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After Standard Offer

After Standard Offer. Restructuring Roundtable Friday, January 28, 2005 Douglas S. Horan, Senior Vice President & General Counsel. March 2005: A Smooth Transition to Basic Service. NSTAR Residential Default Rates vs. ISO Clearing Prices (2002 – 2004).

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After Standard Offer

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  1. After Standard Offer Restructuring RoundtableFriday, January 28, 2005 Douglas S. Horan, Senior Vice President & General Counsel

  2. March 2005: A Smooth Transition to Basic Service

  3. NSTAR Residential Default Rates vs. ISO Clearing Prices(2002 – 2004)

  4. Proposals for Change Should Be Grounded in Sound Public Policy • Structural changes should: • Produce customer benefit • Allow (not force) customer choice • Allow (not force) markets to develop

  5. Basic Service as Currently Structured Is Beneficial to Customers • Prices are relatively stable • Customers benefit from utility buying power • Prices track market over time • Service is simple • Customers can shop, if they perceive value • Customers are generally satisfied

  6. Basic Service Allows Retail Market Development • Nothing prevents retail transactions today, where customers and suppliers believe they add value • Over 10,000 NSTAR customers buy from the retail market already • It is a mistake to assume we know the “optimal” level of market participation • SO is a big market barrier; additional migration to the retail market will occur after SO ends

  7. Changing Retail Policy While the Wholesale Market is in Flux Presents Challenges • Debate is raging over how to assure long term resource adequacy • Will multi-year commitments be imposed? • On generators, load, or utilities? • Forcing retail customers into an uncertain wholesale market structure is bad policy

  8. Changing Utility Procurement Process for Basic Service • Be clear about your objective • Fewer price changes? • Smaller price changes? • Lower prices? • Avoid long term contracts (> 2 years) • High cost; deviation from market will create “stranded costs” • Statewide procurement creates complexity, provides no benefit

  9. Summary • Basic Service provides customer benefit • Allow markets to develop; don’t force them • Allow wholesale market to stabilize before changing retail policy

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