NSTAR Electric Co. v. Department of Public Utilities, 968 N.E.2d 895

NSTAR seeks to shift recovery of supply-related bad debt costs from distribution rates to supply rates under Massachusetts’ Electric Restructuring Act framework.
Two NSTAR rate mechanisms exist: distribution rates for delivery and supply rates for electricity consumed; the department regulates these under applicable statutes and regulations.
The 2003-2005 settlement process moved supply-related bad debt costs from distribution to supply rates through a settlement path rather than a general rate case.
The January Settlement (2005) stated removal would occur in a future general rate case or as proposed/approved, subject to department review.
The December Settlement (2005) created an Alternative Rate Stabilization Plan and references Exhibits NSTAR-3 through NSTAR-22; NSTAR later argued these exhibits effected the removal of bad debt from distribution rates, while the department sought explicit textual provisions and a clear legal basis.
The department’s final order on reconsideration (2010) found issues with the settlement’s language and failed to provide adequate subsidiary findings, leading to a remand to produce a proper statement of reasons and findings.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether December Settlement expressly removed bad debt from distribution rates.	NSTAR contends exhibits incorporated into the December Settlement remove bad debt.	Department asserts only explicit text controls; exhibits not expressly incorporated.	Remand for a clearer basis; ambiguity requires further explanation.
Whether the December Settlement, read with its exhibits, binds NSTAR to remove bad debt from distribution rates.	Exhibits NSTAR-3 to NSTAR-22 incorporated by reference; intended removal.	Only explicit language binding the removal exists; exhibits insufficient.	Remand; department failed to articulate how exhibits bind the parties.
Whether the department's reliance on the text vs. the effect of the settlement constitutes reversible error.	Department conflated text with effect; failed to show grounds.	Department’s reasoning acceptable under contract interpretation.	Remand to provide subsidiary findings and clear rationale.

Mass. Inst. of Tech. v. Department of Pub. Utils., 425 Mass. 856 (1997) (requires adequate subsidiary findings for agency decisions)
Fitchburg Gas & Elec. Light Co. v. Department of Pub. Utils., 440 Mass. 625 (2004) (deference to agency with substantial evidence standard)
Mass. Inst. of Tech. v. Department of Pub. Utils., 453 Mass. 191 (2009) (review of agency orders and statements of reasons)
Southern Union Co. v. Department of Pub. Utils., 458 Mass. 812 (2011) (interpretation of settlement agreements and agency policy)
Boston Edison Co. v. Boston Redevelopment Auth., 374 Mass. 37 (1977) (need for adequate reasoning in agency decisions)
New Boston Garden Corp. v. Assessors of Boston, 383 Mass. 456 (1981) (substantial evidence review and factual support)
MCI WorldCom Communications, Inc. v. Department of Telecomm. & Energy, 442 Mass. 103 (2004) (contract interpretation and agency decision context)
Shea v. Bay State Gas Co., 383 Mass. 218 (1981) (consideration of contract objects and industry practice)
Bryne v. Gloucester, 297 Mass. 156 (1937) (contract interpretation factors and course of dealing)
Day v. United States, 360 U.S. 548 (1959) ( incorporation by reference and notice to sophisticated parties)
Trambly v. Ricard, 130 Mass. 259 (1881) (recognition of interpretive standards in contracts)