In its brief in the Commission's proceeding to examine the optimal structure of the state electric market, Staff recommended that standard offer service be provided through quarterly bidding for one year contracts with quarterly averaged pricing. Staff argued that the record developed in the case does not support use of long term contracts of greater than three years duration in the SOS portfolio, nor does it support the utilities' purchase, lease or construction of generation. Staff also stated there is no reason to believe that bilateral negotiated contracts would yield a superior result to that achieved under the existing SOS model. Staff urged rejection of the People's Counsel recommendation for utilities to adopt a portfolio planning approach with a ten to fifteen year planning horizon.

As to energy efficiency and conservation, Staff noted its support for a Commission mandate of broader adoption of time of use rates. Specific proposals for integrating energy efficiency and conservation measures in the SOS procurement process should be examined by the Demand Response and Distributed Generation Working Group. The full text of Staff's Brief is available on the NEM Website.

FirstEnergy Solutions (FES) has filed a complaint against Detroit Edison alleging the utility engaged in Code of Conduct violations. The conduct complained of stems from letters and materials Detroit Edison sent in January and February 2006 as well as in October 2006 to FES customers. FES maintains these letters and materials impermissibly provided FES customers with advice on continuation of service with another service provider, interfered with FES' relationship with its existing customers, and used inaccurate information and discriminatory service offerings to induce FES' customers to switch to Detroit Edison service. FES also claims that Detroit Edison violated statutory provisions prohibiting unjust, unreasonable, inaccurate or improper rates. A hearing in the matter will be held January 10, 2007. The full text of the FirstEnergy Solutions Complaint (Docket U-15081) is available from NEM headquarters.

Central Hudson submitted two proposals affecting its retail choice programs. First, Central Hudson proposed a change in its capacity release program. By the terms of the change, retail suppliers that choose to take assignment of Central Hudson's primary delivery point capacity will receive a "partial slice of system." Retail suppliers will pay the pipelines directly and the current billing and reimbursement processes used by Central Hudson will be eliminated. However, "in order to avoid the provision of any subsidies to retail suppliers who take assignment of capacity at prices below the WACOC paid by full service customers, the Company proposes to include an adjustment, called the Capacity Assignment Adjustment, for the difference between the WACOC and the weighted average cost of capacity associated with the pipeline capacity released through the Retail Access Program, in the Transportation Demand Adjustment." The Capacity Assignment Adjustment will be set annually, subject to reconciliation, based on Central Hudson's estimate of its system WACOC for the applicable annual period, the current pipeline rates for the pipelines upon which Central Hudson releases capacity and estimated deliveries to SC 6, 12, and 13 customers. Central Hudson is proposing this change to be compliant with a FERC Order that addressed release of pipeline capacity to retail suppliers. The full text of Central Hudson's Capacity Release Proposal is available on the NEM Website.

Central Hudson also proposes to update its deliverability demand billing determinants that apply to retail access customers in SC 6, 12 and 13. The revised demand determinants are proposed to become effective April 1, 2007. Current determinants are 8% for peaking service and 34% for storage service. Proposed determinants are 20% for peaking service and 27% for storage service. These changes directly impact amounts billed to retail suppliers. Comments on the proposed changes are due January 29, 2007. The full text of Central Hudson's Demand Determinant Proposal is available on the NEM Website.

NFG and National Grid filed proposed curtailment changes at the beginning of the year. As to NFG's specific proposal to eliminate the 96-hour limitation on the length of short-term curtailments, the Commission found it was consistent with prior Orders and approved NFG's proposal. The Commission also approved National Grid's proposal to modify its unauthorized use rate to the greater of the market price of gas plus $25 per Dth, or 125% of the highest per Dth cost of gas during the calendar month of unauthorized use. The Commission thought the change was advisable to reflect increased prices in the market.

However, the other more significant curtailment policy changes proposed by NFG and National Grid were not adopted. One of the main reasons cited for the proposed changes was the increased levels of customer migration that could possibly contribute to core customers not being served during curtailment events. The utilities had proposed a broadening of their authority to redirect gas owned by marketers and customers, considerable utility discretion in declaring the existence and duration of a curtailment, and generally vague provisions about compensation for diversions. The Commission felt that given the complexity of the issues that Staff should investigate further and report its findings. The full text of the Gas Curtailment Order is available on the NEM Website.

The Commission approved O&R's retail access plan that was filed in January 2005. The Commission approved the continuation of O&R's E-Bids program whereby residential and small commercial customers can post solicitations on an Internet site for marketers to competitively bid offers to serve the customers with energy supply. Also, the Commission approved the continued dissemination of O&R's Energy Choice catalogs that are shopping guides for residential and commercial customers that give information on the PowerSwitch program, E-Bids, marketer contact listings, and marketer-provided advertisements.

The Commission directed that O&R make a supplemental filing within 45 days of the Order providing additional information on: 1) the competition outreach and education budget; 2) potential efforts to facilitate customer aggregation; 3) improved billing formats (i.e., the ability to bill a flat fee or credit on the marketer's behalf) and the provision of interval billing data to marketers via EDI. O&R must also conduct Market Expos expanded to additional customer classes than only large commercial customers, and O&R must continue hosting energy fairs for residential and small commercial customers. The full text of the O&R Order is available on the NEM Website.

The OCC appealed to the state Supreme Court the Commission's order on rehearing that approved CG&E's modified rate stabilization plan (RSP). In its decision, the Supreme Court remanded the Commission's order finding that the Commission had failed to provide record evidence and sufficient reasoning when it modified its order on rehearing. The Supreme Court also found the Commission had abused its discretion in denying OCC's discovery requests pertaining to alleged side agreements that may have existed between the RSP settlement parties as such agreements could be relevant to a determination of whether the settlement as a whole was the product of "serious bargaining" on the part of the parties.

The Supreme Court rejected OCC's claims that CG&E's standard service offer was not a market-based rate. The Court also rejected OCC's argument that the RSP does not provide for a competitive bidding process as required by state law. The Court reasoned that the RSP "provides customers with a reasonable means of customer participation." Also rejected was OCC's claim that it was discriminatory to allow only the first twenty five percent of shopping customers to avoid paying the rate stabilization charge of the nonbypassable POLR component. Finally, the Court also rejected OCC's contention that CG&E had been improperly permitted to avoid its corporate separation obligations. The full text of the Supreme Court Order is available on the NEM Website.