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May 18, 2007
NEM Summer Executive Committee and Policy Development Meeting

Save the Dates: NEM's Summer Executive Committee and Policy Development Meeting will be held July 9-10, 2007, in Chicago, Illinois. More details coming soon.

NAESB Development of Demand Side Management/Energy Efficiency Business Practices

NAESB has begun the process of development of Demand Side Management/Energy Efficiency business practices. A meeting will be held May 24, 2007, from 10AM to 4PM Central at the NAESB offices in Houston, Texas. The meeting is intended to further refine the scope of NAESB activities in this first phase of the development of business practices related to DSM/EE. It was previously decided that the scope of the first phase would focus on measurement and verification of energy savings and peak demand reduction from both a wholesale and retail market perspective, addressing quantities and not prices. The meeting agenda is posted and can be accessed at and meeting materials and comments will be posted on the NAESB web site ( as they are received. Those interested in participating should contact

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Proceeding on Release of Auction-Related Information

The Commission has decided to open a proceeding to examine whether to authorize the public release of information related to the Illinois auction that was provided in 2006 to the state Office of Attorney General (OAG). Staff rules, auction rules and bidder applications all limit the release of confidential information. In March of this year the OAG filed a complaint with FERC pertaining to the Illinois auction that was based in part on confidential information it had obtained. The OAG also filed a letter with the ICC calling for it to publicly release auction information. The full text of the Order Initiating Proceeding is available on the NEM Website.

New York
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NEM Comments on Capacity Release Programs

The Commission issued for comment a Staff Straw Proposal on natural gas capacity planning and reliability. The Staff Straw Proposal suggested that the utilities implement mandatory capacity release programs for marketers serving core customers. However, marketers that are currently using their own capacity to meet core customer requirements would be grandfathered, i.e., permitted to continue doing so at then current volumetric levels. New and/or incremental marketer loads would be served using utility capacity. Additionally, firm utility Primary Delivery Point Capacity used by marketers would be required to be held for twelve months. The Straw Proposal recommends that utilities work with pipelines to encourage implementation of Delivery Point Operator/Citygate Swing Customer (DPO/CSC) programs.

In its comments on the Straw Proposal, NEM urged the Commission to incorporate three recommendations into the capacity release programs that are implemented for New York utilities as follows:
1. Capacity release programs should permit assets to follow the customer;
2. Utility storage assets can and should be made available to marketers, and utility incentives should be aligned with this goal; and
3. DPO/CSC programs should be expanded throughout the State’s utilities and pipelines.

NEM argued that the implementation of these recommendations will ensure the on-going forward development of retail gas choice, in a manner that preserves the reliability of the system. The full text of NEM's Comments is available on the NEM Website.

NEM Petition for Rehearing/Clarification of Order on Utility Hedging for Mass Market Customers

NEM submitted a Petition for Rehearing/Clarification of the Commission's Order requiring utilities to continue to hedge for mass market electric customers. While noting its appreciation for the thoughtful efforts of the Commission over the course of many years to implement competitive retail policies to facilitate the provision of energy choice to New York consumers, NEM voiced concern about the potential impacts on retail market development of the Order. NEM urges the Commission to grant rehearing and/or clarification of the issues to preserve the benefits that have been achieved for consumers thus far and to ensure that an environment continues to exist to provide those benefits in the future.

NEM specifically requested that the Commission reform and/or clarify its Order consistent with the following:
1. Continued ratepayer subsidies of risk free utility hedging for mass market customers is contrary to Commission policy and significant advances achieved in competitive market development. If a utility decides to enter the commodity market, it should do so with shareholder risk capital. Utility hedging should begin to be progressively phased out for mass market customers given the achievements in retail market development;
2. To permit a utility to compete in an otherwise competitively risk-managed commodity market with all of its costs and risks borne by captive ratepayers is unquestionably anti-competitive and significantly disadvantages any investor who does not have access to risk-free capital.
3. Electric utility hedges, if permitted, should be of limited duration;
4. The purpose of volatility measurement standards should be explained; and
5. The gas and electric utilities should both be required to provide after-the-fact reporting of hedging activities.

The full text of NEM's Petition is available on the NEM Website.

Commission Institutes Energy Efficiency Performance Standard Proceeding

The Commission instituted a proceeding to establish an electric and natural gas energy efficiency performance standard. The proceeding will focus on achieving 15% reductions in electricity usage from expected levels by 2015. Targets and programs are also to be designed for optimization of efficient use of natural gas. Parties to the proceeding should:

"1. Examine critical design options for the near and longer term, including cost-effectiveness, the role for NYSERDAbased models, and whether certain types of efficiency programs are best administered centrally while others are more suited to delivery by utilities, competitive load-serving entities, or others;
2. Measure and compare the expected benefits and costs of various design options;
3. Integrate generic Commission determinations with existing and new programs developed in individual rate cases;
4. Consider and prioritize end-user efficiency programs, market transformation approaches, research and development, and generation, distribution and transmission efficiencies, including the efficiency potential of distributed generation;
5. Develop target goals and timetables for natural gas usage efficiency;
6. Develop energy efficiency programs to ensure all New Yorkers, especially those with low incomes, have the opportunity to benefit from lower bills resulting from lowered usage and consider environmental justice concerns in program design;
7. Assess best practices to integrate demand response technology and utility rate incentives to encourage customers to shift usage and reduce peak loads;
8. Address coordination of the development of energy
efficiency resources with other State initiatives and New York City, other municipal, and local energy efficiency programs;
9. Ensure transparent and technically sound methods for measurement and verification of net energy savings, benefits, and costs, as well as assessments of customer satisfaction and program efficacy."

The full text of the Order Initiating Proceeding is available on the NEM Website.

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Default Service Rules and Policy Statement

The Commission issued final rules and a policy statement on electric default service. By the terms of the rules, rates are to be regularly adjusted (at least quarterly for residential and small business customers and at least monthly for large business customers). Default service providers (DSPs) will be permitted to request rate reconciliation as well. DSPs are to procure a portfolio of energy products, ranging from fixed term to spot market purchases. Competitive solicitations shall be used. The Commission noted its expectation that reliance on shorter term and spot market products should increase over time. Each customer will be offered a single rate option, also called the Price to Compare.

The Commission determined that the electric utilities distribution rates should be examined to determine if generation costs remain embedded therein. A collaborative process may be used to develop uniform standards on embedded costs to apply to each electric utility.

In anticipation of potentially large price increases at the expiration of utility rate caps, DSPs should give residential and small business customers the option to defer paying some portion of the increase. This option should be available to customer classes whose total bill increase exceeds 25%. Th mitigation option should be implemented in a competitively neutral fashion.

A Retail Markets Working Group is to be convened 45 days after publication of the policy statement in the state Bulletin. This group will develop recommendations on information and data access, rate and bill ready billing, purchase of receivables, customer referral programs, supplier tariffs and retail choice ombudsmen.

The full texts of the Default Service Rules and Policy Statement are available on the NEM Website.

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