Electricity Restructuring Act

In Massachusetts and throughout the United States , most electricity consumers have historically been served by localized, heavily regulated monopolies. Electric utilities have owned and operated power generation, transmission, and distribution facilities, and they have supplied and delivered electricity to all consumers within exclusive service territories.

Massachusetts officially began the process of deregulating its electricity industry under the framework of t he Electric Utility Restructuring Act. This act, passed by the state legislature in 1997, incorporates several key provisions relating to the development and purchase of clean energy.

First, the electricity generation segment of the industry was restructured. Utilities within the Commonwealth were required to sell off their power plants, which transformed them into "wires-only" entities known as distribution companies. This unbundled the electricity services defined by the state's Department of Telecommunications and Energy (DTE). Now, these services are delivered as follows:

•  Generation services are provided by power suppliers, including companies that own and operate power plants or other generating facilities, as well as entities that buy electricity from these facilities. Generators, brokers, and marketers compete for the right to supply these services to consumers at both the wholesale and retail levels. The DTE licenses the competitive suppliers operating in Massachusetts , but it does not regulate the rates they charge.

•  Transmission, distribution, and customer services are provided by distribution companies-the traditional utilities that continue to own and operate the high-, medium-, and low-voltage wires and other equipment used to deliver electricity from generating facilities to consumers. These companies provide metering, billing, and information services, and they are required to offer generation services to consumers not served by competitive suppliers. The DTE regulates the rates charged by distribution companies for power delivery, customer, and generation services.

By deregulating electricity generation in Massachusetts, the act created market conditions conducive to the development and purchase of clean energy. Suppliers have incentives to offer differentiated products based on the price, fuel sources, air emissions, and other attributes of electricity, and consumers can buy products based on power generated by clean energy facilities. To inform power purchasing decisions, the act also introduced uniform labeling requirements that identify products with higher renewable energy content and lower pollutant and greenhouse gas emissions, helping consumers compare the offers of competing suppliers.

Three other key provisions relating to clean energy technology are as follows:

•  The act mandated the implementation of a Renewable Portfolio Standard to ensure an increasing role for clean energy in the state's electricity supply portfolio.

•  The act established the Renewable Energy Trust to create a ratepayer-funded source of revenue for encouraging the development of renewable energy resources and promoting the growth of the state's clean energy sector.

•  The act required the promulgation of air emissions rules and regulations for reducing the environmental and health impacts associated with fossil-fuel-fired electricity generating facilities.