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Basic Electric Service for Residential and Small Business Customers

This article discusses the principles and objectives of restructuring electric service for residential and small business customers, emphasizing the need for affordable and accessible options. It also outlines the Attorney General's framework, portfolio of contracts, and the importance of a transparent and efficient statewide auction process.

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Basic Electric Service for Residential and Small Business Customers

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  1. It’s Basic Electric Service for Residential and Small Business Customers Joseph W. Rogers Chief, Utilities Division Massachusetts Office of the Attorney General

  2. Default Service Principles • The overall objective of restructuring was and remains to produce real benefit for all customers, and all proposals for change must be measured against this standard. • Smaller customers have not had significant access to competitive retail electric markets; residential, and especially low-income customers, may not have viable, reasonably priced retail competitive options.

  3. Principles (cont.) • Default Service provided by local utilities may be the only viable energy option for small, residential and low-income customers for the foreseeable future; such service provides a valuable means of delivering the benefits of the competitive market to those customers, and should continue to be offered to them. • Retail choiceshould be maintained.

  4. Basic Electric Service • “Electricity service is essential to the health and well-being of all residents of the commonwealth, to public safety, and to orderly and sustainable economic development,” and that “affordable electric service should be available to all consumers on reasonable terms and conditions.” Electric Utility Restructuring Act of 1997 • New England has some of the highest rates in the country • Need to provide a Basic Electric Service for small customers on reasonable terms and conditions - A bare bones service at bare bones prices

  5. Attorney General’s Framework • Portfolio of Contracts • Statewide Auction • Renaming of Default Service to Basic Service

  6. Portfolio of Contracts • Portfolio should contain both long term and short term contracts • Long term contracts to diversify the risk and temper volatility • Spot purchases to mitigate migration and balance the portfolio • Uncertain future requires flexibility in the creation and maintenance of the portfolio • Annual procurements • Laddering of contracts • e.g. spot, one-year, two-year, and three-year • Flexible percentages of each

  7. Statewide Auction • New Jersey Style Auction • Conducted by an independent consultant • Reviewed by another independent consultant for approval by DTE • Transparent and Efficient • An open and transparent process will attract more bidders • Uniform process and results across the state • Allows aggregation of small loads • Prevents market concentration and the potential for market power abuses.

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