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December 23, 2005
Upcoming NEM Events

The South Carolina Research Authority (SCRA) has graciously offered the use of its Advanced Technology "Trident Research Center" for our Winter Executive Committee Meeting on January 19 and 20, 2006. Please hold these dates on your calendar. NEM's Winter Executive Committee Meeting will be used to assess our advocacy priorities for the coming year. Charleston, South Carolina is a charming city and a great venue for our agenda setting meeting for 2006. Please register using this hotlink.

Please mark your calendars for NEM's Annual Membership Meeting and National Restructuring Conference on April 25-26, 2006, in Washington, DC at the Marriott Metro Center. Those members interested in sponsoring the event should contact headquarters. Advertisements for the event, including sponsor information, receive international media distribution.

NEM Comments on Demand Response and Advanced Metering

The Energy Policy Act requires FERC to assess available demand response resources and report its findings. FERC Staff will hold a technical conference on January 25, 2006, at 9AM to discuss this issue, and it also issued questions for comment.

In its comments, NEM argued that for the benefits of competition to be fully realized we must empower consumers, through time-differentiated, market-based pricing signals to make well-informed, cost-benefit lifestyle choices by conserving energy and shifting demand when it is to their advantage. NEM recommended that the Commission consider separating the definitions, and resultant cost recovery incentives, between “enhanced” and “advanced” metering and information technology investments. NEM suggested that “Enhanced Metering Technology” (EMT) could be defined to include technology that is far superior than the decades old meters currently in place and yet currently available. Advanced metering and information technology could include bi-directional, remotely addresssable and configurable and easily upgradeable, independent and parallel-processing nodes that may already be technically achievable.

Demand response resources should be permitted to fully participate in the market. NEM recommended that negawatts should be aggregated, dispatched and priced as transparently as megawatts. NEM also recommended that there should be standards for the sale of demand, in order for demand to become a liquid, tradeable commodity in the market.

NEM also stated that consumers lack the market-based rates and time-differentiated usage information that are prerequisites to permitting them to make educated cost-benefit decisions on their energy usage. Without these tools, consumers cannot be expected to engage in conservation or demand shifting in a significant way. Most of the effort in restructuring has been to correctly price supply, yet the truly efficient market must also properly price demand as well. Until the market for both megawatts and negawatts is liquid and transparent, energy prices to consumers will not be optimal.

The full texts of NEM's Comments and the Conference Notice are available on the NEM Website.

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NEM Comments on NSTAR Settlement

NSTAR filed a proposed settlement providing that electric commodity for residential customers be procured as follows: (1) 50 percent of its load will be procured under one-year contracts; (2) 25 percent of its load will be procured under two-year contract; and (3) 25 percent of its load will be procured under three-year contracts. NEM urged the Department to reject the proposal. NEM cautioned that by staggering procurements over three years, ratepayers will not become educated consumers responding to meaningful price signals. Price signals are a prerequisite for consumers to make informed lifestyle choices based on the costs and benefits of demand responsive behavior. While locking consumers into historically high prices may ultimately benefit the energy services and technology industry, it does not serve the public interest to misallocate resources in such a fundamental way.

Mandating a three-year commitment for a quarter of the supply is also likely to artificially inflate prices due to the lack of liquidity to hedge supply in the last half of the contract. It will also exacerbate the ongoing credit crisis, significantly increasing energy costs and reducing competition simultaneously.

NEM also argued that this market structure and three-year contract duration will insulate the retail price from market movements inasmuch as ¾ of supply will always be locked in. As a result, a retail boom will be created when the forward market drops below the “locked in” NSTAR rate and a retail bust will be created when the forward market increases above the “locked in” NSTAR rate. This could severely inhibit consumer migration in the NSTAR service territory.

The full text of NEM's Comments are available on the NEM Website.

New Jersey
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NEM Comments on Proposed Choice Regulations

The Board proposed readoption of its energy competition regulations with modifications. The regulations will expire January 9, 2006, unless readopted. NEM submitted comments urging the Board make the following modifications to the regulations: 1) duplicative third party verification requirements should be eliminated; 2) the state should minimize its impact on the dialogue between competitive suppliers and consumers. Marketing and advertising should be creative endeavors, not state mandates; 3) a fourteen-day right of rescission is impractical, costly and potentially anti-competitive. A three-day right of rescission is commonplace in the industry; 4) consumers should have a reasonable time to understand the impact of choice. However, thirty days may be too expensive given the current prices and volatility of natural gas and electricity; 5) marketers should retain the ability to petition for a reduction in the amount of the security bond posted. The full texts of NEM's Comments and the Proposed Regulations are available on the NEM Website.

Many thanks to Intelligent Energy for its assistance with this proceeding.

New York
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National Grid Files Joint Proposal

National Grid filed a joint proposal on choice program initiatives. Pursuant to the proposal, the utility's current backout credit of $.004/kwh for SC1, SC1B, SC1C, and SC2ND will be reduced to $.0027/kwh for customers not part of the purchase of receivables program, and will be reduced to $.0004/kwh for customers that are part of the purchase of receivables program. The current backout credit of $.002/kwh for demand metered customers and customers served under PSC 214 will be reduced to $.0005/kwh regardless of whether the customer is part of the purchase of receivables program. The current backout credits will remain in effect for an eighteen month transition period after the proposal goes into effect. Additionally, customers served under an ESCO contract in effect as of August 30, 2005, with a specified termination date after the end of the transition period, may be eligible for continuation of the current credits for the duration of the contract or discontinuance of service, whichever comes first.

National Grid will purchase receivables for electric and natural gas sales at a discount and without recourse for customers on a utility single bill option. At the end of the transition period, the discount rate for residential and SC2 non-demand customers will be zero percent. The discount rate for purchase of natural gas receivables will be limited to a range of 1.25% and 2%.

The full text of the Joint Proposal is available on the NEM Website.

Commission Denies Request for Retail Market Investigation

NYSEG and RG&E requested that the Commission conduct an investigation to prevent potential gaming by unregulated, affiliated companies that own generation and sell electricity in New York's retail electric markets. The Commission denied the utilities request finding that "the manipulation depicted in the scenario could not likely be successfully deployed." The Commission determined it had jurisdiction to affect the conduct complained of, even though it involved a sale and purchase at wholesale, because it retains jursidiction over all ESCOs doing business in the state. The Commission found that NYSEG/RG&E understated the deterrent effect of antitrust laws and overstated the protection of state action immunity to prevent such conduct.

The Commission noted that there are current measures in place to prevent market manipulation such as the requirement that ESCOs disclose affiliate relationships in their applications, Staff monitoring of customer and load migration in general and to specific ESCOs, and prior experience with complaints by ESCOs against other ESCOs. Therefore, it declined to implement additional measures at this time. The full text of the Order is available on the NEM Website.

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