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April 20, 2012
NEM's 15th Annual National Restructuring Conference

Since this is the beginning of NEM’s 15th Year, we have made special plans to celebrate this milestone at our 15th Annual National Restructuring Conference in Washington, DC on April 24 and 25, 2012. The Conference will be held at the Embassy Suites DC Convention Center, 900 10th Street, NW, Washington, DC. The Agenda is available at this hotlink.

Public Service Commission Chairs, Commissioners and other elected and appointed officials from around the country have confirmed their participation. Your sponsorship and support would be very helpful to make this NEM Event the best ever.

Sponsorship opportunities for this event can be viewed online at this hotlink.

Early registration for the April event is available online at this hotlink.

CFTC Final Rules Defining Swap Dealer, MSP and ECP and Final and Interim Final Rules on Commodity Options

CFTC adopted definitions of the terms “swap dealer,” “major swap participant,” and “eligible contract participant” under Dodd Frank. The final rule definition of “swap dealer” follows that set forth in Dodd Frank:

"i. holds itself out as a dealer in swaps,
ii. makes a market in swaps,
iii. regularly enters into swaps with counterparties as an ordinary course of business for its own account, or
iv. engages in activity causing itself to be commonly known in the trade as a dealer or market maker in swaps."

An interim final rule will provide an exception to the definition of swap dealing for swaps in certain situations for the purpose of hedging a physical position. The final rules establish a de minimis exception to the “swap dealer” definition when the aggregate gross notional amount of the swaps that the person enters into over the prior 12 months in connection with dealing activities does not exceed $3 billion.

A “major swap participant” is defined as:
"1. A person that maintains a “substantial position” in any of the major swap categories, excluding positions held for hedging or mitigating commercial risk and positions maintained by certain employee benefit plans for hedging or mitigating risks in the operation of the plan.
2. A person whose outstanding swaps create “substantial counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets.”
3. Any “financial entity” that is “highly leveraged relative to the amount of capital such entity holds and that is not subject to capital requirements established by an appropriate Federal banking agency” and that maintains a “substantial position” in any of the major swap categories."

CFTC adopted a final rule to permit commodity options to transact subject to all rules and regulations applicable to any other swap. It additionally issued an interim final rulemaking that proposes to provide a trade option exemption from the general swaps rules, for certain physical delivery commodity options. However, there would be conditions for the exemption including position limits, large trader reporting, appropriate recordkeeping and reporting requirements, antifraud and anti-manipulation rules, and the retention of certain swap requirements for swap dealers and major swap participants that engage in trade options. Comments on the interim final rule are due within sixty days after publication in the Federal Register.

CFTC Fact Sheets on the Rulemakings are available on the NEM Website. The Final Rule and Interim Rule on Commodity Options is also available on the NEM Website.

FERC Staff 2011 State of the Markets Report

At yesterday's Commission meeting, Staff presented its 2011 State of the Markets Report. Highlights of the Report include:

1. Natural gas production reached an all-time record in 2011;
2. Record high natural gas storage inventories were seen heading into winter 2011/12;
3. Natural gas prices fell to a ten year low to under $3/MMBtu;
4. U.S. natural gas consumption in 2011 was up less than 1% over 2010 with most of the growth accounted for by natural gas-fired power generation;
5. Power prices in 2011 were down throughout the U.S., with the exception of the ERCOT area and Cinergy trading hub. On average, nationwide power prices were down 0.5% from last year; and
6. Demand response participation in the RTOs has been increasing and grew by 40% last year in the Northeast to 20 GW of cleared capacity.

The full text of the State of the Markets Report is available on the NEM Website.

NOPR on Standards for Measurement and Verification of Demand Response and Energy Efficiency

FERC is proposing to incorporate by reference in its regulations the business practice standards adopted by NAESB pertaining to the measurement and verification (M&V) of demand response and energy efficiency resources participating in organized wholesale electricity markets.

The proposed Phase II Demand Response M&V Standards add more specificity to existing definitions and business practice standards in the following areas: meter data reporting deadline, advanced notification, telemetry interval, meter accuracy for after-the-fact metering, meter data reporting interval, and adjustment window. FERC requests comment on whether the DR M&V standards are set forth with sufficient specificity and also whether greater consistency between regions should be encouraged.

The proposed EE standards are designed to create a standard method for quantifying the energy reductions from energy efficiency measures. The EE M&V Standards "include six new definitions and 63 business practice standards. Included are definitions for energy efficiency baseline and demand reduction value. The standards contain criteria for the use of energy efficiency products in organized wholesale electricity markets, general measurement and verification plan requirements, and detailed criteria of acceptable measurement and verification methodologies."

Comments on the NOPR are due sixty days after publication in the Federal Register.

New Jersey
Click here to view all past updates.
BGS Hearing

The Board will convene a "legislative-type" hearing on May 4, 2012, from 10AM to 1PM for the purpose of taking comments on the BGS procurement process, policy issues directly related thereto, and issues that are of particular interest to the Board that warrant individual consideration outside of the yearly BGS review process. The Hearing will be held at the Board’s Office at 44 S. Clinton Avenue, 1st Floor, Board Room, Trenton, New Jersey. Those wishing to participate must contact Staff by May 1, 2012, at Final comments in the BGS review proceeding are due on May 18, 2012. The full text of the Notice of Hearing is available on the NEM Website.

Click here to view all past updates.
Forum on Alternative Fuel Vehicles

The Commission will convene a forum to examine the increased use of alternative fuel vehicles, specifically electric and natural gas on May 31, 2012. The forum will explore how the Commission can foster policies and regulatory frameworks that support investments in natural gas and electric vehicles and their required infrastructure. The forum will take place at the Anthony J. Drexel Picture Gallery at Drexel University, Philadelphia. An agenda is forthcoming.

In preparation for the forum, the Commission has issued a series of questions for comment as follows:

"Questions Designed to Guide the Discussion on Natural Gas Vehicles

1. Beyond the incremental vehicle costs, what is the primary obstacle to the success of the natural gas vehicle (NGV) market in Pennsylvania ?

2. What impact would further development of NGVs have on demand for natural gas and the long-term price of natural gas?

3. How will increased demand resulting from NGVs affect utility infrastructure?

4. To what extent will utility investment in infrastructure be necessary to address demand for NGVs?

5. What lessons have been learned from prior NGV endeavors?

6. What kinds of cost recovery/tariffs are appropriate to support the NGV market? Are current tariffs adequate?

7. Will there be sufficient competition to ensure fair pricing and adequate service by non-regulated NGV fueling stations?

8. How do we create a level playing field for utilities, retail natural gas suppliers, and fueling stations?

9. Who should undertake the consumer education or retail sales of NGV fuel – utilities, non-regulated utility affiliates or others?

10. How could regulatory lag keep utilities from adjusting to swings in market prices and make them less competitive?"

"Questions Designed to Guide the Discussion on Electric Vehicles

1. Beyond the incremental vehicle cost, what are the primary obstacles to electric vehicle (EV) adoption in Pennsylvania?

2. What impact would further development of EVs have on electricity demand and the long-term price to consumers?

3. How will the widespread use of EVs affect the both the wholesale and retail price of electricity?

4. What role, if any, should the Commission or electric distribution companies play in the education of consumers or permitting, installing, maintaining and inspecting of electric vehicle supply equipment (EVSE)?

5. How does the long term outlook for electric generation match-up with the introduction and growth of the EV market?

6. What lessons have been learned from prior EV endeavors?

7. What kinds of cost recovery/tariffs are appropriate to support the EV market? Are current tariffs adequate?

8. To what extent will utility investment in infrastructure be necessary to address demand for EVs?

9. How will EV charging affect the load shape of the electric system?

10. What type of net-metering and/or ancillary service opportunities do EVs present for consumers?

11. What kind of regulatory treatment is appropriate for utility infrastructure investments that are directly related to EVs?

12. What role, if any, should the Commission take to incent the build out of public EVSEs?"

Comments are due May 18, 2012. The full text of the Secretarial Letter is available on the NEM Website.

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