Editor’s Note: This story has been updated to include more detail of the research Massachusetts legislators are using to support ending residential retail choice in the state, including the estimated price difference for retail choice residents over five years, as well as critics' objections to the research.
- A sweeping Massachusetts bill aimed at driving climate progress includes a clause that would ban retail energy companies in the state’s residential sector. It would make Massachusetts the first state to reverse course on retail electric choice after allowing it for decades.
- The energy omnibus bill currently in conference, S.2842, includes a provision that would prevent retail suppliers from creating new contracts or renewing contracts after 2023. The provision comes without amendments from S.2150, a 2021 bill from state Sen. Brendan Crighton, D, that received support and testimony from Attorney General Maura Healey and then-state Energy and Environmental Affairs Secretary Kathleen Theoharides, among others.
- However, retail choice advocates point out, the state has strong demand for other options besides the incumbent utility service: 79% of Massachusetts respondents to a 2021 poll by SurveyUSA on behalf of Clean Choice Energy said they would like to choose who provides their electricity.
At least 18 states have opened up their electricity markets to competition. Arizona backed away from plans to allow retail choice in the early 2000s in the face of the Western energy crisis, but no states have reversed course so far after allowing it, retail choice advocates say. Connecticut, Illinois and New York, among other states, have also reviewed their retail choice rules through proposed legislation, consumer advocacy reports and legal challenges of retail energy suppliers.
Massachusetts, which opened its retail electricity market to competition in 1998, could be the first to reverse it, after studies and support from the Office of the Attorney General showed retail electric supplier offers as generally being more expensive than the default utility supply offer.
The state legislature has considered this issue in the House of Representatives since 2018, as the AG reported higher costs for customers who left municipal or investor-owned utility service. Healey’s testimony on S. 2150 last summer noted that arrears increased during the COVID-19 pandemic, saying that residents were being charged more by electric suppliers in nearly every community examined.
"I know it is a big deal for us to call for the banning of an industry," Healey told the state Joint Committee on Telecommunications, Utilities and Energy, but "this industry has overcharged Massachusetts customers for far too long."
However, the 2021 study is "riddled with inaccurate results," creating an unrealistic picture for state legislator support of eliminating retail choice for residential customers, Christopher Ercoli, president of the Retail Energy Advancement League, said in an interview with Utility Dive.
According to REAL, retail suppliers lock rates in at the beginning of a contract, so many retail energy customers in Massachusetts that are locked into rates from last fall are currently saving money as energy prices are currently increasing in the country and internationally.
The survey from Clean Choice Energy showed 83% of respondents said they would like to power their homes with clean, renewable energy, which is what many retail choice providers are offering.
Retail electricity choice advocates said the investor-owned utilities in the state are in essence lobbying that utilities can decarbonize the grid cheaper, through economies of scale, but retail suppliers say it’s taking longer for utilities to offer 100% clean energy options.
"Competition is the fastest way for you to receive any results," Ercoli said, adding that investor-owned utilities in Massachusetts use 51% clean resources, while three-quarters of the existing competitive supply offers in the state offer a 100% clean energy supply option.
The major utilities in the state say they have not lobbied for the removal of retail choice.
"National Grid has not offered an official position on this provision, but we urge our customers to consider all available energy supply options and determine which one best meets their needs," National Grid spokesperson Bob Kievra said in an e-mail.
"We have not provided testimony on this bill, and responding to those information requests from our state leaders, regulators and policymakers is the extent of our involvement on this legislation," Eversource spokesperson William Hinkle said in an email.
"We've been happy to work with our regulators ... as well as the Attorney General, responding to their requests and providing information to assist in efforts to better understand how we can help protect customers across the commonwealth from overpaying a different supplier," Hinkle added.
According to REAL, the question of retail competition would best be addressed through the Massachusetts Department of Public Utilities. The state regulators could reopen docket 19-07, an investigation into consumer interests in the retail electric competitive supply market.
REAL's members aim to work with all of the bill "conferees to find a way to maintain the residential choice," Ercoli said. "We feel as though taking choice away is certainly not the way to go about addressing what is ultimately a larger climate bill that they're trying to get done here."
S. 2842 aims to accomplish a lot more than banning retail suppliers. The broad-ranging bill has support for other clauses that would expand clean energy resources and energy storage within the state.
For example, the bill directs the state energy department to study and make recommendations for a competitive solicitation with other New England states for 1,750 GWh of long-term clean energy generation. The bill would also set a 10 GW offshore wind goal by 2035, as well as establish a timetable for offshore wind efforts.
The consumer advocacy basis of ending residential retail choice
The state Office of the Attorney General has studied possible pricing discrepancy between retail choice and utility customers for several years, publishing three reports, the most recent one published in April 2021. According to the attorney general’s report, consumers paid more than $60 million additionally each year by paying residential suppliers instead of the utility rate, for a total of $426 million over five years.
The bill received wide support from consumer advocates and state regulators when it was discussed in 2021, including Department of Public Utilities Chair Matthew Nelson, according to staff of the bill’s sponsors.
However, retail suppliers allege that the report did not properly include input from the industry and that the analysis was not reviewed by an independent third party.
The Retail Energy Supply Association “has been consistently denied access to the non-public data the AGO relies upon and as a result cannot confirm the accuracy of any of these ‘black box’ figures,” Daniel Allegretti, RESA spokesperson, said in an email.
RESA made a public record request for the confidential data in the report, but the full figures are not public due to suppliers involved in the study insisting on nondisclosure agreements, according to Chloe Gotsis, attorney general’s office spokesperson. The report, reviewed by Susan Baldwin, a consultant hired by the Office of the Attorney General, used multiple subcontractors to look at the data from Massachusetts consumers, according to Gotsis.
RESA has issued its own report refuting the findings of the attorney general’s office, claiming that residential retail electricity rates were consistently compared to utility rates during periods of low energy prices for the utilities. The attorney general’s report states it uses all competitive supply charges from June 2015 to June 2020.
RESA’s rebuttal report also says the attorney general’s report does not take into account higher utility premiums for clean energy service. However, Baldwin’s analysis concluded the premium for additional renewable sources was $0.005/kWh, as opposed to consumer loss from retail service, which was over $0.03/kWh. Moreover, according to the attorney general, retail suppliers typically meet a less strict standard of renewable energy resources, making them cheaper resources than the Class I renewable energy certificates, which are required in parts of the clean energy offers from utilities. Class I RECs have a threshhold for environmental benefits delivered into the New England grid.
Other retail advocates, including REAL, have touted RESA’s report and asked for an analysis of times when energy prices are very high, as they are currently, because residential retail choice rates would allegedly be locked in below rising utility rates.
“Abolishing energy choice in Massachusetts and relying solely upon a utility with no competitive incentive could leave Massachusetts unable to meet the state’s climate goals and would deny customers the opportunity they have today to choose who supplies their energy and from which sources,” Allegretti said.
CORRECTION: A previous version of the story misidentified the reason why the state of Arizona did not advance retail choice policy. It was due to the Western energy crisis during the early 2000s. We have updated the story to clarify that Connecticut, Illinois and New York are among those who are addressing retail choice-related consumer concerns.