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NSTAR CEO Thomas J. May shares with T&D World his views on the impact of the 1997 comprehensive restructuring laws.
In 1997, the Massachusetts Legislature enacted a comprehensive electric restructuring law with the intention of creating a competitive electric-supply market that would lower consumer electric rates and still provide for a reliable source of energy.
For electricity customers, the law has been an undeniable success. In 1998, customers realized an immediate 10% price reduction and in 1999, a further reduction of 5%, totaling a 15% reduction, which is retained today and which adjusted for inflation.
Regrettably, the good news for Massachusetts' consumers has been overshadowed in recent months by record increases in market prices for oil and natural gas, as well as by concerns resulting from extensive media coverage of deregulation in California. Despite those concerns, the facts show that on critical elements of restructuring, Massachusetts and California are considerably different.
State-to-State Differences
First and foremost, the Massachusetts Legislature provided for mechanisms within the electric restructuring law to guarantee rate reductions while providing flexibility within that rate structure to allow for inflationary cost-- of-energy adjustments. In doing so, the Legislature maintained the economic viability of distribution companies by allowing them to recoup the actual costs of energy.
According to California's law, electric rates are capped. The result has been that California's utilities are forced to buy power in...