Overview of the Electricity Market in New England
Beginning in the 1990s, states throughout the US decided to deregulate their electricity systems to create competition and lower costs. Deregulation created retail customer choice and wholesale markets. Over time, customer choice has also advanced options for the type of electricity sold, most notably with renewable power supply.
Your electric service consists of two components, supply and delivery:
- The supply component is associated with the production and sale of electricity that you use.
- The delivery component is associated with the wires, poles, meters, and other equipment used to deliver electricity to your home or business.
In New England, any customer of a utility company outside of Vermont that is not a municipal electric utility may choose its supply component provider. Specifically, you can choose an electric supply company licensed by your state (a “competitive supplier”) or instead elect to purchase supply from your electric utility (called “basic service”). While you have your choice of supply providers, the delivery component is still regulated as a monopoly service and therefore you and all other electricity consumers must buy the delivery component from your local electric utility company.
Electric choice means you can shop around for the best price and terms for your electricity supply, while still enjoying the same reliable delivery service from your electric utility. It also offers you more control over how your energy dollars are being spent. For example, you can select sources of power based on your preferences regarding environmental impact.
The supply component of your electric service has a wholesale and a retail component. The wholesale component is associated with the electric power plants in the region that generate the electricity that you use. Supply sources for regional power plants include natural gas, nuclear, hydro, wind, and solar. These power plants are part of a regional electric “grid” overseen by the Independent System Operator of New England (ISO-NE). ISO-NE operates the grid; ensures reliability; balances electric supply and demand instantaneously; and manages the region’s competitive wholesale electricity markets. The retail component is overseen by state regulatory agencies, including the licensing of competitive suppliers and the regulation of utility basic service.
Delivery service also has a wholesale and a retail component. The wholesale component is associated with high-voltage transmission facilities – tall towers and fat cables — that transport electricity from power plants to your electric utility’s service territory. The retail component of delivery service is associated with lower-voltage distribution facilities largely constructed along streets and roadways that transport electricity within your electric utility’s service territory to your home or business. The retail component of delivery service also includes the meters attached to our home which measure your electricity use.
NEED (National Energy Education Development)