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January 26, 2007
NEM Annual Membership Meeting and National Restructuring Conference and Winter Executive Committee Meeting

We had a highly productive Executive Committee meeting last week at the South Carolina Research Authority. Many thanks to Bill Mahoney and Russ Keller of SCRA for hosting the meeting and to all of the members who attended and contributed to the discussions.

Please mark your calendars for April 24-25, 2007, for NEM's Annual Membership Meeting and National Restructuring Conference. The meeting will be held in Washington, DC at the Marriott Metro Center. More details will be forthcoming.

Standards of Conduct Rulemaking

In light of the D.C. Circuit Court of Appeals recent decision in NFG v. FERC, the Commission has issued a rulemaking proposing changes to its standards of conduct. Earlier this month, the Commission issued interim rules on standards of conduct applicable to natural gas transmission providers such that the relationship between natural gas transmission providers and their energy affiliates would not be governed by the standards. The Commission is requesting comments on whether the interim rules should be made permanent. Additionally, the Commission is requesting comments on changes to standards of conduct applicable to electric utility transmission providers, i.e., whether the standards should apply to the relationship between an electric transmission provider and its marketing affiliates but not to its energy affiliates and whether this would be adequate to protect customers from undue discrimination.

The proposed rulemaking also requests comments on: 1) whether it is desirable to have consistency between the natural gas and electricity standards of conduct; 2) changes to the definition of "marketing affiliate"; 3) permissibly shared risk management employees and lawyers; 4) appropriate form of disclosure to customers of transmission providers' discretionary activities; 5) permitting "planning employees" that are engaged "in all aspects of 'integrated resource planning' for bundled retail load, to receive non-public transmission information, and to interact with transmission function employees, provided that the integrated resource planning is conducted pursuant to state mandate"; and 6) permitting "competitive solicitation employees" to "conduct competitive solicitations intended to serve bundled retail load, and to receive non-public transmission information and to interact with transmission function employees in order to evaluate proposals submitted in a competitive solicitation."

Comments are due 45 days after the proposed rulemaking is published in the Federal Register. The full text of the Proposed Rulemaking is available on the NEM Website.

FERC Issues First Civil Penalties Under EPAct Authority

FERC assessed its first civil penalties under its expanded penalty authority granted by the Energy Policy Act of 2005. FERC has the authority to assess civil penalties of up to $1 million per day per violation for violations of rules, regulations and orders issued under the Natural Gas Act, Natural Gas Policy Act and Federal Power Act. The penalties totaled $22.5 million. SCANA agreed to pay a $9 million civil penalty and to disgorge over $1 million in profits stemming from an investigation into violations of its OATT, specifically with respect to improper use of its network transmission to facilitate off-system power sales. Pacificorp agreed to pay a $10 million civil penalty for violations of its OATT and Standards of Conduct. Entergy Corp. will pay a $2 million civil penalty and contribute $1 million to a charity to settle violations associated with its Alternative Flowgate Capability system and failure to post information on its OASIS. Northwestern Energy will pay $1 million to settle violations of its OATT. Finally, NRG Energy will pay a $500,000 civil penalty to settle violations of Market Behavior Rules stemming from misrepresentation of a reliability must run generation facility in ISONE. The full texts of the Civil Penalty Orders are available on the NEM Website.

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Illinois CUB Issues Consumer Warning

The Citizens Utility Board (CUB) of Illinois issued an alert to consumers warning that, "unregulated natural gas companies continue to pitch bad deals that could lose customers hundreds of dollars." CUB has created a Gas Market Monitor that has tracked gas marketer offerings since 2003. CUB alleges that its Gas Market Monitor shows that 95 percent of gas marketer offerings have "lost money to date compared with the prices of regulated utilities." CUB's Market Monitor compares utility variable rate offerings with marketer fixed price offerings. The full texts of CUB's Consumer Alert and Gas Market Monitor are hotlinked here.

New York
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Spitzer Formally Announces Nomination of Sparks-Beddoe to Commission

Governor Spitzer has formally announced that Angela Sparks-Beddoe will be nominated as a Commissioner of the New York Public Service Commission and that she will be designated to serve as the Commission's Chair. Ms. Sparks-Beddoe is currently the Vice President of Energy East Management Corporation. Prior to her positions with Energy East, she held a number of roles at NYSEG. The full text of the Spitzer Administration press release can be viewed at this hotlink.

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Duke Energy Ohio RFP for PIPP Customers

Duke Energy Ohio will issue an RFP for bids to supply natural gas for the Percentage of Payment Plan (PIPP) customer class on January 29, 2007. Those interested in participating in the bid process should provide their company/organization name, contact person name, contact person's e-mail address, and contact person's telephone number via email to and

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Bills Introduced to End/Restrict Retail Electric Choice

Bills have been introduced in the General Assembly to end or restrict the availability of retail choice. The bills are in response to the pending expiration of rate caps and possible related price spikes.

Senator Norment introduced SB 1416, which would move the end of the rate cap period from December 31, 2010, to December 31, 2008. After the end of the rate cap period, the Commission would be required to conduct biennial utility rate reviews to determine "whether the utility's earnings have produced a fair combined rate of return on the utility's common equity for its generation and distribution services." Utilities would be permitted to construct new generation facilities and recover costs of these facilities in rates. Choice would be retained for customers with demand greater than five megawatts provided the customer cannot return to utility service without having given five years written notice (subject to certain exemptions whereby the customer pays market-based rates).

Congressman Morgan introduced HB 3050, which would repeal the state's electric restructuring law effective January 1, 2008. Utilities would be permitted to build new generation facilities, subject to Commission review, and recover costs through rate base, rate surcharges, adders or other recovery mechanisms as are determined to be "in the public interest."

Congressman Hogan introduced HB 3068, which would institute a process whereby default service rates are to be based on "prices for generation capacity and energy in competitive regional electricity markets." However, the Commission would establish default service rates if it determines that it is "unable to identify regional electricity markets where competition is an effective regulator of rates."

The full texts of SB 1416, HB 3050, and HB 3068 are available on the NEM Website.

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