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February 24, 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:

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.

DOE Report on Demand Response

As required by the Energy Policy Act, DOE submitted a report to Congress on the benefits of demand response. DOE recommended that the states "consider aggressive implementation of price-based demand response for retail customers as a high priority," reasoning that, "flat, average-cost retail rates that do not reflect the actual costs to supply power lead to inefficient capital investment in new generation, transmission, and distribution infrastructure and higher electric bills for customers." DOE notes however that price-based demand response is not immediately achievable because current metering and billing systems do not support time-based rate structures. In the interim, DOE recommends encouraging incentive-based demand response programs.

DOE identified four benefits of demand response: 1) financial benefits - individual customer bill savings and incentive payments; 2) market-wide financial benefits - lower wholesale market prices resulting from demand response; 3) reliability benefits - operational security and adequacy savings; and 4) market performance benefits - mitigation of suppliers' ability to exercise market power.

DOE issued recommendations to encourage nationwide demand response as follows: 1) foster price-based demand response through time-based rates; 2) improve incentive-based demand response programs to increase participation; 3) strengthen demand response analysis and valuation; 4) integrate demand response into resource planning; 5) adopt enabling technologies; and 6) enhance federal demand response actions. The full text of DOE's Demand Response Report is available on the NEM Website.

Order on NYISO's Implementation of Netting Bilaterals Project

In a July 2005 Report to the Commission, NYISO discussed the lack of progress toward implementation of the Netting Bilaterals Project. NYISO stated that the project was on the "non-priority list where some work may be undertaken in 2005 if possible using baseline resources." NYISO stated it did not think the Project would be started prior to 2006.

In response to numerous protests, including that of NEM, the Commission ordered NYISO to file, within 60 days of the order, a timetable for implementation of the Netting Bilaterals Project that includes specific dates of completion for the Concept of Operations and realistic dates for implementation. NYISO must also file quarterly status reports on its progress. FERC was concerned with NYISO's inaction despite a previous Commission Order directing the Project be implemented as soon as possible. The Commission noted its previous support of netting of bilaterals as a way to reduce market participants' risk and to improve market liquidity. The Commission also noted implementation of netting of bilaterals in PJM and ISONE. The full text of the Order is available on the NEM Website.

Click here to view all past updates.
Commission Opens Investigation into Type II Standard Offer Service

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.

New York
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National Grid, ConEd and NFG Activities on ESCO Referral Programs

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 Rebuttal Testimony

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.

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