Document Search
Site Search
Advanced Search
Updates & Alerts
News & Media
Upcoming Meetings
Deregulation Library
Member Services
Accent Energy
Advantage Energy
AGL Resources
Agway Energy
Alliance Data Systems
APS Energy Service Corporation
BlueStar Energy
Commerce Energy
ConEdison Solutions
CrossFire Group
Customer Link
Electric America
Elster Electricity
Energy America
Energy Source (Regional Member)
Excelon Corporation
First Energy (Regional Member)
Goodwatts Energy
IDT Energy
Infinite Energy
Intelligent Energy
InterContinental Exchange, Inc.
Interstate Gas Supply
IMServ (Invensys)
InBusiness TeleServices (Regional Memembers)
KeySpan Energy
Liberty Power
Matrix Imaging
Media Fusion
New York Energy
New York Mercantile Exchange
Ohms Energy Corporation
Peoples Energy
Pinnacle West
Power Direct Telemarketing
Prebon Energy
ProLiance Energy
Select Energy
Sempra Energy Soulutions
SPi Group
South Star Energy
Total Gas and Electric, Inc.
USCL Corporation
Vectren Source
Washington Gas Energy Services Inc.
WPS Energy
March 2, 2007
NEM Tenth Annual Global Energy Forum and Membership Meeting

Please mark your calendars for April 24-25, 2007, for NEM's Tenth Annual Global Energy Forum and Membership Meeting. The meeting will be held in Washington, DC at the Marriott Metro Center. The White House, Presidential candidates, senior congressional leaders and CEOs of other deregulated industries have tentatively confirmed attendance. An agenda will be forthcoming. Day one all the headliners appear and the VIP reception will take place. On day two, PUC Chairs and Commissioners and NEM members will have a roundtable on all the issues affecting NEM members. FERC and PUC Chairs have confirmed.

FERC Conference on Competition in Wholesale Power Markets

FERC convened the first of a series of conferences on competition in wholesale electric markets on February 27, 2007. The conference consisted of three panel discussions. Participants included economists, consumers (large and small), utilities, cooperatives, ISONE, generators, a wind energy producer, and state Commissioners.

Chairman Kelliher began the conference by noting that wholesale electric market competition is national policy, as recently affirmed by the federal Energy Policy Act of 2005, and that his perspective is informed by this underlying fact. Commissioner Spitzer noted in his initial remarks that he is not wedded to the status quo. Spitzer recommended that federal policy should accommodate environmental concerns. He also noted disapprovingly the practice of some stakeholders to support competition, except in their own service territories. Commissioner Wellinghoff’s initial remarks stated his focus on efficiency in delivery of electric services and ensuring that consumers get the best benefit from the electric system.

Consumers played a critical role in the conference, with some supporting current market constructs and others questioning whether the market is providing them benefits. Wal-Mart convincingly argued in support of competitive wholesale and retail markets as the most effective way for them to manage their energy costs. Wal-Mart recounted mitigation of $10 million in electric costs and $10 million in gas costs last year (not including Texas and New York) through competition. In contrast, ELCON, an early competitive market advocate, recommended that the Commission acknowledge that the Day 2 RTO construct is not working for end use customers, that FERC examine if the problem can be fixed, and if not, examine an appropriate level of regulation. Commission Moeller queried, if we currently had $3 gas, whether ELCON would be raising the issue. Another consumer group, Public Citizen, disputed the benefits of competitive markets on a more fundamental level, questioning whether market based rates have produced a just and reasonable result.

Two of many themes developed in the conference are the need to facilitate the participation of demand response and renewables in the market. Many participants called for the removal of barriers to participation of demand response in the market. One panelist noted that currently, demand response is called on to mitigate emergencies and is not engaged fully to effect price. With respect to renewables, it was argued that opportunities for these resources are greater in organized markets. Since the resource base for renewables is principally located in rural America, adequacy of transmission to these resources was also deemed critical.

Panel 1 - Review of the Origins of Restructuring and Assessment of Market Performance

During this panel, Professor Joskow of MIT discussed the historical precedent for restructuring including utilities high operation costs, inefficient utilization of generation and transmission capacity, poor coordination and slow adoption of new technology. Joskow noted that the pressure to adopt deregulation stemmed from consumers. Another panelist noted that the wholesale electric markets have provided the vast majority of new generation and have done so at their own risk, not at the risk of captive utility ratepayers. Existing generation has attained greater productivity and efficiency. However, certain factors underpinning restructuring were not anticipated. For instance, the fallacy of the assumption that there was a virtually inexhaustible supply of natural gas at $3 or less. There has also been an unanticipated underinvestment in transmission.

The Commission raised interesting questions in the context of this panel. Chairman Kelliher asked what is the proper measure of success of wholesale markets. He suggested this could include: 1) who bears the risk (ratepayers vs. competitive entities); 2) deployment of new technologies; 3) efficiency; 4) open access to the transmission system and to markets; 5) adequacy of supplies; and 6) reliability of service. Kelliher argued that mere movement of prices was not an adequate measure. (ELCON suggested that consumer satisfaction should also be a measure.)

Commissioner Kelly was interested in how competition can foster the development of technology and renewables to an even greater extent. Commissioner Wellinghoff questioned the lack of supply and demand resource symmetry in New England, and more broadly, wanted to explore the benefits of bringing increased demand response in the market. Commissioner Spitzer noted that restructuring arose in the high-cost states and asked what benefits are in it for the low-cost states to persuade them to support restructuring. He was also interested in what can be done in RTO and non-RTO regions to facilitate long-term contracting.

Panel II - Review of Organized Markets

Exelon and other panelists argued compellingly as to the successful operation of organized markets such as PJM. Exelon also noted that organized markets are essential to retail choice programs. Exelon testimony included a “Competition: Myths and Facts” sheet refuting misconceptions and erroneous accusations about the competitive wholesale market. Professor Hogan of Harvard outlined areas for future FERC action including: 1) remedying the scarcity pricing problem; 2) setting a boundary between when markets and FERC act on transmission investments; 3) resolving the uncertainty created by the Ninth Circuit’s decision on the enforceability of contracts; and 4) resolving the freeloader problem created by those on the edge of organized markets that benefit from its reliability without actually joining.

The panel prompted a series of questions from the FERC Commissioners. Chairman Kelliher asked which of the Day 1 RTO, Day 2 RTO or bilateral markets was best. He also was interested in the lack of generation building in New England despite the increased demand and low reserve margins. Commissioner Kelly asked about the challenges businesses face in implementing demand response and whether it is possible to implement demand response in states without retail choice. Commissioner Spitzer inquired if there would be a material difference in result in Illinois if it had been under the cost of service model versus the auction model it chose to employ.

Panel III - Review of Bilateral Markets

NARUC President Kerr stated that NARUC as an organization is supportive of open access wholesale market structures. Kerr highlighted three issues of import to NARUC: 1) the importance of regional planning and coordination, 2) the role of renewable resources, and 3) effective market monitoring and enforcement. Many panelists argued that the bilateral markets are working well. For instance, Southern Company said the “traditional model” delivers significant benefits such as stable pricing, adequate supplies, the opportunity for integrated system planning and resulting economies of scope, a shorter term wholesale market to provide optimization opportunities, and clear avenues of accountability.

The Commissioners also had many questions for these panelists. Commissioner Moeller stated that the advantage of organized markets is the ability to see congestion costs and therefore address their root causes. Moeller asked how it would be possible to achieve that in bilateral markets. Moeller also asked if organized markets facilitated participation of renewable resources. Commissioner Kelly asked why the APPA’s Electric Market Reform Initiative was undertaken and what is the status of transmission activities in the West. Commissioner Wellinghoff asked about the advisability of creating a market for trading RECs. Chairman Kelliher was interested in why the Southeast market structure seemed to excel in promoting transmission investment. Kelliher also asked if it would be useful to identify best practices in competitive procurement.

Chairman Kelliher advised that it had not yet decided the course of follow-up activities.

Click here to view all past updates.
Electric Choice Legislation Introduced

After last week's informational hearing, Senator Fonfara of the Energy and Technology Committee introduced legislation entitled "An Act Concerning Electric Rate Relief." The bill provides for:
1) expedited deployment of advanced metering infrastructure by the utilities, and for choice customers, meter installation must occur within sixty days after switching.
2) competitive suppliers must offer offer time-of-use pricing options to all customer classes.
3) introductory competitive supplier offers to residential and small commercial customers must be listed on utility bills. Introductory offers may be offered with fixed prices or based on service characteristics. All suppliers must offer a service based on time of consumption. A customer's choice of offer can be exercised via return portion of utility bill, phone, and website.
4) When customers initiate service, reinitiate service, or make an inbound utility call, they shall be given the option to participate in a marketer referral program.
5) Residential and small commercial customers must be able to voluntarily aggregrate into buying pools.
6) Utilities shall earn performance-based financial incentives for implementation of select retail choice initiatives.
7) Utilities shall implement purchase of receivables programs.
8) Utilities shall make customer information available to competitive suppliers (account name, billing address, service address, utility account number, utility rate class, monthly historic consumption for the prior twelve month period, other information deemed necessary by the Department).
9) Customers must be able to change to competitive suppliers without the imposition of switching charges.
10) The Department shall issue an RFP for investments in enhanced demand side management initiatives.
11) Utilities must file standard service portfolio plans demonstrating cost-effectiveness, ability to provide stable rates, and advisability of entering into seasonally differentiated procurements and customer differentiated procurements. Two months before the delivery date any standard service contract, the output of the contracts shall be offered to competitive suppliers based on share of load in each service territory.
12) Interconnection regulations must be adopted by the Department that meet or exceed national standards.
13) The Department shall conduct a study of the need for baseload generation in the State.

A hearing on the legislation will be held March 6, 2007, at 9:30AM of the Legislative Office Building. The full text of the bill is available on the NEM Website.

Click here to view all past updates.
Legislature Considering Do Not Mail Registry

The Maryland legislature is considering SB 548, a bill to establish a do not mail registry. The bill would require the Division of Consumer Protection of the Office of Attorney General to establish and operate, "a restricted mailing registry that contains a list of the mailing addresses of consumers who reside in the State and who choose to not receive solicitations." Those sending solicitations to Maryland consumers would have to purchase the registry and quarterly updates. Those sending solicitations to consumers on the registry would be subject to a fine, "not exceeding $5,000 for each violation." The full text of SB 548 is available on the NEM Website.

Click here to view all past updates.
NEM Comments on Proposed Default Service Policy and Consumer Protection Measures

NEM submitted comments commending the Commission for its proposed comprehensive strategy set forth in its Proposed Policy Statement, Advanced Notice of Formal Rulemaking on default service regulations and Order on electricity price mitigation. Taken in combination, these measures will advance the development of the competitive retail electric market and provide needed regulatory certainty to the stakeholders.

The Commission proposed a portfolio approach to default service procurement that would be adjusted quarterly for small customers, drawing from experience in the natural gas market. NEM expressed concern that given the underlying portfolio that would determine the size of those adjustments (based largely on long term contracts), whether the price derived under the laddered, portfolio approach will bear enough resemblance to actual market conditions. NEM reiterated its recommendation that small customers receive monthly-adjusted market-based pricing and large customers receive hourly-adjusted market-based pricing. NEM also questioned whether the proposed interim rate reconciliations would further skew rates away from current market conditions. NEM supported the Commission's determination that fixed price offers be provided by the competitive marketplace.

NEM supported the Commission's proposals to implement statewide and utility-specific consumer education programs on the functioning of electric markets and the availablity of choice. NEM also supported the Commission's proposals to implement utility purchase of receivable programs, marketer referral programs, utility and Commission choice ombudsmen, and uniform supplier tariffs. The full texts of NEM's Comments on the Commission's Proposed Policy Statement, Default Service Regulations and Consumer Education Campaign are available on the NEM Website.

* Member Login :

User ID: 



*****   Click Here to stop receiving NEM Regulatory Updates    *****

3333 K Street, N.W., Suite 110
Washington, D.C. 20007
Tel: (202) 333-3288     Fax: (202) 333-3266

© Copyright 2004 National Energy Marketers Association