Power Supply Services in the Cape & Islands

Power Supply Services

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The state's Electric Utility Restructuring Act gives consumers the opportunity to buy electricity from competitive power suppliers. Some of these suppliers own and operate fossil, nuclear, and renewable energy facilities, and they sell their electricity through wholesale and retail markets. Others serve only as brokers or marketers, selling dirty, cleaner, and green energy products. Local consumers also can continue to receive "basic" power supply service from their distribution company. NStar and National Grid (formerly Nantucket Electric) are no longer allowed to own power plants, however.

All suppliers must be licensed by the Massachusetts Department of Public Utilities (DPU), and they must track and report the attributes (e.g., fuel sources and emissions) of the power they generate and sell. They also must comply with the provisions of the state’s Renewable Portfolio Standard (RPS), which mandates that they purchase “generation attributes,” in the form of renewable energy credits (RECs), from green power facilities equivalent to a fixed percentage of their total sales. On March 1, 2007, the RPS ratcheted up to 3.0%.

Power generation services now account for more than 50% an electric bill. NStar and National Grid offer supply services at rates regulated by DPU. Competitive suppliers set their own rates, and some offer "boutique green" products based on RECs generated by hydro, wind, solar, and bioenergy facilities. Most Cape and Vineyard consumers buy power through an agreement negotiated by the Cape Light Compact with ConEdison Solutions; most Nantucket consumers continue to purchase power from National Grid.

Consumers face an array of choices as they seek to realize the monetary savings and other benefits promised by the deregulation of the electricity industry. Furthermore, power supply markets are not yet mature, meaning that promised benefits are not yet available to many consumers. Click on the links below for more information:

Market Status

Basic Utility Service

Competitive Options

Supplier Lists
Cheap Power
Green Power

Market Status
The evolution of competitive power markets in Massachusetts has been uneven yet relatively predictable based on the provisions and schedules of the Electric Utility Restructuring Act of 1997. The wholesale market functions with reasonable efficiency, and most of the cost savings promised by deregulation have been realized by consumers that purchase large quantities of electricity. The "standard offer" price protections afforded to ratepayers from 1998 through early 2005 delayed market entry by retail power suppliers, while other market barriers continue to constrain competition on pricing at the retail level. Electricity generated by renewable energy facilities is not yet widely available for purchase, except in the case of credit-based "boutique green" power products, which are described below.

Customer migration data maintained by the Massachusetts Division of Energy Resources profile market status (these data do not include customers served by municipal utilities). As of February 2004, only 3.4% of more than 2.5 million customers had migrated to a competitive supplier, 62.7% were served by the standard offer, and 33.9% remained on default service. The chart below illustrates these data, as well as an important trend: Larger customers are more likely to have switched to a competitive supplier. The small number of consumers served by competitive suppliers accounted for 22.6% of total consumption in February 2004.

The bars at left show that as of March 1, 2004, most Massachusetts consumers continued to buy electricity from their utility supplier. The bars at right show that large consumers were more likely to have switched to a competitive supplier. These trends have largely held since then. (Data source: Massachusetts Division of Energy Resources)

Since March 1, 2005, when the standard offer rate protections for retail consumers disappeared, these trends have generally held: Most consumers remain on basic service, which replaced both the standard offer and default service options shown in the chart. Consumers on Cape Cod and Martha’s Vineyard are bucking the trends due to the existence of the Cape Light Compact (CLC), a municipal aggregator. Buying cooperatives, trade associations, nonprofits, and other organizations also can attempt to secure better deals from competitive suppliers by providing aggregation services.

As the state's only municipal aggregator, the CLC leverages the purchasing power of all types of consumers located in the 21 towns in Barnstable and Dukes counties. The hope is that increased buying power will lead to lower prices. That has not always proven to be the case. Under an agreement negotiated between the CLC and Mirant Americas Retail Energy Marketing in 2002, tens of thousands of local consumers previously served by NStar were able to purchase lower-cost electricity. Savings totalled several million dollars by the time this agreement ended in 2004. In January 2005, the CLC's competitive supply agreement with ConEdison Solutions went into effect. Savings in 2005, relative to NStar's rate for basic service, were modest. In 2006, the CLC-ConEdison Solutions rates were among the highest in the continental United States, giving back any savings realized in previous years. In 2007, CLC and NStar rates have been similar.

Utility Option: Basic Service
Distribution companies are required to provide "basic" generation service to consumers who have not selected a competitive supplier. NStar and National Grid purchase power from wholesale electricity markets through competitive solicitations, and they supply the power on a not-for-profit basis at rates approved by DTE.

Basic service customers can sign up either for fixed-price power, where the rate remains constant over a 6-month period, or for variable pricing, where the rate changes monthly. Pricing, fuel source, and other attributes of the basic service available to local consumers are detailed in energy disclosure labels distributed as bill inserts by NStar and National Grid. Through its GreenUp Program, National Grid offers green power products to Nantucket consumers.

Information from March 2004 labels for residential consumers is summarized in the tables below for illustrative purposes. Prices for generation services since then have doubled, due in large part to the rising costs of fossil fuels and New England's over-reliance on natural gas.

NStar Basic (Default) Service, March 2004

Parameter	Attributes
Cost for residential consumers	Fixed: $0.05722/kWh fixed through June 2004 Variable: ranged from $0.05023 – $0.06618/kWh through June 2004
Fuel source mix	Fossil: at least 55% (31% natural gas, 15% oil, 9% coal) Nuclear: 16% Municipal waste: 13% Hydroelectric: at least 5% Biomass: 1%

National Grid Basic (Nantucket Electric Default) Service, March 2004

Parameter	Attributes
Cost for residential consumers	Fixed: $0.05702/kWh through April 2004; $0.06018 from May-October 2004 Variable: ranged from $0.05027 – $0.06504/kWh through October 2004
Fuel source mix	Fossil: at least 46% (17% coal, 16% natural gas, 13% oil) Nuclear: at least 27% Hydroelectric: at least 7% Municipal waste: 3% Biomass: 3%

Competitive Options
Most competitive suppliers attempt to compete on pricing and contract terms, trying to offer lower prices or price stability. These suppliers typically target industrial and large commercial consumers. Other suppliers pursue residential and small commercial customers by offering products differentiated by fuel source, typically "boutique green" products. These products generally add anywhere from 1¢ to 3¢ to the cost of each kilowatt-hour or about $5 to $15 to the monthly electric bill of an average residential consumer.

For detailed information and practical tips on choosing a competitive supplier, click here. Click on the links below for more information on supply options:

Competitive Supplier Information
Cheap Power
Green Power

Supplier Lists
NStar and National Grid provide consumer guides and maintain updated lists of competitive suppliers selling electricity within their service territories. The Cape Light Compact offers information on its power supply options, but it only compares its products to NStar's when it offers a lower rate:

Cheap Power
Lower-price power supply options help reduce electric bills—a critical need for many consumers. These savings may, however, come at a cost: Under present energy and environmental policies, the prices paid for electricity generated by fossil fuels and other sources do not reflect “true cost” considerations.

Fossil fuels such as natural gas, coal, and oil are burned to produce most of the power generated in New England. On a daily basis, fossil power generation produces more harmful emissions than any other U.S. industry. Nuclear plants and large hydroelectric facilities are also significant contributors to the New England supply mix. They release no air pollutants or greenhouse gases, but they do have other serious impacts. For example, local communities are downwind of the Pilgrim Nuclear Station, the only nuclear plant in Massachusetts, while large hydro facilities ruin natural water courses, alter habitats, and harm fisheries.

The tradeoffs associated with cheap power are illustrated by the power supply agreement between the Cape Light Compact and Mirant Retail Energy Marketing Services. This agreement, which ran through the end of 2004, reduced the aggregated electric bill of tens of thousands of Cape and Vineyard consumers by a total of about $4.5 million. But consumers were forced to patronize a subsidiary of the corporation that owns the Canal Generating Station in Sandwich—one of the dirtiest power plants in New England.

On the "physical path," when the Canal plant is operating, it releases more than 1.5 tons of pollution and 200 tons of greenhouse gases each hour to meet the average demand of Cape & Islands communities. According to the Toxics Release Inventory maintained by the U.S. Environmental Protection Agency, the plant emitted more than 20 pounds of mercury into local environments in 2001; the amount of mercury found in a household thermometer is sufficient to contaminate a pond's ecosystem and to transform predatory fish into unhealthy food. Mirant's retail marketing outlet exists to profit on output from its generating facilities by trading in power markets. By negotiating a competitive supply contract with Mirant, the CLC gave this corporation a "contract path" for profiting by environmentally insulting local communities.

Green Power
The state’s RPS requirements are building demand for green power by requiring suppliers to purchase growing quantites of renewable energy certificates (RECs). At present, "delivered green" products, which are based on the green electrons fed to the power grid by renewable facilities, remain largely unavailable. However, in the summer of 2007, NStar proposed to change this situation by giving local consumers the opportunity to buy power from wind turbines located in New York and New England.

Boutique green products provide consumers with opportunities to offset some or all of their electricity needs by purchasing the attributes associated with renewable generation. For every megawatt-hour of power produced by green facilities, a REC, also known as a green credit or green tag, is created. By paying a small premium for credit-based products, consumers can reduce their energy footprint and support renewable energy development.

National Grid's GreenUp Program was the first boutique green offering targeted to local consumers. Nantucket consumers receiving basic supply service can pay a small surcharge to purchase RECs from small or low-impact hydro facilities, biomass plants, wind turbines, and solar installations. Charges, on a per-kilowatt-hour basis, are added to the supply portion of the regular electric bill. National Grid makes no profit when its customers choose to purchase credits from green power brokers, but it continues as their supplier of record.

The CLC's Compact Green Program operates on a similar principle: Cape and Vineyard consumers may buy boutique products to offset 50 or 100% of their purchases under the CLC's supply agreement with ConEdison Solutions. NStar does not offer any green power products yet.

The figure below displays the role of individual renewables in the supply mix for several 100% green options that were available to Nantucket consumers in 2004. It also illustrates the RPS-eligibility of each product, based on the sources of generation and other state criteria. Buying products based on generation from RPS-qualified facilities reduces the amount of RECs available to retail suppliers, creating an incentive for new renewable energy installations within New England.

The figure shows that the renewable supply portfolio is dominated by small hydro facilities (25 to 75% range), but a 100% wind product is available: Mass Energy is partnering with the municipal utility in Hull, Massachusetts, to offer credits generated by the spinning blades of the town’s initial 660-kW turbine. A sample March 2004 green product offering, GreenerWatts New England from the Center for Ecological Technology and Conservation Services Group , is characterized in more detail in the table below. The table illustrates the tradeoffs associated with buying boutique green power products: Out-of-pocket costs are higher, but "true costs" are much lower. Green power purchases account for substantially reduced emissions, they decrease regional dependence on fuels shipped in from elsewhere, and they help build the market for renewable energy.

CET/CSG GreenerWatts New England 100%, March 2004 (See “Disclosure Label” from CET/CSG)

Parameter	Attributes
Cost for residential consumers	Nantucket Consumers: +1.9 cents/kWh ($0.019/kWh) over usual rate Cape & Vineyard Consumers: +3.6 cents/kWh ($0.036/kWh) over usual rate, based on a cost of $72 for block of credits equivalent to 2000 kWh
Fuel supply mix (credits)	Small or Low-Impact Hydro: 75% Biomass: 14% Wind: 10% Solar: 1%
Emissions in relation to regional average	SOx: less than a fourth of regional average NOx: less than a sixth of regional average CO₂: less than a third of regional average

Last updated 09.10.07