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December 2, 2005
Upcoming NEM Events

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.

The South Carolina Research Authority (SCRA) has requested the use of its Advanced Technology "Trident Research Center" for our Winter Executive Committee Meeting on January 19 and 20, 2006, but the request has not yet cleared. Please hold these dates on your calendar and let us know if there is a conflict ASAP. NEM's Winter Executive Committee Meeting will be used to assess our advocacy priorities for the coming year. Charlestown, South Carolina is a charming city and a great venue for our agenda setting meeting for 2006.

Settlement Filed on PJM Market Mitigation Rules

A settlement has been filed on PJM's market mitigation rules. The settlement establishes new scarcity pricing rules such that, "when scarcity pricing is triggered in a Scarcity Pricing Region, the price in the entire Scarcity Pricing Region will be set equal to the highest market-based offer price of all generating units operating under PJM direction to supply either energy or reserves on a real-time dispatch basis in that region." PJM's current "three privotal supplier" test used to determine whether suppliers should be subject of offer capping with respect to a particular transmission constraint will be continued subject to certain modifications, including changes to offer capping calculation rules. Also, "offer price caps will be applied with respect to transmission constraints only to generation suppliers that fail the three pivotal supplier test." Additionally, PJM will exempt the APS South interfacce from offer capping (in addition to the Western, Central, and Eastern reactive limits in the MAAC Control Zone). The full text of the Settlement is available on the NEM Website.

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Commission Closes Demand Response Proceeding

The Commission closed its demand response proceeding finding that the activities identified in the proceeding had largely been completed. The Commission directed the following demand response proceedings be commenced: 1) each utility is to submit a real time pricing tariff for its largest customers in its next rate case subsequent to the CAISO's implementation of an hourly day ahead market price; 2) each utility is to include proposals for critical peak pricing (CPP), time of use (TOU) pricing and inverted rate tariffs for its small commercial and residential customers, as well as CPP and TOU tariffs for customers over 200 kilowatts in monthly demand, in its next rate case; 3) the Executive Director should investigate the institution of a new rulemaking on more customer friendly billing formats for energy bills and report its recommendation to the Commission in January 2006; 4) agency staff should prepare a set of draft protocols for estimating load impacts for price responsive and reliability demand response programs and identify additional cost data that should be collected by April 3, 2006; 5) staff should prepare a proposed rulemaking or other evaluation approach six months after the protocols are circulated; and 6) staff should hold a workshop by March 15, 2006, to identify the issues to be addressed in developing relevant cost-effectiveness tests for demand response programs, and recommend whether the Commission should open a rulemaking on the topic. The full text of the Order is available on the NEM Website.

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Consumers Energy 2004 Stranded Cost Application

Consumers Energy filed an application for determination of its 2004 stranded costs. Consumers calculates its stranded costs incurred in 2004 to be zero using the formula applied in previous cases. However, this is dependent on Consumers recovery of Clean Air act costs in another proceeding, as well as the allocation of 2004 third party net sales revenues to stranded costs. If it is determined that Consumers 2004 stranded costs were greater than zero, Consumers requests authority to recover those costs through a surcharge applied to retail access load. The full text of Consumers 2004 Stranded Cost Application is available on the NEM Website.

New York
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NYSEG and RG&E File Draft Mandatory Hourly Pricing Tariffs

NYSEG and RGE filed draft proposed mandatory hourly pricing tariffs as ordered by the Commission. NYSEG and RGE noted that the filings are subject to their outstanding petition for rehearing on the order. NYSEG and RGE proposed to create a new service classification for customers 1000 kilowatts and above. "Customers with demands of at least 1,000 kilowatts for two of the prior twelve months will qualify for the new service class." Customers in this service class will have two electric supply pricing options, an ESCO Rate/Pricing Option or the Hourly Pricing Option. The Hourly Pricing Option would become effective January 1, 2007, for NYSEG and January 1, 2009, for RG&E. Customers taking service under the Hourly Pricing Option must have interval meters with telecommunications access. NYSEG/RG&E will provide meters at the customer's expense and assist with the process of obtaining needed telecommunications equipment. The full text of the NYSEG/RG&E filings are available from NEM headquarters.

Staff Testimony in Central Hudson Rate Case

Staff filed testimony in Central Hudson's rate case. Staff recommended that Central Hudson be required to file a revised unbundling cost of service study and tariffs that include a separate merchant function charge and a mechanism for net lost revenue recovery. Staff also recommends that Central Hudson be required to institute unbundled bill formats, including billing and metering amounts, as required by Commission Order.

Staff opposed Central Hudson's proposed POLR supply surcharge. Staff argued that, "the surcharge has no cost-basis and would, therefore, artificially increase commodity prices; would duplicate the profit margin contained in the Merchant Function Charge (MFC) proposed by the Staff Unbundling Panel; and generally would not be equitable for Central Hudson's full service customers."

The full text of Staff's Testimony is available from NEM headquarters.

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Staff Testimony in Support of DEO Application to Exit Merchant Function

Staff filed testimony on Phase 1 of DEO's application to exit the merchant function by instituting a Standard Service Offer (SSO) mechanism in place of the current GCR mechanism. Staff found that DEO had demonstrated it should be granted an exemption from commodity sales services because the level of participation in choice and the number of competitive suppliers demonstrates effective competition or reasonably available alternatives. Staff recommended that a descending clock auction method be used and that PIPP tranches be included in the auction and not bid separately. Staff characterized the change from GCR service to the SSO mechanism as "little more than a change to the way Dominion purchases gas for its sales customers, i.e. replacing its existing gas procurement function with purchases from the winning SSO bidders. This arrangement will be totally transparent to Dominion's customers." Staff also said that, "it cannot be known a priori whether the SSO price will be higher or lower than the GCR would have been. That is not the appropriate criteria for a decision on whether or not to approve Phase 1. The criteria should be whether the proposal represents a reasonable, relatively risk-free, framework by which to examine whether a better model exists for giving customers competitive choices." The full text of Staff's Testimony is available on the NEM Website.

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