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After Standard Offer. Restructuring Roundtable Friday, January 28, 2005 Douglas S. Horan, Senior Vice President & General Counsel. March 2005: A Smooth Transition to Basic Service. NSTAR Residential Default Rates vs. ISO Clearing Prices (2002 – 2004).

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After Standard Offer

Restructuring RoundtableFriday, January 28, 2005

Douglas S. Horan, Senior Vice President & General Counsel

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NSTAR Residential Default Rates vs. ISO Clearing Prices(2002 – 2004)

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Proposals for Change Should Be Grounded in Sound Public Policy

  • Structural changes should:

    • Produce customer benefit

    • Allow (not force) customer choice

    • Allow (not force) markets to develop

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Basic Service as Currently Structured Is Beneficial to Customers

  • Prices are relatively stable

  • Customers benefit from utility buying power

  • Prices track market over time

  • Service is simple

  • Customers can shop, if they perceive value

  • Customers are generally satisfied

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Basic Service Allows Retail Market Development Customers

  • Nothing prevents retail transactions today, where customers and suppliers believe they add value

  • Over 10,000 NSTAR customers buy from the retail market already

  • It is a mistake to assume we know the “optimal” level of market participation

  • SO is a big market barrier; additional migration to the retail market will occur after SO ends

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Changing Retail Policy While the Wholesale Market is in Flux Presents Challenges

  • Debate is raging over how to assure long term resource adequacy

    • Will multi-year commitments be imposed?

    • On generators, load, or utilities?

  • Forcing retail customers into an uncertain wholesale market structure is bad policy

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Changing Utility Procurement Process for Basic Service Presents Challenges

  • Be clear about your objective

    • Fewer price changes?

    • Smaller price changes?

    • Lower prices?

  • Avoid long term contracts (> 2 years)

    • High cost; deviation from market will create “stranded costs”

  • Statewide procurement creates complexity, provides no benefit

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Summary Presents Challenges

  • Basic Service provides customer benefit

  • Allow markets to develop; don’t force them

  • Allow wholesale market to stabilize before changing retail policy