National Grid separates your bill into two services: supply and delivery. Supply Services is the portion of your electric service for which you can shop for your electricity supply from a supplier other than National Grid. These suppliers, often referred to as competitive suppliers, can be companies that produce or generate electricity or are brokers that buy electricity in the wholesale market and sell it to residents and businesses. National Grid is a delivery company, which means we will deliver electricity to you regardless of your choice of supplier. We encourage you to shop and compare the prices of competitive suppliers. Find out more about choosing your supply of electricity from a competitive supplier by visiting our Energy Choice area.
If you choose a competitive supplier, National Grid will continue to deliver electricity to your home or business, read your meter, care for the poles and wires, provide customer service, and restore power when there is a service interruption.
If you have not chosen a competitive supplier, we will purchase electricity and deliver it to you through Basic Service. The Supply Services section of your bill identifies you as a Basic Service customer by listing National Grid as your supplier. Basic Service ensures that no one will be without a supply of electricity.
To make sure we can provide you electricity through Basic Service, we buy electricity periodically throughout the year. We conduct a competitive solicitation, requesting bids from wholesale electricity suppliers who want to supply us electricity that we can deliver to you. As a result, we enter into contracts to purchase electricity from one or more of these wholesale suppliers. We do not profit from any of these arrangements or from the prices we pay wholesale electricity suppliers under these contracts.
National Grid purchases its Basic Service supply and sets Basic Service rates for three groups of customers. Which group you are in will depend upon the rates for which you are billed delivery service by us, which are shown in the Delivery Services section of your bill. The three customer groups and the delivery services included in each are as follows:
- Regular Residential (R-1)
- Residential Low Income (R-2)
- General Service (G-1)
- Street Lighting (S-1, S-2, S-3, S-5, S-6, and S-20)
- General Service - Demand (G-2)
- General Service - Time-of-Use (G-3)
As a Basic Service customer, you have two pricing options available to you - a Fixed Price and a monthly Variable Price. As the term implies, the Fixed Price Option offers a price that does not change over several months (6 months for Residential and Commercial customers and 3 months for Industrial customers), and provides the convenience of having a more stable electric bill that would only vary as a result of the amount of electricity you use from month to month.
The monthly Variable Price Option offers a price that changes each month. This rate option offers customers the opportunity to save money by shifting their electricity usage from the months with higher prices to those with lower prices.
National Grid sets the rates for each option based on the prices in its contracts with its Basic Service suppliers.
The Basic Service rate billed to you under the Fixed Price Option will remain the same for several months at a time. Under the Fixed Price Option, the Basic Service rate changes every May 1 and November 1 for Residential and Commercial customers, and every February 1, May 1, August 1, and November 1 for Industrial customers. All rates are based on average monthly contract prices in our Basic Service supply contracts over the applicable period.
All Residential Group customers and all G-1 (General Service) Commercial Group customers are automatically placed on the Fixed Price Option when first applying for Basic Service. Customers are allowed to choose the monthly Variable Price Option at any time. However, they can only move between the pricing options once during an uninterrupted stay on Basic Service, which means that they cannot later request to move back to the Fixed Price Option if they continuously receive Basic Service and have never bought their electric supply from a competitive supplier.
If you are an Industrial Group (G-2 and G-3) customer on the Fixed Price Option and decide to switch to a competitive supplier in the middle of a 3 month pricing period, you will receive a billing adjustment, which will be either a credit or a charge. The billing adjustment compares your Basic Service charges on the Fixed Price Option to what you would have been charged under the Variable Price Option. We apply this adjustment to ensure that Basic Service customers in the Industrial Group are billed for the actual cost of Basic Service electricity they consumed. The calculation uses the monthly rates under the Variable Price Option because they represent our monthly cost of supplying Basic Service to you for the months before you left Basic Service. This Basic Service billing adjustment, referred to as "Market Price Adjustment" when it appears on your bill, may be a credit or a charge, and is reflected on the bill prior to when your switch to a competitive supplier is effective. To learn more about this adjustment see Basic Service Billing Adjustment below.
The monthly rates under the Variable Price Option will change from month to month to reflect the monthly prices of electricity we purchase each month under our contracts with our Basic Service suppliers.
All Industrial Group customers and all street lighting Commercial Group customers are automatically placed on the Variable Price Option when first applying for Basic Service. Customers are allowed to choose the Fixed Price Option at any time. However, they can only move between pricing options once during an uninterrupted stay on Basic Service, which means that they cannot later request to move back to the Variable Price Option if they continuously receive Basic Service and have never bought their electric supply from a competitive supplier.
In order to provide Basic Service rates that can be compared to prices of competitive suppliers so our customers can make better decisions on whether to buy their electricity from a company other than National Grid, National Grid is allowed to include in the Basic Service rates that appear on your bill an additional charge to reflect certain administrative costs that are paid by National Grid. National Grid is subject to these administrative costs solely because it is required, by state law, to provide Basic Service to our customers. Competitive suppliers have similar costs as part of their business of selling electricity to residents and businesses in Massachusetts.
Administrative costs that are reflected in the Basic Service rates you see on your bill include the cost of "working capital", that is, money the Company needs throughout the year to pay its expenses on time. These administrative costs also include Basic Service charges that the Company was unable to collect from other Basic Service customers. Also included are the cost of employees who conduct the competitive solicitations and enter into contracts for Basic Service, calculate the Basic Service rates and submit them to our regulator for approval, create and distribute all of the required information to our customers, and bill customers for Basic Service.
Finally, National Grid is subject to rules developed as a result of a state law for promoting the development of clean, renewable energy. The rules govern the state’s Renewable Energy Portfolio Standards (RPS)and require companies like National Grid who provide electricity to residents and businesses to either buy electricity generated from renewable electric generation resources or purchase Renewable Energy Certificates (RECs), which are used to fund the development of renewable electric generation resources. National Grid complies with these rules by purchasing RECs and the cost is reflected in Basic Service rates.
National Grid calculates Basic Service rates using monthly prices in our contracts with wholesale suppliers for each 3 or 6 month period under the Fixed Price Option. These monthly contract prices are also different among the 3 geographic load zones where we deliver electricity. We must also estimate the quantity of electricity we believe our customers receiving Basic Service will need each month. This calculation is not exact and often, over the course of the Fixed Price Option period, the amount we bill our Basic Service customers is different from what we ultimately pay for Basic Service under our contracts. National Grid also determines the difference between the cost of purchasing RECs to comply with the state’s RPS, which was described above, and the amount billed to Basic Service customers for purchasing the RECs. The difference between the amount billed and the actual cost of Basic Service supplied and RPS compliance is measured over a year, and will show that we have either billed too much or too little as compared to our actual cost.
National Grid does the same evaluation for the administrative costs, which are also described above. We estimate what these costs are likely to be and calculate the charges that are added to the Basic Service rates calculated from the prices in our contracts with wholesale suppliers. Each year, we compare the amount billed through the administrative charges and actual administrative costs to determine if we have billed too much or too little as compared to our actual costs.
National Grid does not make money or profit from Basic Service. As a result, our regulator allows us to recoup any amount we have under-billed and requires us to refund any amount we have over-billed. This takes place over a 12-month period after our regulator has reviewed our comparison of Basic Service billings to the costs of supplying Basic Service, complying with the RPS, and our administrative costs.
The Independent System Operator for New England (ISO-NE) oversees the New England power system and the flow of electricity across all of New England. As part of its design of the New England electricity market, it has segregated New England into geographic regions, referred to as "load zones". Electricity prices aim to satisfy the demand for electricity as economically as possible in each load zone. Electricity prices are determined by available power plants and the demand for electricity within a load zone. Massachusetts has three load zones: Northeastern MA/Boston (NEMA), Southeastern MA (SEMA), and Western/Central MA (WCMA). National Grid provides Basic Service to customers in all three load zones.
As explained above, your bill is separated into two services: supply and delivery. While you cannot control how the electricity is delivered to your home, you can reduce your cost by reducing your consumption of electricity and/or purchasing your electric supply from the seller of your choice. For tips on reducing your energy consumption, please visit Energy Saving Programs. For more information about choosing a competitive supplier, please visit our Energy Choice area.
The following is an illustrative example of how an Industrial Group (G-2 and G-3) customer can estimate your Billing Adjustment when leaving Basic Service in the middle of a 3 month Fixed Price Option period (the Billing Adjustment does not apply if you leave Basic Service from the Variable Price Option):
ABC Manufacturing, Inc. uses 20,000 kWh each month and is thinking about buying electricity from a competitive supplier. They decide to buy from a particular competitive supplier, who then enrolls ABC Manufacturing as one of its customers at the end of the first month of a three month Basic Service period.
First, ABC Manufacturing can estimate what it was billed for Basic Service under the Fixed Price Option, which is $2,740.00 as shown below.
|Monthly Usage||Fixed Price||Total|
Next, ABC Manufacturing can estimate what it would have been billed for Basic Service under the Variable Price Option, which represents National Grid’s monthly cost to buy electricity for ABC Manufacturing, which is $3,840.00 as shown below.
|Monthly Usage||Variable Price||Total|
The difference between the $2,740 estimate of Basic Service charges under the Fixed Price Option and the $3,840 representing the estimated actual cost of the electricity consumed by ABC Manufacturing is $1,100.00. A Billing Adjustment of $1,100.00 would appear on ABC Manufacturing’s bill for the last month it was on Basic Service. The actual calculation performed by National Grid’s billing system is more complex and will determine the precise amount of the Billing Adjustment.