The five restructured New England states open to retail electric supply competition – Connecticut, Maine, Massachusetts, New Hampshire and Rhode Island – saw significant activity during the 2022 and 2023 calendar years. High prices caused by market conditions and aggressive regulatory actions made it a challenging period for the New England retail supply industry.
Connecticut
Proposed regulatory changes: The Connecticut public utility commission (referred to as PUC for all states) moved forward on two sets of significant regulatory changes: State renewable portfolio standard (RPS) rules and State licensing rules. The RPS rules include new substantial RPS-specific bond requirements totaling millions of dollars for larger suppliers. The retail licensing rules are awaiting finalization. Changes would include reducing the current five-year license review cycle to two years, imposing significant increases in licensing bonds and including a data security self-certification.
Enforcement: The PUC aggressively initiated investigations and imposed significant sanctions regarding fines, service suspensions and settlements that encouraged investigated suppliers to depart Connecticut. Discount Power, Public Power and affiliates, Sunwave, Verde, Eligo, and Xoom each received at least $1 million in fines or refunds, plus other sanctions, during 2022-2023.
Investigation into retail pricing practices: In 2021, the PUC expanded Phase I of an investigation into service terms for the small number of low-income “hardship” customers to assert the right to develop and impose limits on residential sales by all retail suppliers. The REAL retail supplier trade group and several individual suppliers challenged the statutory basis for the Phase I proceeding in a Connecticut Superior Court action. The parties later dismissed the appeal as moot, following a PUC decision in mid-2023 to terminate Phase I without a final order.
Instead, a legislative change was implemented, affording hardship customers rights to return to the retail market under specified conditions. The PUC opened a new Phase II docket which, again, targeted limits on offers to residential customers in general. Once again, the REAL trade group challenged the statutory basis of the Phase II investigation, and the Phase II case has been on hold pending the result. Retail plaintiffs argue the statute requires supplier limits to be determined only on a supplier-by-supplier basis rather than on an industry-wide basis, as argued to date by the PUC.
Appeal and resolution of voluntary renewable offer investigation: In the Fall of 2020, the PUC issued a controversial, first-in-the-country decision that would change the ability of Connecticut retail suppliers to offer products that included voluntary compliance with RPS requirements above mandatory minimums, including:
- the voluntary component of such offers could no longer be bundled with a conventional retail offering but must be offered as an RPS-only product;
- the particular certificates used in a voluntary product would be subject to geographic limitations (i.e., only the New England, New York and so-called PJM regions adjacent to Connecticut); and
- the wording used in describing voluntary offers would be strictly regulated (including no longer using the terms “renewable” or “green” offers).
Following a lengthy appeals process through the Connecticut Superior and Appeals Courts, the state Supreme Court took the case on its own motion and denied all retail supplier challenges in a July 2023 decision.
Implementation of the multiple disruptive changes proposed by the PUC in its original decision was completed in Q1 2024.
Maine
Proposed regulatory changes: One key regulatory development was the PUC’s completion of a significant retail supplier rulemaking in mid-2022. A key feature is a new registration process for retail supplier marketing agent companies operating in Maine.
Enforcement: During much of 2023, the PUC was actively engaged in a regulatory investigation into marketing complaints against the state’s largest retail supplier, Electricity Maine. In early 2024, all parties except the State Office of Public Advocate reached a settlement agreement that is awaiting review.
Massachusetts
Potential legislative changes: For many years, the Massachusetts Attorney General has argued – and the State PUC rebuffed – that competitive retail supply harmed residential customers and the residential market should be phased out. In 2021, the PUC Chair unexpectedly testified he saw potential merit to the Attorney General’s views, kicking off a lengthy debate between retail supporters and opponents. In the Spring of 2023, the Senate passed an energy bill which included a residential retail market-killing section not supported in the counterpart House energy bill, which failed to survive the House-Senate Conference process.
The battle has continued into 2024, where a similar retail-killing bill from the Senate faces off against a House bill that retains competition but adds a host of provisions intended to weed out bad apples. Although the retail supply industry hopes to retain residential competition, likely coupled with additional market protective measures, the outcome remains unclear at this time.
Proposed regulatory changes: Due to the legislative differences relative to retail competition, the PUC stopped work on the multi-year reform investigation to consider regulatory changes to the Massachusetts retail marketplace. As for non-PUC changes, in early 2022, the Department of Energy Resources required retail suppliers to meet very substantial (up to a $1 million cap) bond requirements for RPS obligations. Additionally, in 2023, the state Department of Environmental Protection began developing a new Clean Heat Standard requiring retail suppliers to make annual filings and purchases of either new Clean Heat credits or alternative compliance payments.
Enforcement: Most PUC investigation and enforcement activity involving Massachusetts-licensed retail suppliers is undertaken under the agency’s informal enforcement rules and, as such, is nonpublic. Public enforcement efforts by the agency have been limited to investigations leading to substantial remedies against retail suppliers Indra and Mega Energy and non-supplier marketer Utility Expense Reduction.
New Hampshire
Proposed regulatory changes: A critical change for retail suppliers is the substantial move to implement a pro-competitive purchase of receivables (POR) regime for all New Hampshire utility areas. POR has been in place in Connecticut, Massachusetts and many non-New England restructured states for over a decade. Active proceedings were conducted throughout 2023, and most issues were resolved by settlements in late 2023, with implementation details expected during 2024.
Rhode Island
Proposed regulatory changes: The most significant change is the completion of a POR proceeding in 2023, which has been under consideration in regulatory proceedings at the PUC since 2020. The final implementation was scheduled for April 2024.
Enforcement: In 2022, the PUC notified retail supplier Sunwave of its noncompliance with obligations to either purchase qualifying RECs or make an alternative compliance payment to address the amount required to cover its Rhode Island electricity load for 2021. Following notice to the Company and a failure to respond, PUC issued a September 2022 decision requiring a nearly $100,000 payment out of the Company’s bond. This amount is double the alternative compliance payment for the renewable obligations Sunwave should have paid.
In sum, historically high prices due to disruptions in energy markets have posed significant challenges for retail suppliers, wholesale suppliers, policymakers, and consumers across New England. These challenges have been exacerbated by state-specific developments, notably burdensome regulatory and legislative initiatives in Connecticut and uncertainty about long-term prospects for the Massachusetts residential marketplace due to opposition from key officials and the State Senate.
Activity in the remaining states included substantial progress towards implementing pro-competitive POR programs, implementing additional municipal and community aggregation programs, and a new focus on implementing safeguards to lessen adverse impact on low-income or hardship customers from high market prices.
About the author
A shareholder in the regulatory and administrative law area at Davis Malm, Rob is a regulatory and business lawyer with extensive experience dealing with legal issues faced by clients in highly regulated industries. He represents competitive energy and communications companies nationally and routinely represents clients in a wide range of regulatory issues. Rob has covered every aspect of New England regulations for electricity, communications, natural gas and water clients, from obtaining utility commission and local licenses to ensuring ongoing compliance with state, local and federal laws.
