles in
its electric restructuring docket (DPU 95-30) as a guide for
unbundling in the natural gas industry. As a result of the
directive, the LDCs formed the Massachusetts Gas Unbundling
Collaborative. One of the LDCs, Bay State Gas Company, had already
begun its own collaborative effort related to its company-specific
unbundling filing. Other participants were marketers, customer
groups, state government agencies, and DTE. |
Investigative
Studies |
02/98 |
Bay State
Collaborative Closed. Bay State Gas Company brought its
company-specific collaborative process to a close after determining
that it would be unable to reach a comprehensive settlement. |
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04/97 |
Bay State
Collaborative Started. Bay State Gas Company began a
collaborative to examine unbundling issues related to its pilot
project that began in July 1996.
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