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December 21, 2007
2008 NEM Winter Executive Committee Meeting and Annual Spring Membership Meeting

NEM will hold its Winter Executive Committee and Policy Development Meeting on January 17 and 18, 2008, at the South Carolina Research Authority in Charleston, South Carolina for a third time. Please register at this hotlink. Hotel accommodations have been arranged at the rate of $109 per night at the Hilton Garden Inn, Charleston Airport, 5265 International Blvd., North Charleston, SC 29418. Please call (843) 308-9330 to make your reservations. An agenda for the meeting is available at this hotlink.

NEM booked the new Embassy Suites Hotel Washington D.C. Convention Center for the Annual Spring Membership Meeting and Restructuring Conference on April 29 and 30, 2008. Hotel accommodations have also been arranged at this facility located at 900 10th Street, NW, Washington, DC 20001. NEM has secured preferred hotel rates of $259.00 per night. Please call (202) 739-2001 to make your reservations.

Please call headquarters for sponsorship opportunities for the Spring Event as advertisements are currently being developed. Your attendance, participation and sponsorship of these events are needed and would be greatly appreciated as would your input on speaker invitations and discussion topics.

President Signs Energy Independence and Security Act of 2007

The President signed HR6, the Energy Independence and Security Act of 2007. The legislation increases fuel economy standards for cars and light trucks to 35 miles per gallon by 2020. It also increases the renewable fuels standard to 9 billion gallons in 2008, progessively increasing to 36 billion gallons by 2022. The legislation sets national efficiency standards for light bulbs, increasing energy efficiency standards by thirty percent and effectively phasing out most common incandescent bulbs by 2012-14. Notable omissions from the final legislation include renewable electric standards as well as oil and gas tax credit repeals. The full text of HR6 is available on the NEM Website.

FERC Adopts Rule on Natural Gas Market Transparency

FERC approved a final rule that will require certain natural gas market participants to annually report, beginning May 1, 2009, on their wholesale, physical natural gas transactions. FERC adopted the rule to establish the size of physical gas markets, indexed and fixed price transactions, and to identify major traders.

The rule establishes new Form 522 to be used, "for any buyer or seller of more than 2.2 million mmBtus of physical natural gas each year to report aggregate volumes of relevant transactions." Reporting entities will disclose the total volume of sales and purchases, the volumes of fixed price transactions, the volume of transactions that were reportable to price index publishers, whether the entity sells gas under a blanket sales certificate, and whether it reports transactions to a price index publisher. FERC indicated certain exemptions to the reporting requirement: "A market participant operating under blanket sales certificate authority, buying less than 2.2 million mmBtus and selling less than 2.2 million mmBtus must file Form No. 552 for identification and certain reporting purposes but will not be required to report aggregate volumes of relevant transactions. A market participant buying less than 2.2 million mmBtus and selling less than 2.2 million mmBtus and that does not operate under blanket sales certificate authority does not have to file the form." The full text of FERC's Press Release is available on the NEM Website.

Customer Groups Seek Investigation of Wholesale Power Prices

A group of 41 customer organizations petitioned FERC to expand its ongoing inquiry into wholesale competition in organized electric markets. The petitioners urge FERC to, "investigate the justness and reasonableness of wholesale power prices charged in RTO-run centralized markets." The petitioners allege that certain generators are earning "supra-competitive" returns and that consumers located in regions where these returns are earned are paying steadily higher rates than in regulated markets. The petitioners argue that critical conditions - absence of market power, optimized resource mix, absence of impediments to long term contracting in a LMP environment and price responsive demand - are lacking in RTO-run organized markets necessary to produce just and reasonable rates. The full text of the Customer Petition is available on the NEM Website.

FERC Reverses NERC Determination on Applicability of Reliability Standards to Retail Marketers

FERC reviewed an appeal by three retail power marketers regarding a determination made by NERC that they were properly registered as load serving entities (LSEs) by ReliabilityFirst Corporation (a Regional Entity) and therefore subject to compliance with LSE Reliability Standards. The marketers had agreed to their registration as purchasing-selling entities, but not to their registration as LSEs. The registry criteria for entities to be deemed LSEs is: 1) peak load greater than 25MW; and 2) to be directly connected to the Bulk Power System. The marketers noted they do not own or operate any physical assets and therefore do not satisfy the criteria. Additionally, other Regional Entities besides ReliabilityFirst affirmatively declined to register the marketers as LSEs.

In its review, FERC reversed NERC's reliability determination for the retail marketers. FERC found that "NERC's determinations were not supported by the record or its own registry criteria," that the registry criteria was inconsistently applied, and that NERC had not adequately identified reliability standards that would be applicable to the retail marketers. However, FERC was concerned about a potential reliability gap in the bulk power system. Accordingly, NERC is directed to file a plan within 75 days of FERC's order on how to develop a uniform approach for the application of appropriate reliability standards to retail marketers. The full text of the Order is available on the NEM Website.

New York
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Commission Initiates Proceeding on Electricity Reliability and Infrastructure Planning

Stemming from its inquiry into utilities electric commodity supply portfolios, the Commission has determined to initiate a proceeding to examine short-term reliability backstop issues as well as a long-term, integrated electric resource plan (ERP). A collaborative process will be used to develop standards for the approval of regulated backstop proposals and a long term ERP. Chairwoman Acampora clarified that, "we will utilize regulatory approaches should the market not address the energy needs and related public policy goals of the State, but only in a judicious manner keeping in mind their impacts on both consumers and markets. We should also emphasize that, even if regulatory intervention is required, we intend to use market mechanisms, such as competitive bidding, to achieve those ends to the extent feasible." The Commission expects that the collaborative should address the following issues related to an ERP:

"1) How long before a reliability need date should utilities begin planning backstop projects?
2) Given the Commission’s PSL responsibilities, how can construction of proposed merchant proposals be ensured?
3) What procedures, filing requirements, and other process matters should be established if a regulatory backstop is required?
4) How should a number of public policies concerns—fuel diversity and security; transmission versus generation(including renewables, demand side and energy efficiency projects); generation diversity (base-load, intermediate, peaking, distributed, etc.); non-internalized costs (externalities such as emissions and environmental justice); relative cost-effectiveness of projects; impacts on the affordability and reasonableness of rates; achieving State goals for renewable generation and energy efficiency, etc.—be addressed in choosing among potential regulated backstop projects?
5) How should plant retirements be considered or planned in light of the above-referenced public policy concerns?
6) Are the tentative agreements by industry participants regarding cost allocations and prudence and cost recovery determinations reasonable?"

The Commission also made a determination about long-term contracting. It found, "that a substantial portion of the wholesale market is now served by long-term contracts for electricity. As a result, the Commission's policy is to continue to encourage the use of voluntary forward contracts of all durations by all parties, together with all other instruments legitimately used in any competitive market. If the wholesale markets have a reasonable balance of spot purchases together with short-, medium- and long-term contracts, retail price volatility and the opportunities to exercise market power at the wholesale level could be reduced, as could the investment risks of both new and existing generation." However, "utility long-term contracts may be required to support new construction to maintain reliability, if adequate reliability is not provided by the wholesale market, and may be judiciously used to achieve other public policy goals such as the renewable portfolio standard." The full text of the Commission Press Release is available on the NEM Website.

Commission Approves Mandatory Hourly Pricing Tariffs

The Commission approved on a permanent basis the mandatory hourly pricing tariffs filed by ConEd, O&R, NIMO, NYSEG and RGE. Staff reported that the utility filings were in compliance with the Commission's Order requiring implementation of mandatory hourly pricing. The utilities are required to file an evaluation report on February 1, 2009, incorporating usage data and outreach efforts to form an assessment of the effectiveness of the hourly pricing program. The full text of the Order is available on the NEM Website.

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