NST » Topics » Retail Electric Rates

This excerpt taken from the NST 10-K filed Feb 11, 2008.

Retail Electric Rates

 

Electric distribution companies in Massachusetts are required to obtain and resell power to retail customers through basic service for those customers who choose not to buy energy from a competitive energy supplier. Basic service rates are reset every six months (every three months for large commercial and industrial customers). The price of basic service is intended to reflect the average competitive market price for power. As of December 31, 2007, 2006 and 2005, customers of NSTAR Electric had approximately 47%, 49%, and 68%, respectively, of their load requirements provided through basic service. For 2007 and 2006, the residential, commercial and industrial customer classes’ load requirements provided through basic service were 56%, 31% and 13%, respectively, and 52%, 31% and 17%, respectively. NSTAR Electric fully recovers its energy costs, including costs related to charge-offs of uncollected energy costs, through DPU-approved rate mechanisms. Though energy delivery charges vary slightly by region, the basic service price for all residential customers decreased an average of 8% from $0.1186 to $0.1084 per kilowatt-hour effective July 1, 2007. Medium and large commercial customers decreased an average of 17% from $0.1142 cents to $0.0947 cents per kilowatt-hour effective October 1, 2007. The basic service price for all residential customers increased an average of 3%, from $0.1084 to $0.1117 per kilowatt-hour effective January 1, 2008. Medium and large commercial customers increased an average of 17% from $0.0949 cents to $0.1106 cents per kilowatt-hour effective January 1, 2008.

 

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Changes in Massachusetts’ Regulatory Environment

 

In January 2007, a new Governor and Attorney General took office. The Governor has a very significant influence on energy regulatory policy in Massachusetts. The Governor has identified energy policy as a key initiative of his administration, and has functionally reorganized key energy offices. His reorganization plan, which took effect on April 11, 2007, created a new cabinet position—the Secretary of Energy and Environmental Affairs. The Secretary now oversees a newly formed CUC, consisting of three commissioners. The CUC leads the DPU, a newly formed agency that has jurisdiction over electric, natural gas, water and transportation matters. The agency previously responsible for such functions, the MDTE, was eliminated.

 

During late 2007 and January 2008, the Massachusetts House of Representatives and Senate drafted and approved two separate energy policy reform bills. These bills address energy procurement, renewable and alternative energy generation and other green power initiatives and utility regulation. Both bills are currently under review by a joint House and Senate Conference Committee. This Committee is expected to combine the two bills into one comprehensive energy policy reform bill for ultimate approval. It is anticipated that the resulting bill will be enacted into law during 2008. NSTAR cannot anticipate or predict what terms the final bill will include, and therefore, cannot predict the timing, ultimate approval, or potential impact of this legislation.

 

Proposed Rate Decoupling

 

On June 22, 2007, the DPU opened a generic investigation into rate structures and revenue recovery mechanisms in order to promote efficient deployment of demand resources in Massachusetts. Demand resources are installed equipment, measures or programs that reduce end-use demand for electricity or natural gas. This investigation will include, in part, a review of whether and how existing rate mechanisms may be changed to better align a company’s financial interests with the needs to provide greater energy efficiencies and foster the advancement of price-responsive demand in regional wholesale energy markets. Historically, Massachusetts retail electric and natural gas distribution companies have sponsored customer-funded energy efficiency and load reduction programs with an incentive to mitigate a company’s lost retail distribution revenues. However, there is an inherent disconnect between the sponsorship of such programs and the continued maintenance of revenue and sales growth levels. The DPU has opened a proceeding to determine whether it should implement a base revenue adjustment mechanism that “decouples” a utility’s retail distribution revenues (the recovery of fixed infrastructure costs, including a return component and the recovery of other operating costs) and its sales volumes.

 

NSTAR supports the DPU’s objectives that would promote greater levels of energy efficiencies and alternative energy resources. It is important that the outcome of this generic decoupling proceeding effectively achieve these objectives in balance with other rate policy objectives. NSTAR Electric anticipates working to achieve an effective rate mechanism with the DPU. However, NSTAR cannot predict the timing or the ultimate outcome of this proceeding.

 

This excerpt taken from the NST 10-K filed Feb 16, 2007.

Retail Electric Rates

 

Electric distribution companies in Massachusetts are required to obtain and resell power to retail customers through basic service for those who choose not to buy energy from a competitive energy supplier. Basic service rates are reset every six months (every three months for large commercial and industrial customers). The price of basic service is intended to reflect the average competitive market price for power. As of December 31, 2006, 2005 and 2004, customers of NSTAR Electric had approximately 51%, 32% and 24%, respectively, of their load requirements provided by competitive suppliers.

 

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This excerpt taken from the NST 10-K filed Feb 22, 2005.

b. Retail Electric Rates

 

Electric distribution companies in Massachusetts are required to obtain and resell power to retail customers through either standard offer or default service for those who choose not to buy energy from a competitive energy supplier. Standard offer service will end on February 28, 2005. Therefore, effective March 1, 2005, all customers who have not chosen to receive service from a competitive supplier will be provided default service. Default service rates are reset every six months (every three months for large commercial and industrial customers). The price of default service is intended to reflect the average competitive market price for power. As of December 31, 2004, 2003 and 2002, customers of NSTAR Electric had approximately 24%, 26% and 27%, respectively, of their load requirements provided by competitive suppliers.

 

On December 21, 2004, the FERC issued an order approving Boston Edison’s October 2004 request to modify its Open Access Transmission Tariff (OATT). Effective January 1, 2005, Boston Edison is allowed to include 50 percent of construction work in progress in its rate base for transmission projects by including this amount in its local network service transmission rate formula, rather than capitalizing Allowance for Funds Used During Construction (AFUDC) charges on the entire construction expense balance. The order is subject to Boston Edison filing annual reports of its long-term transmission plan.

 

In December 2004, NSTAR Electric filed proposed transition rate adjustments for 2005, including a preliminary reconciliation of transition, transmission, standard offer and default service costs and revenues through 2004. The MDTE subsequently approved tariffs for each retail electric subsidiary effective January 1, 2005. The filings are to be updated in February 2005 to reflect final 2004 costs and revenues which are subject to final reconciliation.

 

On February 1, 2005, the Independent System Operator – New England began operating as a Regional Transmission Organization. As a result, NSTAR has given notice to the RTO and other interested parties of its intent to file for proposed changes to its OATT. This change is expected to provide for consistent application of the OATT among all NSTAR Electric companies. The 2004 OATT and the related revenue have been based on this proposed change. If successful, NSTAR Electric expects to include the impact in its 2005 billing rates.

 

Effective January 1, 2005, NSTAR Electric’s Standard Offer Service Fuel Adjustment (SOSFA) rates for each of Boston Edison, ComElectric and Cambridge were modified to a level of 1.564 cents per kilowatt-hour with the approval of the MDTE.

 

Effective October 1, 2004, Boston Edison’s SOSFA rate was modified to 1.223 cents per kilowatt-hour from zero upon approval by the MDTE. The MDTE has allowed companies to adjust prices to reduce deferred cost balances that arise due to rapidly changing market costs for the oil and natural gas used to generate electricity and the SOSFA is designed to collect the costs of fuel that companies incur for purchasing electricity from their suppliers to serve their standard offer service customers. Effective September 1, 2003, the Boston Edison SOSFA

 

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was reduced to zero while the ComElectric and Cambridge Electric SOSFAs were increased to 1.424 cents per kilowatt-hour until January 1, 2004 when they were reduced to 1.223 cents per kilowatt-hour. These changes followed an increase in this rate adjustment from zero to 0.902 cents per kilowatt-hour that was effective May 1, 2003 for all three NSTAR Electric companies. The SOSFA was at zero from April 1, 2002 through April 30, 2003 for all three NSTAR Electric companies. The MDTE has ruled that these fuel index adjustments are excluded from the 15% rate reduction requirement under the 1997 Massachusetts Electric Restructuring Act.

 

In December 2003, NSTAR Electric filed proposed transition rate adjustments for 2004, including a preliminary reconciliation of transition, transmission, standard offer and default service costs and revenues through 2003. The MDTE subsequently approved tariffs for each retail electric subsidiary effective January 1, 2004. The filings were updated in February 2004 to include final costs and revenues for 2003.

 

On December 1, 2003, NSTAR Electric and NSTAR Gas filed their annual reconciliation report on their pension and PBOP rate adjustment mechanism. Hearings were held during 2004. NSTAR anticipates an order by the end of the first quarter of 2005. NSTAR cannot predict the overall timing and result of this order on its financial position or results of operations.

 

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