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December 4, 2009
Winter Executive Committee Meeting

January 2010 Executive Committee Meeting - NEMís Annual Winter Executive Committee Policy and Planning Meeting will be held January 19 & 20, 2010, at the headquarters of South Carolina Research Authority in Charleston, South Carolina. NEMís room rate has been secured at $129.00 per room per night at the Hilton Garden Inn Charleston Airport, 5265 International Blvd., N. Charleston, SC 29418. The Executive Committee sets the course for NEMís advocacy in the coming year at this meeting. A Draft Agenda is hotlinked here. Many thanks to Bill Mahoney and South Carolina Research Authority for the generous offer to host this meeting. Please use this hotlink to register.

Wellinghoff Testimony on OTC Derivatives Legislation

Chairman Wellinghoff testified before the House Energy and Environment subcommittee of the Committee on Energy and Commerce this week on OTC derivatives legislation. Wellinghoff stated that, "Whatever decisions Congress makes for currently-unregulated financial derivatives, those decisions should not apply to RTO/ISO markets, which are already regulated fully, comprehensively and effectively by FERC. Any amendments to the Commodity Exchange Act should preserve FERCís exclusive oversight of RTO/ISO rates, terms and conditions for power sales and transmission service, and prevent dual regulation of RTO/ISO markets by FERC and the Commodity Futures Trading Commission (CFTC)." Wellinghoff went on to testify that, "In short, the RTO and ISO markets should remain subject to FERCís exclusive jurisdiction. FERC encouraged development of these markets, and has regulated all of their rules, for the purpose of facilitating pro-consumer competition. FERC has many years of experience with the development and functioning of these markets. While I and others continue to seek improvements in these markets, I see no problem in these markets that would be solved by supplementing or displacing FERC oversight with CFTC oversight. No regulatory failure has occurred that would warrant such a major shift in oversight of these markets. These markets are vital in meeting the electricity needs of many millions of Americans, and nothing has been proffered to warrant the uncertainty of inserting a new regulator and a new regulatory regime." The full text of Wellinghoff's Testimony is available on the NEM Website.

Review of Texas Gas' Potential Non-Conforming Service Agreements

In the course of its review of whether Texas Gas' agreements conform to the pro forma service agreements in its tariff, Texas Gas filed what it argued to be a non-conforming agreement with a shipper that permits varying contract demands throughout the summer season. Upon review, FERC determined that the agreement with the shipper appears to conform with Texas Gas' currently effective pro forma service agreement. The Commission noted that Texas Gas' pro forma service agreement includes blanks to insert different daily contract demand quantities to be effective during certain date ranges as specified by parties. As such, since FERC viewed the service agreement with the shipper to be conforming to the pipeline's tariff in permitting the variation of contract demand, other similarly situated parties would be likewise entitled to contract for daily contract demand that varies on a montly basis or some other date range. FERC ordered Texas Gas to file additional information explaining why the agreement should be deemed a non-conforming agreement.

In its explanatory filing, Texas Gas states that, "the additional blanks on the NNS pro forma service agreement are provided, instead, solely to permit a contract's CD and NDQ to increase (but not decrease) by specified amounts on specific dates in order to give customers who plan expansions or future growth, such as the addition of new markets, the certainty that transportation capacity will be available to meet future needs, without requiring such customers to reserve and pay for unneeded capacity in the near term." The full texts of the Order and Texas Gas' Explanatory Filing are available on the NEM Website.

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Commission Delays Consideration of Delmarva POR Plan

In response to a request from Staff, the Commission has decided to defer consideration of Delmarva's electric POR plan until its January 13, 2010, Administrative meeting. The Commission reasoned that, "the implementation of the purchase of receivable program without acceptance of an appropriate discount rate would be premature. Consequently, the Commission rescinds the requirement that Delmarva implement its purchase of receivables program by December 7, 2009. At the time that the Commission issues an order accepting the Revisions and establishing an effective date, it will direct a new date by which the purchase of receivables program shall be implemented by Delmarva." The Commission also directed Delmarva to respond to Staff data requests pertaining to its POR filing within five business days of the Order. The full text of the Order is available on the NEM Website.

New York
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ALJs Ruling on Discovery in NYSEG/RGE Rate Cases

The ALJs issued a ruling in NYSEG/RGE's rate cases pertaining the utilities' request for confidential treatment of certain discovery responses. Specifically, the information the utilities sought to protect pertained to work papers and exhibits that incorporated in a spreadsheet-based model they used to forecast their monthly cost of gas for 2009, 2010 and 2011, including model inputs for gas commodity costs, pipeline transportation and storage charges, financial hedging costs, and system throughput, and the calculations by which the inputs are combined to produce the weighted average monthly and annual gas cost forecasts. The ALJs denied the request for confidential status of the information but granted it restricted status from disclosure.

The ALJs reasoned that, "First, the assertion that knowledge of the utilities' commodity costs and hedging practices could enable marketers to change their own hedging and pricing practices to the detriment of consumers is completely unsupported by any information establishing a link between the knowledge and the harm. Certainly, it is hard to imagine that marketers stand to gain anything by deliberately setting their prices above those of the Companies, and if they deliberately set them lower, it is difficult to see how that is harmful to their customers.

It is equally unclear how it would be harmful to customers or competition for marketers to have a better sense of when to actively pursue new business and when not. One would expect sales to pick up when marketers are able to offer good prices to customers, and to tail off when they cannot. That is fairly fundamental to all price-based competition.

Finally, the argument that marketers participating in this proceeding and receiving responses to information requests will 'unfairly gain a competitive advantage' over those who do not, is simply wrong. If marketers who expend time and resources participating in these cases are able to learn of public information that non-participating marketers may not know about, any competitive advantage they gain from their efforts is fairly earned. This is no different than the advantage gained by a marketer who reads and studies utilities' tariffs over those who do not. Our obligation is to assure that our proceedings are open to all interested parties. It is not our responsibility, nor is it consistent with the requirements of FOIL or with support for competitive markets, for us to deny information to parties who actively seek it just because those parties have competitors who may not make the same effort."

The full text of the Ruling is available on the NEM Website.

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Columbia Gas Settlement Approved

This week the Commission approved a settlement that would replace Columbia's current gas cost recovery mechanism with an auction approach to gas procurement. The settlement provides for a two-tiered auction process. First, a wholesale auction process will be used for two consecutive one-year periods commencing on April 1, 2010, that will determine a Standard Service Option for non-migrated customers. Beginning in the year 2012 a retail auction process will be utilized to set a Standard Choice Option (SCO) for non-migrated customers. As a result of the SCO auction, individual customers will be transferred to winning bidders. The settlement would also implement a uniform fee for firm balancing service to be applied to both standard service and migrated customers. The full text of the Order is available on the NEM Website.

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