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May 4, 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.

NEM Tenth Annual Membership Meeting and Global Energy Forum

NEM's meeting last week in Washington, DC was a great success. Many thanks to all of you that participated as attendees, discussion leaders and as our meeting sponsors.

Topics of discussion spanned from the global (Russian energy policy as a political tool), to the national (perspectives from both sides of the aisle on upcoming initiatives in the U.S. Congress, NYMEX activities), to the local (the status of retail access programs across the country and enhancements that can further facilitate retail market development).

Participants included U.S. Senator Richard Burr, U.S. Congressman Joe Barton, U.S. Congressman John Shaddegg, U.S. Congressman Tim Murphy, Ansis Teteris, Ministry of Economics, Republic of Latvia, FERC Commissioners Marc Spitzer and Jon Wellinghoff, Former Ambassador Keith Smith, NYMEX President James Newsome, MCI Founder Jack Goeken, Delaware Senate Majority Leader Harris McDowell, Illinois Commerce Commissioner Erin O'Connell-Diaz, Ohio PUC Commissioner Don Mason, NYPSC Administrative Law Judge Jeffrey Stockholm, Pennsylvania PUC Energy Advisor Eric Matheson, and Georgia PSC Senior Utilities Advisor Jamie Barber.

Thanks again for your support of this event.

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Proposed Decision on Direct Access

Commissioner Peevey issued a proposed decision on the request for a rulemaking to reinstitute direct access (DA). The proposed decision concludes that, "Given the potential benefits from increased retail choice from direct access competition, a formal inquiry opening a rulemaking to consider whether, or how, to lift the suspension is warranted." The proposed decision sets forth a three phase proceeding. In Phase I, the threshold question of whether, or under what conditions, the Commission has the legal authority to left the DA suspension would be addressed. Phase II would entail examination of the issue of whether, or subject to what market and regulatory preconditions, lifting the direct access suspension would be in the public interest. Finally, Phase III would consider what retail rules would be appropriate under a reconstituted DA market. The full text of the Proposed Order is available on the NEM Website.

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New Electric Choice Legislation Introduced

Three bills were introduced in the Senate last week pertaining to energy choice. The bills have been referred to the Committee on Energy Policy and Public Utilities.

SB 426 is intended to support residential electric competition by requiring that utilities offer a rate for residential choice customers for distribution, billing and collections at the same distribution charge paid by full service customers. Amounts collected under this rate are to be remitted to choice suppliers, subject to a reduction for bad debt not included in the distribution charge. Currently, residential customers wishing to buy from competitive suppliers must pay twice for administrative costs including collection, bad debt and billing services. The full text of SB 426 is available on the NEM Website.

SB 427 would require the Commission to institute a biannual process for assessing the electric power needs of Consumers and Detroit Edison. A competitive bidding process would be utilized to meet any projected need, and it would be administered by an Independent Evaluator. In contrast to the 21st Century Plan which mandates that utilities own and operate power sources, the competitive bid process under SB 427 would be open to all sources of power including power purchase agreements, efficiency measures, renewables and other generating projects operated by private entities. The full text of SB 427 is available on the NEM Website.

SB 428 would require that electric choice customers paying new generation plant fees or existing securitization fees receive equivalent amounts of power or a monetary credit in return for their payments. This bill is intended to counteract the utility practice of charging securitization and other generating fees to choice customers without their receiving benefit from such payments. The full text of SB 428 is available on the NEM Website.

Commission Initiates Smart Grid Proceeding

The Commission directed Staff to convene a collaborative on smart grid infrastructure initiatives to monitor national developments. "When options appear cost-effective and practical to implement, the Staff should establish evaluation critera and standards, triggering pilot programs or broader deployment in Michigan. The collaborative should emphasize reviewing and adopting technologies that make the grid flexible and efficienct, enable distributed technologies, and preserve reliability." Staff is to submit annual reports on the status of the collaborative. The full text of the Order is available on the NEM Website.

Consumers Files Balanced Energy Initiative

Consumers filed a proposed "Balanced Energy Initiative" with the Commission, a 20-year comprehensive energy resource plan to meet its projected electric power requirements. The proposal includes, "energy efficiency and demand management programs, an expanded renewables program, the utilization of existing generation resources, and the development of new in-state electric power generating plants." Significantly, Consumers proposed, "adding 500 MW of natural gas-fired combined cycle capacity in 2011 followed by a net 500 MW clean coal plant in 2015. The plan also includes purchases of short-term capacity and energy over the 2009-2015 period pursuant to the Company’s recent solicitation for power."

Integral to Consumers proposal would be repeal or reform of the state electric restructuring law. Consumers argues that "the market structure put in place by PA 141 fails to create the incentives necessary to assure the development of new generation resources. Lacking an ability to accurately predict how many customers will choose an AES as their generation supplier, electric utilities and their lenders are wary of making the enormous investments needed to construct new generating plants. In circumstances where the utility’s prices are fully regulated, the loss of customers to AESs will leave the utility with unrecovered costs. While PA 141 stated that utilities were to be permitted to recover these “stranded costs”, the significant controversy and litigation surrounding those statutory provisions since the passage of PA 141 have demonstrated that reliance upon stranded cost recovery is an uncertain proposition, at best. The uncertainty of customer demand, coupled with the continuation of fully regulated prices, leaves utilities extremely reluctant to make large investments in new generating capacity."

The full text of Consumers' Balanced Energy Initiative is available from NEM headquarters.

New Jersey
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Staff Requests Comments on BGS Proposals

Staff is seeking comments on two Basic Generation Service (BGS) proposals. The first proposal involves a BGS-related pilot power and demand response program on a long-term basis, and the other pertains to which entity should be responsible for the RPS requirements-the electric utilities or the BGS suppliers. Initial comments are due May 9, 2007, and reply comments are due May 16, 2007.

Staff's first proposes that 600 MW of power or demand response be procured under a long term (10 years) contract as a part of the BGS process. Staff requests comments on the following related questions:

1) whether 600 MW is the appropriate amount, and if not, what is?; 2) what process should be used to procure this power (descending clock auction, RFP, other); 3) whether ten years is the appropriate time period, and if not, what is?; 4) whether the power should be specifically designated – i.e. all or some portion, for demand side management; for renewables; for the most competitive, economic source, etc.; 5) whether the total MWs of power should be procured from one bidder or subdivided into individual slices where multiple bidders can win the right to provide the power or demand side management resources; 6) if individual slices are bid, would 25 MW be the appropriate size, and if not, what is?; 7) whether demand response, renewables, or other forms of power should be bid together in the same procurement process?; 8) whether the appropriate time frame for demand side resources are the summer peak months as defined by PJM?; 9) whether the program should be conducted by utility service territory or as a state-wide program; and 10) whether there should be a measurement and verification program for demand side resources?

Staff's second proposal for comment is whether the BGS-related requirements under the Renewable Portfolio Standards should become the sole responsibility of the electric utilities or remain the responsibility of the suppliers bidding into BGS, or some combination of both.

New York
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Procedural Conference in NYSEG 2008 Fixed Price Offer Proceeding

A procedural conference will be convened on May 14, 2007, at 1PM at the Commission's Albany offices pertaining to NYSEG's proposal to offer customers a single fixed supply service commencing in 2008. The purpose of the meeting is to discuss the procedure to be used in the case as well as for NYSEG to offer an explanatory overview of its proposal. Those wishing to be included on the service list for this case should contact the ALJ's assistant at The full text of NYSEG's Fixed Supply Service Application is available on the NEM Website.

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