MA Bill seeks to ban Competitive Electric Suppliers
“Competitive Electric Suppliers” will be banned in Massachusetts if the House passes the Climate Bill that the State Senate passed June 25th 2024....But what does that even mean?
Competitive Electric Suppliers are companies that offer different rates to consumers outside of their utility providers’ (like National Grid and Eversource) established rates.
Utility companies bill you based on both their services (delivery to your home) and the cost of the electricity it purchased on your behalf on the market in order to supply you power. When you go through a competitive electric supplier, the main utility (ie National Grid) still delivers your electricity, but the purchasing portion is done by a third party company. You still receive a standard looking bill from the utility, but the supply portion of the bill (the electricity itself) ultimately is paid to your supplier from the utility.
In theory, this is a good setup that allows for competition on rates in the marketplace for consumers. In practice, however, the State Attorney General has received hundreds of complaints over the years regarding over billing and inflated rates, and the problem seems to stem from the unworkability in the long term of the business model, in that if the utility cannot sell the energy itself it solely bears the brunt of transmission cost with no reimbursement, to oversimplify.
Additionally, utilities like National Grid and Eversource are required to have their rates, as well as any increases, approved by the State. This is not true for competitive energy suppliers, which means consumer bills can increase without oversight, depending on either market conditions or company decisions, without oversight.
This is a topic with a lot of layers and implications, but hopefully this quick, simple overview helps at least put some perspective on the new legislation and the basis for its inclusion in the bill. (WBUR published an excellent piece on the topic last year if you would like more details and an overview of the issues involved you can read that here: Why a plan to drive down electric prices in Mass led to higher bills )
