Massachusetts Electric Seeks Approval to Cut Price of Default Service

The announcement was welcome news for the 260,000 Massachusetts Electric default residential customers who signed up for service after the start of deregulation in March 1998. They have seen their market-based rates skyrocket over the last 10 months, from 3.8 cents a kilowatt hour to 9.213 cents.

Officials at the state's largest electric utility said the proposed rate of 6.917 cents per kilowatt hour reflects sharply lower wholesale costs for electricity, brought about by lower prices for natural gas and the addition of new generating capacity in the region. If approved, the rate would remain in place until next April.

The rate proposal would bring the market-rate price paid by default customers back in line with the more regulated price of 6.631 cents per kilowatt hour paid by the 75 percent of Massachusetts Electric customers getting power under the so-called standard offer.

Standard offer and default prices were the same until late last year, when default prices began moving with the market and jumped dramatically. The rise in standard offer prices was more moderate under terms of the deregulation law.

Neither default nor standard service residential customers have had the option of switching to a supplier other than their local utility because competition has not materialized along with deregulation.

Robert McLaren, senior vice president at Massachusetts Electric, said that if the new default rate is approved by the Department of Telecommunications and Energy, the default and standard offer rates would differ by only about $1.50 a month for a typical customer using 500 kilowatt hours a month.

McLaren said Massachusetts Electric does not expect to change its standard offer rates until the end of the year.

"I wouldn't expect it to go higher," he said. "If things don't change, it'll probably go lower." The Massachusetts Electric filing is expected to be the first of many rate reductions filed by electric utilities in the coming weeks. A spokesman for NStar, which owns the former Boston Edison, Commonwealth Electric, and Cambridge Electric, said a rate filing is in the works.

For commercial default customers, the rate under Massachusetts Electric's proposal would fall from 9.556 cents to 7.045 cents per kilowatt hour. For industrial default customers, the rate would drop from 9.054 cents to 6.787 cents.