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May 16, 2008
CFTC Authority Addressed in Congressional Farm Bill

The final Farm Bill conference report being considered in Congress this week includes provisions on CFTC authority and measures to close the "Enron loophole," by which electronic energy markets for large traders have been exempt from oversight. CFTC would be required to adopt rules pertaining to exempt commercial markets and oversight of those contracts that are classified as a "significant price discovery contract" (SPDC). Large traders of SPDCs on an electronic trading facility would be subject to reporting and recordkeeping requirements. Criminal and civil penalties for violations of the Commodities Exchange Act, such as manipulation, attempted manipulation and false reporting, would be increased such that the civil penalties would be made commensurate with those set for FERC in EPAct 2005. President Bush has threatened to veto the farm bill.

DOE Issues Report on 20% Wind Energy by 2030

DOE issued a report on the costs, challenges and benefits of generating 20% of the country's electricity from wind by 2030. The report details a scenario to increase wind generation from its current production of 16.8 gigawatts to 304 gigawatts by 2030. To achieve the 20% wind energy objective will require enhanced transmission infrastructure, streamlined siting and permitting regimes, improved reliability and operability of wind systems and increased U.S. wind manufacturing capacity. The DOE Report identifies a number of associated benefits with the 20% wind energy goal including reduction of electric sector CO2 emissions by 825 million metric tons, supporting U.S. energy security by diversifying our supply portfolio, stabilizing electricity rates by reducing demand for fossil fuels, supporting local economies in wind development areas, and reducing cumulative water use in the electric sector by 4%. The Report estimates the incremental cost of integrating wind power into the grid at less than 0.5 cents per kWh. The full text of the 20% Wind Energy by 2030 Report is available on the NEM Website.

FERC Enforcement Program

At its agenda meeting today, FERC released a package of enforcement policy reforms including a revised policy statement, an expansion of the no-action letter process, a NOPR on ex parte contacts and separation of functions, and a rule describing entities rights when FERC Enforcement Staff seeks a show cause order. Of particular note, the revised Enforcement Policy Statement provides guidance on factors considered in opening investigations as well as determining appropriate penalties. FERC expanded the issues the subject of which entities can request no-action letters from Staff as to whether a particular transaction, practice or situation would lead to enforcement action. FERC also announced its intent to establish an Internet-based compliance "help desk" to request Staff guidance. The full text of the Enforcement Policy Package will be posted on the NEM Website when made available electronically.

Maryland PSC Complaint Against PJM

Earlier this year, the Maryland Public Service Commission filed a complaint against PJM with FERC questioning, "whether blanket exemptions from energy offer caps are just and reasonable and whether PJM violated its tariff by failing to post the results of the MMU's quarterly evaluation of the need for offer cap exemptions, thus denying stakeholders and the Commission information on which to base a Section 206 complaint and depriving the Commission of an opportunity to consider the merits of the MMU's concerns. As a consequence, customers have paid and continue to pay unjust and unreasonable energy prices that reflect the exercise of market power. The MD PSC seeks both the elimination of these anticompetitive and unlawful exemptions going forward and refunds from at least September 2006, the date of PJM's tariff violations." PJM uses a three pivotal supplier test to determine market competitiveness, imposing offer caps on those generation resources that fail to meet the test. However, there are two exemptions from the offer capping process for generation resources' offers to relieve reactive limits on four transmission interfaces and for generation resources for which construction was commenced within certain time periods.

Upon review, FERC concluded that PJM's existing mitigation exemptions have become unjust and unreasonable and that applying the same mitigation measures to all generators results in just and reasonable rates. FERC found that there was no basis under the Federal Power Act to grant the Maryland PSC's request for retroactive relief. Pursuant to Section 206 of the Federal Power Act, FERC decided to establish a proceeding to examine PJM's existing market power screen and whether it has become unjust and unreasonable. However, given PJM stakeholders current study of the three pivotal supplier test as applied in PJM's capacity and energy markets, a hearing on that matter will not be held until September 2, 2008.

New York
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State Energy Planning Board Meeting

The newly formed State Energy Planning Board met for the first time last week. Governor Paterson created the Board by Executive Order. The Board is charged with developing a State Energy Plan that is due in final form by June 30, 2009, and that will be open for comment. The State Energy Plan is supposed to address long range energy policy objectives and strategies for achieving them. Ten-year demand forecasts and supply requirements for electricity, natural gas, coal and petroleum products are to be developed. The Plan is also to make a comparison of electric and natural gas utility rates charged to different customer classes versus rates charged by states competing with New York State for business. Energy price projections are also to be included in the plan. The full text of the Executive Order Creating the State Energy Planning Board is available on the NEM Website.

ConEd Files Electric Rate Case

ConEd filed an electric delivery rate case proposing to establish a three-year rate plan commencing on April 1, 2009. ConEd proposes to increase the merchant function charge, comprised of a competitive supply-related charge and competitive credit and collection-related charge, paid by full service customers as follows (cents/kWhr):

SC1 Customers
Supply-Related Charge 0.1738 (from 0.1463)
Credit & Collection Related Charge 0.3026 (from 0.2571)

SC2 Customers
Supply-Related Charge 0.1766 (from 0.1487)
Credit & Collection Related Charge 0.3011 (from 0.2558)

SC4, SC5, SC6, SC8, SC9, SC12, SC13 Customers
Supply-Related Charge 0.0726 (from 0.0607)
Credit & Collection Related Charge 0.0599 (from 0.0514)

SC7 Customers
Supply-Related Charge 0.1738 (from 0.1463)
Credit & Collection Related Charge 0.3026 (from 0.2571)

The current billing and payment processing charge of $0.94 per bill is proposed to remain the same. Competitive metering charges for meter ownership, meter service and meter data services for customers eligible for competitive metering are proposed to increase.

With respect to its retail access programs, ConEd proposes to continue its POR program without modification as well as its market match program. With respect to its PowerMove program, ConEd states it will continue the program without modification while also noting it is in the process of reviewing a proposal to expand the program to include customers that contact it for new service. ConEd's report to the Commission on the potential expansion of PowerMove to new customer referrals is due May 24, 2008.

ConEd also proposes rate treatment for the cost of emissions allowances under the Regional Greenhouse Gas Initiative. ConEd argues that such costs should be recovered through the Market Supply Charge/Market Adjustment Charge mechanism in the way that energy-related costs of retained generation are recovered.

The full text of ConEd's Electric Rate Filing is available from NEM headquarters.

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