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 consumer’s 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 NEM’s 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 BGE’s 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.

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 – 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 supplier’s customers’ 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.

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.

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.