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November 3, 2006
NEM Fall Leadership Roundtable and Winter Executive Committee Meeting

Many thanks to Washington Gas Energy Services for hosting NEM's Fall Leadership Roundtable last week in Delaware. Many thanks also to the members and prospective members that participated. It was a great meeting highlighted by remarks from Vice Chairman Cawley of the Pennsylvania Public Service Commission, Delaware Senate Majority Leader Harris McDowell, Commissioner Lester of the Delaware Public Service Commission and Ben Stein of the New York Public Service Commission's Office of Retail Market Development. We were also pleased to have key staff from the Pennsylvania and Delaware Commissions with us throughout both days. Please use these links to view the presentations of Vice Chairman Cawley and Ben Stein.

Please mark your calendars for NEM's Winter 2007 Executive Committee Meeting. It will be held January 18-19, 2007, at the South Carolina Research Authority in Charleston, South Carolina.

Freedom Energy Nominated to NEM Executive Committee

NEM is pleased to announce that Freedom Energy has been nominated to the Executive Committee. Freedom Partners, LLC, d/b/a Freedom Energy is a bold, non-traditional retail energy marketing company serving the New England states. Freedom Energy will be represented within NEM by Stephen J. Fabiani, President of Freedom Partners, LLC, James T. Rodier, General Counsel, and R. Keith Black, Vice President of Energy Operations.

Freedom Energy supplies both electricity and natural gas commodities to the commercial, industrial, institutional and government sectors. Freedom’s unique approach to serving this sophisticated market segment is based upon its ability to structure creative, multi-faceted cost saving supply arrangements that capitalize on the full benefits of wholesale markets.

Freedom Energy’s management team is composed of energy professionals with in excess of 100 years of experience specifically in the energy business. This team has been meticulously assembled with one goal in mind – to differentiate Freedom Energy from all other energy marketing companies by providing truly unique, client responsive energy supply solutions.

Report on Benefits of Restructuring in New England

The New England Energy Alliance released a report on the results of restructuring in the New England region. The report concludes that "the operating performance of power plants has improved significantly, emission rates from the generation of electricity have declined dramatically even as electricity generation has increased 25 percent, and consumers have cumulatively saved between $6.5 to $7.6 billion between 1998 and 2005 based on projections of where prices would have trended in the absence of restructuring." Also of importance, "average real retail rates in the five restructured New England states comparatively declined by 7 to 18%." The full text of the Report is available at this hotlink.

New Jersey
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Board Approves 2007 BGS Proposal

The Board approved the utilities 2007 Basic Generation Service (BGS) auction proposal. Notable issues decided by the Commission include: 1) The CIEP auction will determine a capacity charge. The DSSAC (which will be renamed as a “CIEP Standby Fee”) will be set at 0.015˘/kWh; 2) The Commission declined to lower the threshold for CIEP customers. Therefore, all customers 1,000 kW or greater taking BGS will do so on a CIEP tariff for the 2007 auction as well as the subsequent period of June 1, 2008 through May 31, 2009; and 3) the retail margin paid by all CIEP customers as well as FP customers 750 kW or above will be maintained at 0.5 cents/kWh. The utilities compliance filings are due November 3rd. The CIEP Auction is currently scheduled to begin on February 2, 2007, and the FP Auction is currently scheduled to begin on February 5, 2007. The full text of the BGS Order will be posted on the NEM Website when made available electronically.

New York
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NYSEG Proposed ESCO Referral Program

NYSEG filed a proposed ESCO Referral Program that would use the ESCO Service Approach outlined by the Commission. NYSEG proposed to offer an electric and gas program that provides participating customers with a seven percent introductory discount for two billing cycles. NYSEG proposed that ESCOs be responsible for incremental costs of implementing and operating the program. Per NYSEG's estimate, for the gas program, the monthly cost per ESCO for one-time incremental costs is $1,738 and the monthly cost per ESCO for on-going incremental costs is $3,667. For the electric program, the monthly cost per ESCO for one-time incremental costs is $5,213 and the monthly cost per ESCO for on-going incremental costs is $11,000.

Customers may select an ESCO or be assigned to an ESCO on a rotating basis. Within five days of receiving notice of a customer enrollment, ESCOs must send the customer a contract for the post-introductory period. The customer must affirmatively agree to the contract or be reverted to NYSEG supply service. The program is proposed to commence on March 1, 2007, and end on December 31, 2008. NYSEG stated that if it chooses to contine to offer its Fixed Price Option in 2008, then the electric part of the Referral Program will not be offered during the Voice Your Choice enrollment period.

ESCOs must participate in NYSEG's consolidated billing and purchase of receivables program to participate in the Referral Program. NYSEG proposed that there must be a minimum of two ESCOs providing electric service and two providing gas service at all times during the program. With respect to electric customers, at all times there must be at least one ESCO offering the ESCO Price Option and one ESCO offering the ESCO Option with Supply Adjustment. The full text of NYSEG's filing is available on the NEM Website.

National Grid - Keyspan Merger Testimony

National Grid and Keyspan filed supplemental testimony in support of their proposed merger. The testimony is meant to respond to concerns of potential vertical market power issues. The companies state that they lack the "effective ability to manipulate transmission operations to benefit the generation interests of Keyspan." This coupled with serious adverse consequences, such as financial penalties, loss of market based rate authority, and reputational damage provides the companies with, "no realistic opportunity to exercise short-term vertical market power." With respect to long-term vertical market power issues, National Grid reiterated its long-standing commitment to transmission planning and development for economic and reliability purposes. In fact, National Grid committed to, "assume certain new obligations to propose and build regulated transmission projects with economic or reliability benefits without regard to the impact of such projects on the generation interests of the Companies, subject to appropriate terms, including cost allocation and recovery." Finally, the testimony also states that the companies ability to raise prices in NYISO Zones J or K where Keyspan owns generation are "weak or nonexistent." The full text of the Supplemental Testimony is available from NEM headquarters.

NYSEG Electric Compliance Filing

NYSEG filed a revised compliance filing to implement the Commission's electric rate Order. The changes are the result of a technical conference call NYSEG held with interested stakeholders. In an improvement to the prior compliance filing, NYSEG reworded the section that appeared to impose a wet signature requirement and replaced it with the following language:

"A NYSEG customer enrolling in Retail Access during an Enrollment Period is required to provide an affirmation to its ESCO in substantially the same format as follows:

I understand that as a Customer of NYSEG, participating in Retail Access, I have the right to choose my commodity delivery options. I authorize the supplier providing service to me to convey my delivery option selection to NYSEG."

The full text of the Revised Compliance Filing is available on the NEM Website.

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