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January 6, 2006
Upcoming NEM Events

The South Carolina Research Authority (SCRA) has graciously offered the use of its Advanced Technology "Trident Research Center" for our Winter Executive Committee Meeting on January 19 and 20, 2006. Please hold these dates on your calendar. NEM's Winter Executive Committee Meeting will be used to assess our advocacy priorities for the coming year. Charleston, South Carolina is a charming city and a great venue for our agenda setting meeting for 2006. Please register using this hotlink.

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.

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Governor Ehrlich Requests PSC Action for BG&E Residential Customers

As the rate freeze for BG&E's residential customers nears expiration coupled with high wholesale electric prices, Governor Ehrlich sent a letter to the Commission requesting that it, "take any actions necessary to implement regulatory measures to mitigate customer impacts from such dramatic increases" as its "top priority" for the new year. Ehrlich writes, "the rate freeze has prevented customers' costs from increasing in a rising cost environment. However, it also has created market distortions that have stunted competition and will ultimately prove painful to families trying to make ends meet." Ehrlich requested the Commission to advise if it needs "additional statutory authority to implement any appropriate consumer protections" and that it do so within the next two weeks so the Governor has time to prepare legislation for submission to the General Assembly. The full text of Governor Ehrlich's Letter is available at this link.

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Commission Approves NSTAR Electric-Gas Settlement

The Commission approved NSTAR's electric and gas settlement agreement providing that electric commodity for residential customers be procured as follows: (1) 50 percent of its load will be procured under one-year contracts; (2) 25 percent of its load will be procured under two-year contracts; and (3) 25 percent of its load will be procured under three-year contracts. NEM had opposed the settlement arguing that it will distort price signals, artificially inflate prices due to the lack of liquidity to hedge supply in the last half of the contract, exacerbate the ongoing credit crisis, and lead to periods of retail booms and busts when the forward market varies from the locked in NSTAR rate. The full text of the Order is available on the NEM Website.

New York
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Commission Approves ESCO Referral Program

Completing its review of ESCO referral programs, the Commission decided that it will base the design of such programs on the O&R model, subject to certain modifications to protect consumer interests. The Commission found that the alternative Notice model that had been proposed was unworkably burdensome to administer.

Utilities may select between two referral program options, an ESCO Service option and an ESCO Contract option. Under the ESCO Service option the utility will enroll the customer for the introductory period, and the ESCO will send the customer a contract for the post-enrollment period within five days of utility notice of enrollment. Under the ESCO Contract option the utility will enroll the customer, and the ESCO will provide the customer with a sales agreement governing the introductory and post-introductory period within five days of utility notice of enrollment.

ESCOs are allowed to continue to directly sign up customers outside of the referral program. Utilities must retain recordings of customer consent to participate in the program and issue letters confirming enrollment. Participating customers that have an ESCO preference can select that ESCO, other customers will be randomly assigned to ESCOs on a rotating basis.

The Commission resoundingly rejected certain parties attacks on competition, finding that, "our policies for promoting competition are the best approach to the efficient provision of energy services at just and reasonable rates. Besides those benefits, the introduction of competitive markets for energy commodity services has insulated consumers from the risks associated with utility ownership of generation, permitted customers to negotiate rates that avoid market fluctuations, and created the opportunity for new approaches to meeting customers' energy services needs." The Commission rejected arguments that they did not have the statutory authority to implement competition. The Commission also rejected the antitrust issues that had been raised.

The Commission approved Central Hudson's referral program with certain modifications to commence February 1, 2006. ConEd, O&R and National Grid are to conduct collaboratives to complete their work on referral programs and must file proposed programs within sixty days of the order. RG&E and Keyspan must commence collaboratives by February 1, 2006, to develop referral programs. NYSEG is to commence a collaborative by February 1, 2006, as well, and may do so as part of its current electric rate case.

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

NFG Proposed New Curtailment Procedures

Currently, NFG's curtailment procedure applies to its sales customers only. ESCO customers cannot be included in NFG curtailment orders unless expressly authorized by the ESCO. NFG also is not currently permitted to acquire ESCO supplies for realloaction to higher priority customers without the agreement of the ESCO and customer. Therefore, ESCO customers currently cannot be curtailed unless authorized by the ESCO or if the ESCO's supply is interrupted or curtailed upstream of the utility.

NFG now proposes, "to extend ESCO daily city gate delivery requirements to apply even when the ESCO's customers are curtailed. This change would enable Distribution to curtail customers on the basis of usage - as has long been the prioritization scheme - rather than the source of supply." The gas that NFG acquires under this procedure would be used to reallocate to higher priority customers. The curtailed ESCO or customer would be "compensated using the same methodology provided for similar 'takings' under the existing rules governing short-term curtailment." NFG states that a similar procedure is in place in its Pennsylvania division.

The full texts of NFG's Filing Letter and Tariff Sheets are available on the NEM Website.

Commission Approves NYSEG Purchase of Receivables Proposal

The Commission approved NYSEG's Purchase of Receivables (POR) proposal. It will commence February 1, 2006, and extend through December 31, 2008 (and future modification or extension of the program is possible). ESCOs that select NYSEG's consolidated bill option for all or a part of their customers must sell accounts receivable for those customers to NYSEG. The discount rate for electric sales will begin at 1.01%, and the discount rate for gas sales will begin at 1.66%. The discount rate is subject to future adjustment to reflect NYSEG's actual uncollectible experience as well as the results of NYSEG's pending electric rate case. Payments will be made to ESCOs via wire transfer twenty days after consolidated bills are issued. The full text of the Order is available on the NEM Website.

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Gas Stakeholders Group Meeting and Process

The Commission issued a report finding that there is not effective competition in the retail natural gas supply market in the state. It identified a number of barriers to entry and participation. The Commission will convene the first meeting of the Gas Stakeholders Group on March 29, 2006, at 9AM to begin the study of the issues identified in the report. By January 20, 2006, Staff will send a notice to the Stakeholders of tentative subgroups and issues assigned to each subgroup. Volunteers to participate in the subgroups as well as comments on the issues assigned to each subgroup will be due February 17, 2006.

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