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February 2, 2007
NEM Annual Membership Meeting and National Restructuring Conference

Please mark your calendars for April 24-25, 2007, for NEM's Annual Membership Meeting and National Restructuring Conference. The meeting will be held in Washington, DC at the Marriott Metro Center. More details will be forthcoming. Please forward your ideas for featured speaker invitations and topics to headquarters ASAP.

Study Finds Significant Savings from Demand Response in Mid-Atlantic Region

The five Mid-Atlantic public utility commissions and PJM worked together on a study prepared by the Brattle Group on the effects of demand response. The study examined the impact of curtailing three percent of load in the BGE, Delmarva, PECO, Pepco and PSEG zones during the top twenty five-hour price blocks in 2005 under various alternative market conditions. The study concluded that this three percent curtailment of each zone's super-peak load, reduced PJM's load by 0.9% and yielded an energy market reduction of $8-$25 per megawatt hour (5-8% on average), during the 133-152 hours in which curtailment occurs in at least one zone. If all loads are exposed to spot prices, the study finds that the estimated price reductions could benefit non-curtailed loads in MADRI (Mid-Atlantic Distributed Resources Initiative) states by $57-182 million per year, and the potential benefits to the entire PJM system were $65-$203 million per year.

The study also examined benefits to demand response program participants. These include an energy benefit from curtailing load of lesser value than the price of energy on the spot market, estimated at $85 to $234 per megawatt hour or $9-26 million per year. Benefits also include reduction in capacity needed to meet reserve adequacy requirements for a load shape modified by reducing peaks, estimated at $73 million per year for curtailment of three percent of load in the five study zones. The full text of the Demand Response Study is available at:

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Schisler Resigns from Commission

Chairman Schisler tendered his resignation to Governor O'Malley effective this Friday. In a statement announcing his decision Schisler said, "During my tenure at the Commission I have endeavored to implement the policies enacted by the General Assembly in a fair, impartial and effective manner. My resignation will facilitate the ability of the Public Service Commission to move forward in the important work it must accomplish."

The Baltimore Sun reports that Governor O'Malley will act quickly to name a replacement for the seat, perhaps as early as the end of the week. The Sun noted that potential nominees could include Susanne Brogan, a former Commission member, and Michael J. Travieso, a former People's Counsel.

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Commission Submits "21st Century Energy Plan" to Governor

Governor Granholm had charged the Commission with developing a long-term, comprehensive plan for meeting Michigan's future energy needs. The Commission submitted its "21st Centuty Energy Plan" this week. Based on a projected average load growth of 1.2 percent per year over the next 20 years, and the aging of the existing generation fleet, it was estimated that a new baseload plant would be needed by no later than 2015. The plan recommends that utilities file plans detailing how renewable resources, energy efficiency measures, power available from external markets, and existing traditional generation can meet forecasted demand. To the extent the utility demonstrates a need for a new baseload plant in the plan, the Commission could approve the decision to build the plant by issuing a certificate of need. If the certificate is granted, the utility would seek competitive bids for the construction costs. All customers, including those who participate in energy choice, will be required to bear the expense of such generation.

The plan recommends that all retail electric energy suppliers be required to obtain at least 10 percent of their energy supplies from renewable resources by 2015. Furthermore, consumers participating in energy choice would be required to commit to a twenty-four-month minimum stay with a supplier as well as provide twenty four months notice of their intent to return to utility service. The full text of the 21st Century Energy Plan is available on the NEM Website.

New York
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Staff and CPB Submit Testimony in Keyspan-National Grid Case

Staff submitted initial testimony in the Keyspan-National Grid case. Staff reviewed Keyspan's cost of service and proposed unbundled rates. The utility proposed an unbundled supply rate of $0.22/dth, consisting of $0.169/dth for uncollectibles and working expenses and $0.049/dth (as a delivery rate backout credit) for gas procurement, collection, and promotional advertising expenses for Keyspan Long Island. The utility proposed an unbundled supply rate of $0.53/dth, consisting of $0.415/dth for uncollectibles and working capital expense and $0.113/dth (as a delivery rate backout credit) for gas procurement, collection, and promotional advertising expenses for Keyspan New York. The utility's proposed billing and payment processing credit is $0.65 per bill for Keypsan LI and $0.76 for Keyspan NY.

Staff proposed modifications to Keyspan's unbundling proposals. These include creation of a merchant function charge (MFC) to be included in the Gas Adjustment Charge (GAC), creation of multiple MFCs to reflect differing cost characteristics of different customer classes, and commodity costs proposed to be in the delivery rate backout credit should be included in the GAC. Staff recommended no changes to the billing credit. Staff did oppose Keyspan's proposal to delay unbundling its bills until after the merger is reviewed. Staff argues that now is the time for Keyspan to submit proposed unbundled bill formats and customer education plans so these features can be implemented as part of the initial installation of a new computing system and not as a incremental project later on.

Staff noted that Keyspan retains 20% of the revenue recovered from capacity releases and off-system sales transactions. Staff recommends that going forward the revenue sharing mechanisms for capacity releases, off-system or packaged sales and any streaming transaction be limited to the 85%/15% level established in prior Commission orders and that transactions currently excluded from revenue sharing continue to be excluded.

Staff also recommends that a stakeholder collaborative be convened to examine and identify necessary changes to Keyspan's transportation and balancing rules and procedures. The full text of Staff's Testimony is available at this hotlink.

The CPB also submitted testimony largely opposing implementation of Keyspan's proposals to implement Retail Policy Statement best practices. The CPB recommends that, "proposals that ratepayers fund customer Outreach and Education programs regarding retail competition and Market Expos, be rejected. Similarly, KEDNYís [Keyspan NY] proposal to implement an ESCO Referral program should be rejected, as should its proposal that ratepayers fund information technology costs associated with its POR program. The projected costs of that program should be removed from KEDNYís revenue requirement. We have no objection to KEDNYís proposed POR program if the Company is able to recover all incremental costs, including information technology costs, from ESCOs, without subsidization or guarantee of recovery by ratepayers. We support KEDLIís [Keyspan LI] proposal that it not implement a purchase of receivables program at this time." The full text of CPB's Testimony is available from NEM headquarters.

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OCC Recommendations on Columbia Gas Choice Program

OCC submitted testimony in Columbia's 2004 and 2005 GCR cases recommending changes that would effect the gas choice program. CPB recommends that Columbia be ordered to, "procure the natural gas used to supply its GCR customers through a wholesale auction process similar to the one used for supplying DEO's GCR customers." Although, OCC recommends utilizing a weighted average RFP wholesale auction process rather than the descending clock auction used by DEO. OCC maintains that, "a wholesale auction procurement process would be more transparent than the current GCR process and would establish a more competitive benchmark for residential customers interested in participating in the Choice program, and for Marketers interested in serving those customers."

OCC recommends that the Commission terminate the 2003 Columbia settlement. OCC also recommends a change to Columbia's customer capacity cost allocation methodology that would be based on each customer's actual usage. OCC alleges that, under the current methodology, GCR customers unfairly pay for excess capacity costs. The full text of OCC's Testimony is available on the NEM Website.

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