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February 17, 2006
NEM Annual Membership Meeting and National Energy Restructuring Conference

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 focused on "Adding Value and Winning Customers with Innovation, Technology and Service." To view the agenda, use the following hotlink: http://www.energymarketers.com/agenda/2006/April/April2006.htm

We have already confirmed the following to attend: U.S. Congressman Ralph Hall, Chair, House Energy and Air Quality Subcommittee, U.S. Congressman Tim Murphy, Member, House Energy Committee, Nora Brownell, Commissioner, FERC, Paul Hudson, Chair, Texas Public Utility Commission, Stan Wise, Chair, Georgia Public Service Commission, James Cawley, Vice Chair, Pennsylvania Public Utility Commission, Monica Martinez, Commissioner, Michigan Public Service Commission, Ron Cerniglia, Director, NYPSC's Office of Retail Market Development and Calvin Timmerman, Senior Commission Advisor, Maryland Public Service Commission.

In addition, we will conduct new Mission Critical Workshops. These will include "How to Deal with the Media When they Knock on Your During Price Spikes - Crisis Communications Workshop for Energy Marketers" conducted by Rasky Baerlein Strategic Communications. An additional workshop will focus on "New Market Entry 101 - Significant Compliance, Reporting and Certification Requirements and Political, Legal and Regulatory Framework for Entering New Retail Markets (MI, MD, NY, OH)" to be led by John Dempsey of Dickinson Wright, Joelle Ogg of Brunenkant & Cross and Steven Sherman of Krieg DeVault. Another workshop will examine "Expanding Market Share and Winning New Customers with Innovation and Technology."

Those members interested in sponsoring the event should contact headquarters. Advertisements for the event, including sponsor information, receive international media distribution.

NEM Call on FERC's Proposed Transmission Rules and Potential Impacts on Retail Competition

NEM will convene a conference call on Tuesday, February 21, 2006, at 2PM EST to discuss FERC's proposed transmission rules and potential negative impacts on retail electricity competition. Lorraine Cross and Joelle Ogg of Brunenkant & Cross will lead the discussion. Please join us for this important call. The dial-in number is 913-643-5111 and the passcode is 209337.

FERC proposed eight guidelines for long term transmission rights as follows: "1) the long-term firm transmission right should be a point-to-point right that specifies a source (injection node or nodes), sink (withdrawal node or nodes), and a quantity (MW); 2) the long-term firm transmission right must provide a hedge against locational marginal pricing congestion charges (or other direct assignment of congestion costs) for the period covered and quantity specified. Once allocated, the financial coverage provided by the right should not be modified during its term except in the case of extraordinary circumstances or through voluntary agreement of both the holder of the right and the transmission organization; 3) long-term firm transmission rights made feasible by transmission upgrades or expansions must be available upon request to any party that pays for such upgrades or expansions in accordance with the transmission organizationís prevailing cost allocation methods for upgrades or expansions. The term of the rights should be equal to the life of the facility (or facilities) or a lesser term requested by the party paying for the upgrade or expansion; 4) long-term firm transmission rights must be made available with term lengths (and/or rights to renewal) that are sufficient to meet the needs of load-serving entities (LSEs) to hedge long-term power supply arrangements made or planned to satisfy a service obligation. The length of term of renewals may be different from the original term; 5) LSEs with long-term power supply arrangements to meet a service obligation must have priority to existing transmission capacity that supports long-term firm transmission rights requested to hedge such arrangements; 6) a long-term transmission right held by a LSE to support a service obligation should be re-assignable to another entity that acquires that service obligation; 7) the initial allocation of the long-term firm transmission rights shall not require recipients to participate in an auction; and 8) allocation of long-term firm transmission rights should balance any adverse economic impact between participants receiving and not receiving the right."

Initial comments are due March 13, 2006, and reply comments are due March 27, 2006. The full text of the Transmission Rule NOPR is available on the NEM Website.

Maryland
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NEM and BGE Testimony on Rate Mitigation Proposal

Staff submitted a proposed rate mitigation strategy to address the impending expiration of rate caps for BGE residential customers. Staff's proposed mitigation program would have a two-year duration, commencing in June 2006 and ending in May 2008. BGE residential consumers would participate in the program on an opt-in basis. For the first nine months of the program, participating residential consumer bills will reflect a credit to offset market-based price increases. The credit will be recovered from participating consumers during the remaining fourteen months of the program. This mitigation adjustment is an adjustment to the delivery portion of the bill. The Standard Offer Service generation price will be unaffected.

NEM submitted testimony on Staff's mitigation program proposal for BGE residential consumers arguing that, "By attempting to craft a mitigation program that addresses the political urgency of potential price spikes to residential consumers through the delivery rate, and not the generation rate, this could minimize additional price distortions that undermine both investments in providing competitive retail services as well as proper consumption decisions." NEM's Testimony also offered recommendations to strengthen the emerging competitive retail market including: (1) implementing the purchase of receivables as a low-cost feature of consolidated consumer billing, (2) competitively neutral consumer education must be funded, materials drafted and vetted by interested stakeholders in emergency turn-around times frames, (3) that a new pro-competitive Office of Retail Market Development be created, funded, housed in the Commission and directed to recruit respected, credible market-based utility policy and rate experts, (4) low-cost customer lists that include usage and billing information should be available to qualified suppliers subject to a consumerís absolute right to opt-out for any reason, (5) law, regulations and public policy leadership must eliminate costly delays and risks inherent in program uncertainty, and (6) in the event BG&E claims an inability or unwillingness to perform the needed IT system redesign in the time allowed, NEM recommends the Commission solicit offers of assistance from NEMís services and technology industry segment. The full text of NEM's Testimony is available on the NEM Website.

BGE opposed Staff's mitigation proposal arguing that it would: 1) send distorted price signals and build up the equivalent of a large "credit card balance" for participating customers; 2) create intergenerational inequities for customers who remain in BGEís service territory and bear the costs of customers who move out during or immediately after the initial credit period; 3) negatively impact cash flow, interest coverage ratios, and potentially credit ratings; and 4) create several million dollars of expense in related CIS programming costs, mailing costs, communication and advertising costs, enrollment costs, and additional customer contact costs for handling customer inquiries and complaints. The full texts of BGE's Testimony is available on the NEM Website.

Michigan
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NEM Testimony in Consumers Gas Rate Case

NEM submitted testimony urging consideration of amendments to Consumers' Gas Customer Choice tariff, in particular, the annual reconciliation process, that requires Consumers to reconcile gas delivered into the system by choice customers by looking at each pool independently, without consideration of all gas delivered into the entire system collectively.

Under the current tariff, Consumers' looks at each pool individually to determine whether gas will be returned or retained Ė instead of first looking at all the gas that has been delivered by a competitive natural gas provider to the utility system to see whether the gas delivered by the supplier, in aggregate, met, exceeded or fell short of the supplierís customersí annual consumption. It is possible as a result of the current annual reconciliation process for a utility to keep some lower cost gas, return some higher cost gas, sell some gas at its WACOG and claim some higher priced sales as its own, for a single supplier, even though gas may have been physically delivered into the utility system that balances all customer requirements. The process increases risk to competitive suppliers. Competitive suppliers and choice customers are competitively disadvantaged because the lower cost supplier's gas is kept by the utility to reduce the GCR price. Aggregation reconciliation, instead of reconciliation on a pool by pool basis, was recommended as a possible solution.

NEM also requested that the Commission order a working group in this case or in a separate docket to address the concerns of suppliers participating in the various gas customer choice programs offered in Michigan. The full text of the Testimony is available on the NEM Website.

Many thanks to Interstate Gas Supply, Direct Energy and Dickinson Wright for their assistance in this proceeding.

Ohio
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Technical Conferences Scheduled on Net Metering, Smart Metering and Demand Response, Cogeneration and Power Production Purchase and Sale Requirements and Interconnection

As part of the Commission's inquiry required by the federal Energy Policy Act of 2005 into issues concerning net metering, smart metering and demand response, cogeneration and small power production purchase and sale requirements, and interconnection, a series of technical conferences have been scheduled. The schedule is as follows:

February 24, 2006 - Net Metering and Fuel Diversity
March 9, 2006 - Distributed Generation Interconnection
March 23, 2006 - Sale of Standby Power
April 6, 2006 - Smart Metering and Demand Response


Additional comments will be accepted in this proceeding through April 28, 2006. The full texts of the Notice of Technical Conferences and Net Metering Conference Agenda are available on the NEM Website.

Pennsylvania
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Request for Additional Comments on Default Service Regulations

The Commission reopened the default service rulemaking to consider the impact of the state's Alternative Energy Portfolio Standards Act. The Commission requests comment on the following issues: 1) should Act 213 cost recovery be addressed in a separate rulemaking or as part of the default service regulations; 2) whether prevailing market conditions require long term contracts to initiate development of alternative energy resources, and whether default service providers should employ long term fixed price contracts to procure (and through what kind of competitive procurement process) alternative energy resources; 3) should the force majeure provisions of Act 213 be incorporated into the default service process and how; 4) Due to the minimum solar photovoltaic requirement as part of Tier 1, should such resources be treated differently for procurement and cost recovery purposes; 5) how should the costs determined through a section 1307 process for alternative energy resources and the energy costs identified in the default service regulations be integrated; 6) "may a default service provider enter into a long term fixed price contract for the energy supplies produced by coal gasification based generation if the resulting energy costs reflected in the tariff rate schedules are limited to the prevailing market prices determined through a competitive procurement process approved by the Commission;" 7) should the promulgation of default service regulations be delayed until a time closer to the end of the transition period; and 8) whether the proposed default service regulations need to be revised to reflect the requirements of the federal Energy Policy Act of 2005.

Initial comments are due March 8, 2006, and reply comments are due April 7, 2006. The full text of the Request for Comments is available from NEM headquarters.



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