April 13, 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. Those confirmed to participate include: U.S. Senator Richard Burr, U.S. Congressman Edward Markey, U.S. Congressman Steve Buyer, U.S. Congressman Tim Murphy, FERC Commissioners Marc Spitzer and Jon Wellinghoff, Delaware Senate Majority Leader Harris McDowell, Ohio PUC Commissioner Don Mason, Pennsylvania PUC Energy Advisor Eric Matheson, New York PSC Administrative Law Judge Jeffrey Stockholm, Maryland PSC Assistant Executive Director Calvin Timmerman, MCI Founder Jack Goeken, NYMEX President, James Newsome, and Ansis Teteris, Ministry of Economics, Republic of Latvia.
Please use the hotlink below to view the agenda and to register: http://www.energymarketers.com/agenda/2007/April07Agenda.htm
Please note that the early bird registration discount is in effect through April 13, 2007. The NEM preferred rate at the Marriott Metro Center for hotel accommodations expires on April 13, 2007.
|Task Force Submits Report on Electric Market Competition|
As required by EPAct, the Electric Energy Market Competition Task Force, comprised of representatives from FERC, FTC, DOE, DOJ and USDA, submitted a report to Congress on wholesale and retail electric market competition. The report includes a comprehensive discussion of the evolution of competitive wholesale and retail markets.
The Task Force identified a number of issues for states to consider in relation to retail competition and POLR policies. These include: 1) POLR service price should closely approximate the competitive price; 2) frequent adjustments to POLR prices should be permitted; 3) POLR service that is limited to an obligation to serve customers of a supplier that has left the market is the least intrusive form of POLR service. More expansive forms of POLR service limit development of alternative suppliers; 4) effective retail competition programs require different POLR service designs for different customer classes; 5) consumer awareness and access to comparative pricing information is important; 6) opt-out customer aggregatons are worth considering as a means to reduce marketer transaction costs without limiting customer choice; 7) rules and procedures for customer swithcing should allow customers to switch easily but deter slamming; and 8) auctions may allow retail customers to receive the benefits of competition in wholesale markets as suppliers compete to supply the necessary load.
With regard to the wholesale electric market, the Task Force discussed the bilateral sales approach utilized in the Northwest and Southeast in contrast with the organized market approach in the Northeast, MidAtlantic, Midwest, Texas and California. Shortcomings of the bilateral sales markets include lack of transparency, lack of shared information and difficulty of wholesale customers in obtaining transmission access. By contrast, organized markets provide price transparency, increase efficiency of trading, and provide price signals for generation building. However, concerns exist related to the inability to obtain long-term transmission access at predictable rates and commodity price volatility. Generation investment in wholesale power markets are impacted by the availability of long-term contracts, capital markets, and availability of transmission infrastructure. To elicit adequate supply in wholesale power markets the report recognized several options - allow wholesale price spikes when supplies are short; capacity payments; expand transmission capacity; or traditional regulatory authority over electricity generators/suppliers.
The full text of the Task Force Report is available on the NEM Website.
|NEM and Stakeholders Comments on Capacity Release Program Reform|
NEM submitted comments in FERC's inquiry into possible modifications to its capacity release program. NEM urged that capacity release program rules be updated to simultaneously facilitate the continued growth of both wholesale and retail natural gas markets. NEM urges the Commission to endorse the “assets follow the customer” capacity construct. NEM also argued that the Shipper Must Have Title (SMHT) policy is inconsistent with the current and future development of the retail natural gas markets. The SMHT rule impinges on forward-thinking utilities’ ability to design marketer-friendly capacity release programs and on a broader level limits the marketability of capacity and potentially interferes with the ability to construct “merchant function exit” strategies such as that being developed in Ohio. NEM recommended that removal of the maximum rate cap must be predicated on a Commission finding that the market is sufficiently competitive to prevent the exercise of market power in capacity release markets and the setting of unjust and unreasonable rates. With respect to portfolio management agreements, NEM argued that the core issue as to whether these arrangements are permissible or improper tying is the degree of transparency and openness in the availability of the capacity. Capacity arrangements should be subject to an arms length, competitive bidding process to promote market transparency. In the absence of this, improper tying issues may remain. The full text of NEM's Comments is available on the NEM Website.
AGA suggested that, "when a releasing party combines a release with gas supply obligations or other terms that have a nexus with the releasing party’s own business use of its capacity or natural gas needs, and the replacement shipper is willing, the transaction will not be considered to be an inappropriate 'tying' that is suspect under the Commission’s capacity release policies." AGA proposed exempting two types transactions from the SMHT rule. AGA suggested that transactions to effectuate retail choice programs should not be subject to the SMHT requirement, subject to certain qualifications:
"First, this exception should only apply to: (1) LDCs offering service to entities serving retail customers in state-approved choice programs; and (2) the use of LDC capacity to balance daily and seasonal delivery requirements.
Second, if choice providers receive storage service capacity releases from the LDC as part of the LDC’s support for the choice program, the choice provider should not be entitled to any waiver of the rule with respect to its use of the released capacity – i.e., the lifting of the shipper-must-have-title requirement applies only to the LDC’s use of its own capacity to facilitate its state approved choice program.
Third, the Commission should establish reporting obligations to ensure that it maintains all appropriate oversight ability. LDCs engaging in choice program activities not subject to the title restriction would provide periodic reports on the transactions undertaken subject to this exemption, similar to the reports required of interstate pipelines with respect to use of third party capacity on other pipelines free of the title requirement. LDCs engaging in choice programs subject to the waiver should certify or warrant that their capacity used for their state choice program has been subject to the shipper-must-have-title waiver. LDCs that use their own capacity to facilitate choice programs without being subject to title restrictions would file a report with the Commission each year indicating the name of the choice providers and the quantities of capacity utilized pursuant to this limited waiver of shipper-must-have-title requirements."
AGA also supported lifting the SMHT requirement for storage transactions, accompanied with additional reporting requirements. AGA supported lifting the price cap on short-term capacity releases subject to conditions.
INGAA supported lifting the maximum rate cap for capacity releases, subject to monitoring and reporting requirements. It suggested that the cap on short-term firm and interruptible transportation and storage services provided by pipelines also be lifted. INGAA argued that the SMHT rule should be retained.
NGSA recommended instituting a two-year experimental program in which the price cap for capacity release transactions is reviewed. NGSA agreed that clarification was needed with respect to tying and portfolio management services. NGSA supported retention of the SMHT rule.
The full texts of the above Stakeholders' Comments are available on the NEM Website.
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|Peoples and North Shore Gas Proposed Transportation Program Changes|
Peoples and North Shore Gas filed rate cases that include proposals to change transportation program rules and tariffs. The utilities propose that transportation customers have injections, withdrawal and storage balance limitations based on their pro rata share of all of the storage capabilities available to the utility. The utilities propose to revise the Standby Demand Charge Diversity Factor to .75 (North Shore) and .87 (Peoples). The utilities proposals include:
"1. Eliminate enrollment limitations associated with Rider SVT and to rename the service Rider CFY (Choices For You).
2. Make the Rider CFY enrollment process simpler.
3. Increase Rider CFY’s monthly delivery tolerance and change the way storage is handled to have storage better match the CFY supplier’s customer requirements and rights.
4. Eliminate Rider FST and enable Rider FST customers to (1) take service under a more inclusive Rider CFY, (2) take service under a modified Rider SST, or (3) elect to return to retail sales service.
5. Merge Rider LST into a revamped Rider SST.
6. Modify the Rider SST injection and withdrawal formulae as well as the charges and the methodologies applicable to Rider SST. The Company also proposes to incorporate an annual mechanism to adjust the storage
rights of the programs as the portfolio changes.
7. Include seasonal inventory requirements for Rider SST."
North Shore proposes to "Eliminate Rider TB", and Peoples proposes to "Align Rider TB Customers' daily balancing rights with the fraction of the balancing costs they are paying."
The utilities also propose to:
"9. Eliminate the Customer Change and Activation Charges for Riders P and AGG, respectively.
10. Eliminate charges to suppliers for the use of PEGASys (the Company’s electronic bulletin board).
11. Revise the Diversity Factor.
12. Modify the cash-out index that is currently in Rider TB.
13. Allow imbalance trades in more circumstances with no change to the fee.
14. Introduce an intra-day allocation service.
15. Update various transportation administrative fees to reflect the associated cost of service."
The full texts of Peoples and North Shore Gas filings are available from NEM headquarters. Peoples Testimony and North Shore Gas Testimony on transportation program changes is available on the NEM Website.
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|Board Considering Changes to Energy Competition Rules|
The Board is proposing revisions to its Energy Competition Standards. The rules will be applicable to electric power suppliers, gas suppliers, basic generation service (BGS) providers and basic gas supply service (BGSS) providers, electric public utilities, gas public utilities, aggregators, energy agents, energy public utilities and public utility holding companies.
Proposed rule changes on slamming include: 1) third party supplier (TPS) billing and change order procedures; 2) with regard to electronic enrollments, they must conform to the federal E-Sign Act, marketers must maintain a website informing customers of terms of service, a separate change order must be submitted if the customer switches gas and electric service, and separate negative verification must be provided for switches requested via internet; 3) every TPS must retain all change orders and records of customer switch authorizations for three years; 4) utilities must notify a customer of change orders received from a TPS pertaining to the customer; 5) in the event of a slamming dispute, the TPS must provide the customer switch authorization and customer charges for actual energy used will be considered in dispute; and 6) TPSs are responsible for third parties acting on their behalf.
Proposed rule changes pertaining to affiliate relations include: 1) utilities are prohibited from favoring affiliates to the detriment of competitors through discounts, rebates or other waivers of charges; 2) information sharing restrictions; 3) public utilities must be a separate corporate entity from its affiliates and maintain separate books and records; and 4) limits on competitive products and services that public utilities and their affiliates can offer.
Proposed rule changes on energy licensing and registration include: 1) licensing and registration rules for electric power and gas suppliers and clean power marketers; and 2) surety bond requirements.
Comments are due June 15, 2007. The full text of the Proposed Rulemaking is available at: http://www.bpu.state.nj.us/wwwroot/secretary/enComp.pdf
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|NYSEG Proposed Fixed Supply Service Option|
The Commission directed NYSEG to indicate by this fall whether it would offer a fixed price option in 2008. NYSEG submitted a filing proposing to offer customers a single supply service option. Default service for small customers (those under 500kw) would be FIXED supply service. Default service for larger customers (those equal to or greater than 500kw) would be provided under NYSEG's current hourly pricing tariff. NYSEG also proposed to eliminate the enrollment period under which customers choose between ESCO and utility supply service. The nonbypassable charge is proposed to be fixed for all customers, subject to an annual true-up.
NYSEG commissioned a study which it alleged supports its provision of a default fixed price option. "A survey of 2,612 customers who defaulted to the DSO [Default Service Option] and select customers who defaulted to the VPO [Variable Price Option] were interviewed by telephone starting January 30, 2007 and concluding on February 12, 2007." NYSEG argues that the study results reveal that 81% of residential and 85% of business customers were aware they had a choice of supplier, and 77% of residential and 84% of business customers knew of the most recent choice enrollment conducted by NYSEG. However, of those surveyed, "only 25% of default customers preferred a variable price." Moreover, "61% of residential and 59% of business customers who defaulted (either intentionally or unintentionally) thought they were defaulting to a fixed price or did not know the details of their default service."
The price of the fixed price service is to be derived from a comparison of recent wholesale solicitations, available market price and customer information. For example, under this methodology the supply rate for SC1 customers would be 9.093 center per kWh (in comparison to the current fixed rate of 8.837 cents per kWh). Rates would adjusted by using a Market Price Index. The index would be calculated in November for application in the following calendar year.
NYSEG asserts it will assume numerous risks under the fixed rate proposal - price; quantity; load shape; basis differential; unexpected changes in regulatory requirements, market rules, and laws; supplier default and collateral. Because of these "risks," NYSEG proposed an earnings sharing mechanism, earnings in excess of $20 million pre-tax would be shared 50/50 with customers. The full text of NYSEG's Proposal is available on the NEM Website.
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