In response to a letter of Governor Ehrlich, the Commission has initiated an inquiry into a residential electric rate stabilization and market transition plan for BG&E. BG&E residential rate caps expire June 30, 2006. Governor Ehrlich and the Commission are concerned about the magnitude of price increases customers will experience when the rate caps are lifted. The Commission noted that the price increases are not related to the design of the standard offer service procurement model but rather are due to price inflation of the fuel commodities used to produce electricity.

The Commission wants to investigate a transition to market-based prices for BG&E's customers. However, "in order to prevent distortion in the competitive retail market, the Commission prefers to consider a transition plan that would reflect market-based price signals for electric supply, while mitigating the effects of rate shock on the non-bypassable portion of customers' bills." Accordingly, Staff is directed to file a proposal with "measures to ease the transition of residential customers to market-based rates and [that] allow BGE to recover any revenue shortfall resulting from a reduction in distribution rates resulting therefrom." Staff's proposal and testimony is due January 20, 2006, and reply testimony is due February 10, 2006. Interventions are due February 1, 2006. The full text of the Commission's Order is available on the NEM Website. The full text of Governor Ehrlich's Letter is available at this link.

As required by the Commission, Staff issued a report on future capacity needs. Staff concluded that power demand in the state is expected to increase approximately 2.1% annually over the twenty year study period. Staff recommends an addition of one or two baseload coal generating plants to meet this demand. Toward that end, Staff proposes a Reliability Option ratemaking model. Under this model, "a utility would file an application indicating its need for additional capacity and its plan for meeting that need. If, after a public hearing, the Commission concludes that the utility's plan is the best method of addressing the need, the Commission would authorize the utility to collect a reliability charge from all customers and to include the construction work in progress in its rate base without an AFUDC offset. The Reliability Option would only be available of ownership rights in the plant are extended to other stakeholders and the plant construction is done through a competitive process." Comments on Staff's Report are due March 1, 2006. The full texts of Staff's Report and the Order Requesting Comments are available on the NEM Website.

The Commission ordered electric utilities and alternative electric suppliers, including affiliates, to file energy assessments for 2006. The assessments should discuss the ability to meet customers' expected electric requirements, including expected peak demand, the amoung of generating resources available to meet peak demand, and the amount of expected reserves. Distinction should be made between in-state and out-of-state generation and how generation is expected to affect service to customers. MISO is also requested to comment on issues related to the investigation. The assessments are due April 14, 2006, and comments on the assessments are due May 5, 2006.

As required by the Commission's recent Order, National Grid will re-initiate its collaborative to develop an ESCO referral program. A first meeting will be held on January 18, 2006, at 10AM at the Company's Albany office at 1125 Broadway. National Grid will circulate a proposal for discussion prior to the meeting. A conference call number has also been established as follows: 1-866-393-8073, and meeting # *2192297*.