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January 12, 2007
NEM Winter Executive Committee Meeting

Please mark your calendars for NEM's Winter 2007 Executive Committee Meeting. It will be held January 18-19, 2007, in Charleston, South Carolina. Please register for the event using this hotlink. The agenda is also available online.

A room block has been set aside at the Hilton Garden Inn (843-308-9330) for the January meeting at the rate of $92 per night. Reference the "NEM" block when calling. Alternately, you may also book online at and when it asks for group/convention code, enter "NEM" and the rate will be $92.

Many thanks to the South Carolina Research Authority for offering to host the meeting again this year.

S.6, the "National Energy and Environment Security Act of 2007"

Senator Reid introduced S.6, the "National Energy and Environment Security Act of 2007." It is a "message bill" identifying issues and goals for the 110th Congress to address. S.6 provides that,

"It is the sense of Congress that Congress should enact, and the President should sign, legislation to enhance the security of the United States by reducing the dependence of the United States on foreign and unsustainable energy sources and the risks of global warming by
(1) requiring reductions in emissions of greenhouse gases;
(2) diversifying and expanding the use of secure, efficient, and environmentally-friendly energy supplies and technologies;
(3) reducing the burdens on consumers of rising energy prices;
(4) eliminating tax giveaways to large energy companies; and
(5) preventing energy price gouging, profiteering, and market manipulation."

The full text of S.6 is available on the NEM Website.

Interim Standards of Conduct Rules for Interstate Natural Gas Pipelines

Because of the D.C. Circuit's recent decision in NFG v. FERC on FERC's standards of conduct pertaining to interstate gas pipelines, FERC has issued interim rules to govern pipeline affiliate relations while the Commission considers its reaction to the Court decision. The D.C. Circuit found that FERC had failed to justify its expansion of the definition of energy affiliate beyond marketing affiliates to include non-marketing affiliates such as producers, gatherers, and LDCs. The interim rules retain the Order 2004 rules that were not challenged in the D.C. Circuit, and the challenged provisions are temporarily replaced with Order 497 standards of conduct, as a result "the standards of conduct for natural gas transmission providers will only govern the relationship between a transmission provider and its marketing affiliates."

Other issues were raised on appeal with the D.C. Circuit but were not ultimately addressed by the Court. However, FERC's interim rules reflect changes based on these issues as well. With respect to natural gas transmission providers, the interim rules: 1) omit restrictions on shared risk management activities and employees; and 2) revise the requirement to post all discretionary acts. Also, the Commission will permit natural gas transmission providers to treat lawyers as permissible shared employees and will not require newly certificated pipeline transmission providers to adhere to the standards of conduct until they begin transmission service.

The interim rules are effective as of January 9, 2007. A rulemaking is expected to be issued soon. The full text of the Interim Rules are available on the NEM Website.

NYISO's Proposed Revisions to Prepayment Program

NYISO has filed proposed changes to its OATT and Services Tariff pertaining to its customer prepayment program. Under the existing program, customers are able to reduce collateral requirements by agreeing to prepay for estimated purchases of energy and ancillary services on a weekly basis. NYISO proposes changes to the program that it argues are necessary to reduce NYISO's credit risk. The proposed revisions include: "i) requiring that weekly prepayments be made on the first business day of the week, rather than the last; ii) reducing the applicable cure period should a customer fail to make a prepayment when required; and iii) modifying the calculation used to determine the reduced amount of collateral that must be provided by a prepayment customer." NYISO proposes that the changes become effective as of March 10, 2007. The full text of NYISO's Filing is available on the NEM Website.

Click here to view all past updates.
WPS/Peoples Merger Settlement on Choice Program Issues

WPS and Peoples have settled a number of choice issues raised in their merger proceeding. WPS/Peoples agree to modify the "Choices for You" program as follows: 1) the requirement for a meter number to enroll a customer will be eliminated such that only an account number will be necessary; 2) the requirement that suppliers must send a letter to a customer when Peoples Gas/North Shore Gas terminates service to a Rider SVT customer or does not enroll and ineligible customers in the choice program will be eliminated; and 3) the 50 customer minimum pool size will be eliminated.

Furthermore, WPS/Peoples commit to propose the following changes to the choice program in their upcoming rate cases (expected the first quarter of 2007): "1) Provision of Rate 1 customer lists(customer name and address) to Rider SVT suppliers on substantially the same terms and conditions that these lists are provided for commercial customers. 2) Billing the Aggregation Balancing Gas Charge (“ABGC”) directly to Rider SVT customers. 3) Recovery of the gas cost-related portion of the Gas Companies’ bad debt through their Gas Charges or another tariff rider and not through base rates. 4) As part of implementation of the rate case orders, improve the Gas Companies’ billing systems related to electronic file transfer. 5) Elimination of the PEGAsys (TM) charges. 6) Address the $10 enrollment charge for the CFY program, either by proposing to eliminate or modify this charge, or by presenting cost justification for continuing the $10 enrollment charge."

WPS/Peoples also agree to convene workshops prior to the upcoming rate cases to discuss issues associated with Required Daily Delivery Quantities, upstream capacity allocation, cost allocations, minimum stays, provision of customer payment history and tax identification numbers to suppliers, and purchase of supplier bad debt. The full text of the Settlement is available on the NEM Website.

Click here to view all past updates.
Commission Order on MetEd and Penelec Rate Case

The Commission today rendered a decision in the MetEd and Penelec rate case. The Commission approved distribution rate increases for MetEd and Penelec of $58.7 and $50.2 million, respectively. This is far lower than MetEd's requested $216 million rate increase and Penelec's requested $157 million increase.

The Commission also approved Transmission Service Charge (TSC) riders for the companies. The riders are intended to recover federally approved transmission rates. The Commission approved a $133.5 million rider for MetEd and a $59.9 million rider for Penelec. Vice Chairman Cawley dissented from the Commission's decision to permit inclusion of congestion charges as the result of transmission constraints in the rider. Cawley argued that, "the ALJs failed to properly restrict the costs that the Companies are permitted to pass through the TSC Rider to only transmission-related expenses. The ALJs improperly sanctioned the recovery of generation-related congestion costs, which permits the Companies to circumvent the generation rate cap by reclassifying generation-related congestion costs as transmission expenses." Cawley cautioned that, "inclusion of congestion costs in a TSC Rider may invite other utilities to, in effect, break the rate caps that they have honored to date."

As part of their Rate Transition Plan, MetEd/Penelec had also requested an increase in generation costs. The Commission rejected this request. The full text of the Commission's Order will be posted on the NEM Website when made available electronically. The full text of Vice Chairman Cawley's Dissenting Statement is available on the NEM Website.

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