In a previous Order, the Commission decided that, "existing Type II standard offer service (SOS) for medium-sized commercial customers would cease at the end of May 2007." Staff convened a working group to discuss the future of Type II SOS but no consensus was reached. Parties to the working group, including NEM, recommended a litigated proceeding be instituted. Accordingly, the Commission has opened an investigation, "for the purpose of determining what form of SOS or default service will be made available to Type II customers after May 2007."

The Commission will hold a prehearing conference March 8, 2006, to consider intervention requests and set a procedural schedule. Petitions to intervene are due March 3, 2006. The Commission proposes the following schedule:

Testimony/Comments - March 15, 2006
Reply Testimony/Comments - April 19, 2006
Hearing - Early May 2006
Briefs - May 22, 2006
Reply Briefs - June 5, 2006
Order - early summer followed by a rulemaking, if necessary

Direct Testimony should address: 1) the form of SOS or default service, if any, which should be provided to Type II customers after May 31, 2007; 2) the customers to whom the service or services should be provided; 3) who should provide the service; 4) the means of power procurement; and 5) how proposals will advance movement towards a more competitive electricity supply market for the affected customers. The full text of the Order is available on the NEM Website.

National Grid has filed a proposal to implement an ESCO Referral Program. The proposal is based on the "ESCO Contract Option" endorsed by the Commission's guidelines. By the terms of the proposal, electric and natural gas residential and small non-demand commercial customers could participate in the program for a two-month introductory period and receive a seven percent discount off of the utility's commodity price. Customers can request a specific ESCO or request they be assigned to an ESCO. "Following the introductory period, service would continue on a month-to-month basis consistent with the terms of the ESCO contract provided to the customer by the ESCO within five days notice of the customer's enrollment." Participating ESCOs must accept assignments of both residential and commercial customers. Customer enrollment will be conducted through a postage paid enrollment card included with customer bills, website and National Grid's customer contact center. The full text of National Grid's ESCO Referral Program Proposal is available on the NEM Website.

ConEd also filed an ESCO Referral Program proposal. ConEd's proposal is also based on the "ESCO Contract" model. By the terms of the proposal, participating customers will receive a seven percent introductory discount. Customers can select an ESCO or be assigned to an ESCO. The ESCO must send a sales agreement to the customer within five of notice of the customer's enrollment. Participation is to be on a month-to-month basis subject to cancellation by either the customer or ESCO, but the ESCO cannot cancel during the introductory period. The full text of ConEd's ESCO Referral Program Proposal is available on the NEM Website.

NFG will host a teleconference on March 9, 2006, at 9:30AM to discuss the terms of its ESCO Referral Program. Additional details will follow.

NYSEG submitted rebuttal testimony in its electric rate case. NYSEG argued that "Staff's filing in this case reverses its previous positions taken with regardto the 2002 Rate Plan and seeks to impose punitive and retroactive adjustments that would have a significant adverse impact on the Company's operations and cash flows, to the detriment of NYSEG's customers." NYSEG disputed Staff's contention that its shareholders were unjustly enriched under the commodity options program noting that it had "aggressively controlled its O&M costs, achieved merger synergy savings, undertook prudent strategies to hedge its power supply costs, and was fortunate that purchase power contracts performed as expected." NYSEG also disputed Staff's contention that NYSEG's Fixed Price Option would violate the Commission Retail Policy Statement because, NYSEG argued, it is not a binding order. NYSEG opposed Staff's proposal that if offer only a variable pricing option and develop a hedging policy for residential customers to mitigate the volatility of variable prices. Without commenting on the Commission's authority to order an ESCO Referral Program or offering any proposed details, NYSEG argued that the Staff's proposal to implement an ESCO Referral Program thirty days after an order in the proceeding is unreasonable. Please contact NEM headquarters for the full text of NYSEG's Rebuttal Testimony.

Settlement negotiations in the case are scheduled to commence on February 27, 2006.