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February 22, 2008
Annual Spring Membership Meeting

NEM booked the new Embassy Suites Hotel Washington D.C. Convention Center for the Annual Spring Membership Meeting and Restructuring Conference on April 29 and 30, 2008. This year's theme is "Strategic Energy, Security & Advanced Technology Policies - Think Globally, Save Locally." Please register at this hotlink. A final agenda can be viewed at:

Hotel accommodations have also been arranged at this facility located at 900 10th Street, NW, Washington, DC 20001. NEM has secured preferred hotel rates of $259.00 per night. Please call (202) 739-2001 to make your reservations.

Thus far, we have confirmed the following featured speakers for the event: U.S. Senator Jim DeMint (R-SC), Member, Energy and Natural Resources Committee, US House Majority Whip James Clyburn (D-SC), U.S. Congressman Tim Murphy (R-PA), FERC Commissioner Marc Spitzer, FERC Commissioner Jon Wellinghoff, CFTC Commissioner Michael Dunn, Natural Resources Canada Minister Gary Lunn, David Wales, Deputy Director, Bureau of Competition, Federal Trade Commission, Massachusetts DPU Chairman, Paul Hibbard, New York PSC Chairman, Garry Brown, Texas PUC Chairman, Barry Smitherman and Pennsylvania PUC Energy Advisor, Eric Matheson.

CFTC Establishes Energy Markets Advisory Committee

CFTC announced that it is establishing an Energy Markets Advisory Committee (EMAC). CFTC had previously recommended formation of the Committee in a report it submitted to Congress last year. CFTC Acting Chair Lukken will be Chairman of the EMAC and additional members will be named from a cross-section of the industry (i.e., exchanges, producers, market users and consumers). CFTC explained the need for the EMAC as follows: "Since the enactment of the Commodity Futures Modernization Act of 2000, there have been important new developments in energy markets that create a need for consideration of adjustments in current regulatory and legislative approaches to ensure that the Commission has the means to protect market integrity and competition, while preserving opportunities for innovation and increases in efficiency. This is particularly true in light of evidence that some of the newer energy markets that have emerged since the Modernization Act have taken on some of the characteristics and price-discovery functions of traditional futures markets."

The EMAC will conduct public meetings, submit reports and recommendations to the CFTC and generally serve as a discussion vehicle for matters pertaining to exchanges, firms, end users and regulators regarding energy markets and CFTC regulation. The EMAC's Charter will become effective upon fifteen days notice. The full text of the EMAC Charter is available on the NEM Website.

NOPR on Organized Electric Markets

Following on the ANOPR issued last year, FERC has issued a proposed rulemaking intended to improve competition in organized electric markets. The NOPR sets forth proposals in four areas: demand response, long-term contracting, improved market monitoring and RTO/ISO responsiveness to customers and stakeholders.

Specific demand response proposals include: 1) permit aggregators of retail customers to bid demand response on behalf of those customers; 2) accept demand response resources bids for certain ancillary services comparable to other resources; 3) in a system emergency, eliminate a charge to buyers that take less energy in the real-time market than they bought in the day ahead market; and 4) during a period of operating reserve shortage, allow market clearing prices to reach a level that rebalances supply and demand.

Regarding long-term contracting, it is proposed that RTOs/ISOs be required to dedicate a portion of their website to permit market participants to post offers to buy or sell power on a long-term basis.

Market monitoring proposals include: 1) requiring RTOs/ISOs to provide their market monitors with access to market data, resources and personnel as needed; 2) requiring the market monitor to report directly to the RTO/ISO board; 3) expanding the universe of recipients of market monitor recommendations and increase the scope of behaviors reported to FERC; 4) removing the market monitor from tariff administration; and 5) increasing the dissemination of market monitor information to a large constituency.

To improve RTO/ISO responsiveness to customers and stakeholders, it is proposed that the RTOs/ISOs adopt principles on inclusiveness, fairness, minority position representation and on-going responsiveness.

FERC noted that this NOPR is not its final effort to strengthen competition in organized markets. It ordered that staff technical conferences be convened to address the consumer stakeholder proposal to modify the design of organized markets and to discuss barriers to demand response participation in organized markets.

Comments on the NOPR are due 45 days after publication of notice in the Federal Register. The full texts of the FERC NOPR Fact Sheet, Chairman Kelliher's Statement and Commissioner Wellinghoff's Statement are available on the NEM Website.

FERC Finalizes Cross-Subsidization Rules

EPAct of 2005 expanded FERC's merger and corporate review authority by amending Section 203 of the Federal Power Act to clarify the Commission's jurisdiction over holding company mergers, grant it authority over certain holding company securities acquisitions and grant it authority to review the disposition of generation facilities. EPAct modified FERC's historically used merger test by adding to the public interest determination a finding that a transaction will not result in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company, unless the pledge or encumbrance is in the public interest. FERC has acted to finalize rules to implement this authority.

In Chairman Kelliher's statement on the rules he explains, "In the package of orders we approve today, we leave in place the supplemental merger policy statement adopted last summer but provide some additional clarifications. We also grant several additional blanket authorizations for public utilities to engage in certain corporate transactions where there is no potential to adversely affect market power or rates, and no opportunity for improper cross-subsidization. Finally, under our ratemaking authority, we codify restrictions on non-power goods and services transactions between utilities with captive customers and non-regulated affiliates. Importantly, these restrictions apply not only to utilities that may be seeking merger approval, but to all franchised public utilities that have captive customers or that own or provide transmission services over Commission-jurisdictional transmission facilities. These restrictions are in addition to the ones we impose on utilities with market-based rates and they will fill any regulatory gap in cross-subsidization protection." The full text of the final Cross-Subsidization Rules will be posted on the NEM Website when made available electronically.

Click here to view all past updates.
Rulemaking on Long Term Procurement Policies

The Commission instituted a rulemaking to examine procurement policies underlying long-term procurement plans. Noting there are a number of open and potential proceedings effecting procurement policies, this rulemaking is intended as the forum to integrate those efforts. The case is not intended to be a forum for review and approval of a new set of long-term procurement plans (LTPP). A decision was just rendered on the 2006 LTPP process.

Phase One issues identified by the Commission:

"Standardized resource planning practices, assumptions and analytic techniques applied in long-term procurement plans, based on an integrated resource planning framework;
Interim standards and practices to evaluate the uncertain cost of future GHG regulations during AB 32 implementation and in anticipation of possible federal legislation;
Preparation of a report which provides specific information on each of the relevant programs either under the Commissionís purview or funded by utility ratepayers that contribute to a reduction in GHG;
A methodology to quantify EE in the CEC load forecast;
Methodologies to estimate firm capacity from demand-side resources for long-term planning and procurement purposes;
Customer risk preference study; and
Other identified LTPP program implementation issues."

Phase Two issues identified by the Commission:

"Consider whether and to what extent refinements to policies distinguishing system versus bundled resource needs, including a methodology that allocates the cost of new generation to system and bundled customers; and
Evaluation of whether and how refinements can be made to the bid evaluation process to ensure fair competition between power purchase agreements and utility-owned generation bids, and alternatives to the competitive market approach where competition cannot be used to reach equitable and efficient outcomes."

Comments on the Commission's preliminary scoping memo are due March 17, 2008, and a prehearing conference will be convened April 2, 2008. The full text of the Order Instituting Rulemaking is available on the NEM Website.

Click here to view all past updates.
Commission Names Director of Office of Retail Market Development

The Commission has appointed Torsten Clausen as the Director of its new Office of Retail Market Development (ORMD). Legislation in 2006 authorized the creation of the ORMD. The ORMD did not receive funding until late 2007. The ORMD is charged with ensuring that the benefits of electric competition are extended to residential and small commercial customers. The ORMD's responsibilities include monitoring competitive conditions, identifying potential barriers to retail competition for all customer classes, and proposing solutions to these barriers to the Commission and the legislature.

Click here to view all past updates.
Consumers Files Gas Rate Case

Consumers filed a gas rate case in which it requested a rate increase to recover an additional $91.1 million annually. Consumers proposed to implement a revenue decoupling mechanism (RDM) applicable to its residential customers. Consumers does not propose to extend the RDM to transportation customers reasoning that, "customers who take service under one of the gas transportation tariffs are already sensitive to changes in sales volumes because of Authorized Tolerance Levels and load balancing charges. Essentially, Transportation customers have a price-driven incentive not to deviate from their contracted sales volume."

Consumers proposed rate changes for the three transportation rate schedules ST, LT and XLT. The Rate ST customer charge is proposed to increase from $480 per month to $540 per month and the distribution charge is proposed to increase from $0.7743 per Mcf to $0.8946 per Mcf. The Rate LT customer charge is proposed to decrease from $2,780 per month to $2,440 per month with an increase in distribution charge from $0.4981 per Mcf to $0.6662 per Mcf. The Rate XLT customer charge is proposed to decrease from $6,900 per month to $6,740 per month with an increase in distribution charge from $0.3975 per Mcf to $0.5614 per Mcf. Consumers also proposed changes to the Transportation Authorized Tolerance Levels. The full text of Consumers Filing is available on the NEM Website.

Click here to view all past updates.
HB54 Considered By Legislature

HB54 being considered in the legislature would extend electric rate caps through January 1, 2013, locking in the generation component charged to customers as of December 31, 2007. The bill proposes a portfolio approach to electric procurement to serve default service customers. The portfolio should be designed to achieve, "the lowest reasonable rates to customers on a long-term basis." The portfolio of resources would be procured through auctions, RFPs, spot market purchases, long-term power purchase agreements, bilateral contracts, and the default provider's own generation. HB54 would require all customers to be served under a fixed rate that changes no more frequently than annually. The full text of HB54 is available on the NEM Website.

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