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Retail Unbundling - Massachusetts
Status: The State has unbundling programs for its residential gas customers, but participation is quite limited.
Overview: Massachusetts used a collaborative approach in the late 1990s to develop a program of unbundled retail natural gas service for customers of the State's investor-owned local distribution companies (LDCs). Participants in the collaborative effort included LDCs, marketers, consumer groups, government agencies, and the State regulatory agency, the Department of Telecommunications and Energy (DTE), which became the Department of Public Utilities in April 2007. In October 2000, DTE approved final rules governing unbundled services and model terms regarding capacity assignment, default service, and peaking service. These rules specified that LDCs would continue to be responsible for assuring upstream capacity on interstate pipelines for the first 3 years of a 5-year transition period. In the meantime, DTE and the collaborative participants would work out the details of capacity assignment and cost recovery for LDCs as interstate pipeline capacity is shifted to marketers.

DTE began an investigation in January 2004 to determine whether retail markets were sufficiently competitive to allow LDCs to assign interstate pipeline capacity voluntarily rather than on the currently mandated basis. In June 2005, DTE concluded that the natural gas market was 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 was still limited, marketer participation had not increased, and the number of customers moving to transportation service was stagnant or declining, with essentially no participation by residential customers. 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, DTE directed LDCs to provide customer migration data to DTE on May 31 and November 30 of each year.

As of December 2009, 17 suppliers and 39 retail agents have been approved to provide retail service in the State, but only two suppliers have expressed interest in serving the residential market. According to the Department of Public Utilities, 1,547 residential customers and approximately 15,928 small and medium-sized commercial and industrial customers were receiving unbundled service as of summer 2009. The total number of residential customers is similar to the count since 2006 but substantially higher than the 293 residential customers particpating in 2005. According to the Department, the residential participation increases in 2006-2009 were due to developers entering into agreements with alternative suppliers for multifamily 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.

EIA State Data: In 2008, Massachusetts had 1,390,180 residential and 129,560 commercial customers. They consumed approximately 113 and 57 billion cubic feet of natural gas, respectively. The average prices residential and commercial customers paid for natural gas from local distribution companies were $17.14 and $15.49 per thousand cubic feet, respectively.
Eligibility and Participation in Retail Choice Programs:
Estimated Eligibility and Participation by Customer Class, December 2009

Customer Type

2008 Customer Total

Eligible 2009

Participating 2009

Total

Percent of Customers

Total

Percent of Eligible

Percent of 2008 Customer Total

Residential

1,390,180

1,336,416

100

1,547

0.1

0.1

Commercial/Industrial*

142,950

142,950

100

15,928

11.1

11.1

Total

1,533,130

1,479,366

100

17,475

1.2

1.1

      *Massachusetts had 129,560 commercial and 13,390 industrial customers in 2008.

      Sources: 2008 Customer Total: Energy Information Administration, Natural Gas Annual 2008 (March 2010). 2009 Customer Total, Eligibility, and Participation: Massachusetts Department of Public Utilities (April 2010) and EIA estimates.

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 was not competitive, local distribution companies 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 was not yet sufficiently competitive to change the capacity assignment methodology.
Regulatory and Legislative Actions

Legislation 02/07 Cabinet reorganization plan approved, which includes creation of a new public utility commission (House Bill 2034). In April 2007, the functions of the Department of Telecommunications and Energy will be handled by two new agencies: the Department of Energy and Cable (DTC) and the Department of Public Utilities. DTC will handle telecommunications and cable issues and be within the Executive Office of Housing and Economic Development. DPU will handle electric, gas, siting, pipeline, water, and transportation issues and be within the Executive Office of Environmental Affairs.
Regulatory Actions 04/07 New regulatory agency for energy, water, and transportation issues. On April 11, 2007, the Department of Telecommunications and Energy was replaced by two new agencies: the Department of Telecommunications and Cable and the Department of Public Utilities (DPU). DPU will handle electric, gas, siting, pipeline, water, and transportation issues. DPU is within the Executive Office of Environmental Affairs overseen by the Undersecretary of Energy.
  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. 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.