Section 1B. (a) The department shall define service territories for each distribution company by March 1, 1998, based on the service territories actually served on July 1, 1997, and following to the extent possible municipal boundaries. After March 1, 1998, until terminated by effect of law or otherwise, the distribution company shall have the exclusive obligation to provide distribution service to all retail customers within its service territory, and no other person shall provide distribution service within such service territory without the written consent of such distribution company which shall be filed with the department and the clerk of the municipality so affected.

(b) Each distribution company shall provide a standard service transition rate to those customers who are within said company’s service territory and who choose not to purchase electricity from a non-affiliated generation company after March 1, 1998. A distribution company shall provide a standard service transition rate which, together with the transmission, distribution, and transition charges, produces for such a service package for all retail customers including the facilities on Deer island operated by the Massachusetts Water Resources Authority, prior to the implementation of securitization pursuant to section 1H and the application of a residual value credit pursuant to section 1A or the deduction of the market value of generation facilities pursuant to said section 1A, a rate reduction of at least 10 per cent beginning on March 1, 1998. Said reduction shall be applied against the average of the undiscounted rates for the sale of electricity in effect during August 1997 or such other date as the department may determine to be representative of 1997 rates for such company, but excluding customers with contracts for electricity sales that provide for percentage discounts below cost-based or tariffed rates executed and approved by the department prior to January 1, 1997. Upon the approval by the department of (i) a financing order to implement securitization pursuant to section 1H or (ii) the residual value credits from divestitures or market valuations for such a company, the distribution company shall apply the net proceeds from the divestiture and the net savings from the securitization. The total rate reduction, net proceeds from the divestiture and the net savings from securitization, in combination with the rate reduction implemented by or on March 1, 1998, shall be at least 15 per cent on or before September 1, 1999, applied against the rate adjusted for inflation from August 1997 or such other date as the department may determine to be representative of 1997 rates for such company, which was the benchmark for the March 1, 1998, rate reduction; provided, however that a company unable to meet the rate reduction required under this section shall be subject to the provisions of paragraph (3) of subsection (c) of section 1G. The standard service transition rate shall be offered for a transition period of seven years at prices and on terms approved by the department and shall require a distribution company to purchase electricity after a competitive bid process that is reviewed and approved by the department. Any customer who has chosen retail access from a non-affiliated generation company but who otherwise requires electric service due to said generation company’s failure to provide contracted service shall be eligible for service through the distribution company’s default service provided pursuant to the provisions of subsection (d).

(c) Effective March 1, 1998, no electric company regulated by the department and no affiliate of such electric company shall be allowed to use the distribution system of another electric company or make sales, either directly or indirectly through third parties, to end-use customers in another electric company’s service territory unless the department has approved a restructuring plan for the supplying electric company which provides for comparable direct access to end-use customers within its own distribution service territory or the supplying electric company has entered into an agreement, on or before January 1, 1997, for direct access to an end-use customer located on the border of its service territory, in which event the department shall authorize service by an electric company to such end-use customer. No electric company and no affiliate of such electric company shall be allowed to prohibit sales of electricity or restrict such sales through non-comparable distribution charges to end-use customers in its service territory by another electric company or its affiliate operating under a restructuring plan approved by the department.

(d) Beginning on March 1, 1998, each distribution company shall provide its customers with default service and shall offer a default service rate to its customers who have chosen retail electricity service from a non-utility affiliated generation company or supplier but who require electric service because of a failure of such company or the supplier to provide contracted service or who, for any reason, have stopped receiving such service, and to all customers at the end of the term of the standard offer. The distribution company shall procure such service through competitive bidding; provided, however, that the default service rate so procured shall not exceed the average monthly market price of electricity; and provided, further, that all bids shall include payment options with rates that remain uniform for periods of up to six months. Any department-approved provider of service, including an affiliate of a distribution company, shall be eligible to participate in the competitive bidding process. Notwithstanding the actual issuer of a ratepayer’s bill, the default service provider shall be entitled to furnish a one-page insert accompanying the ratepayer’s bill. The department may authorize an alternate generation company or supplier to provide default service, as described herein, if such alternate service is in the public interest. In implementing the provisions of this section, the department shall ensure universal service for all ratepayers and sufficient funding to meet the need therefor.

(e) As of March 1, 1999, the total, average rates for all of the distribution company’s customers purchasing electricity under said standard service transition rate, shall be subject to an inflation cap through the remainder of the standard offer period. The calculation and implementation of the rate reduction and the inflation cap shall be subject to adjustment, review, and approval in accordance with procedures in the rules and regulations promulgated by the department, which shall require that, the economic value of the rate reduction required under this section, be maintained during the standard service transition rate period.

(f) The department is hereby authorized and directed to promulgate rules and regulations necessary to carry out the provisions of this section, including the procedure for default service procurement and governing a customer’s ability to return to the standard service after choosing retail access from a non-utility affiliated generation company.