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June 20, 2008
NEM Summer Executive Committee Meeting

Proliance has generously offered to host our Summer Executive Committee Meeting and Policy Leadership Elections on July 29 and 30, 2008, in downtown Indianapolis, Indiana. Please register for the meeting at this hotlink. The meeting will take place at the law offices of Krieg Devault LLP.

NEM has a courtesy room block until July 5, 2008, at the Embassy Suites at a discounted rate of $139/night. You must make your reservations by dialing them directly at (317) 236-1923 at your earliest convenience as they will release the rooms after the July 5 date, and the costs may increase. The location of the hotel is 110 West Washington Street in downtown Indy, 3 blocks from the meeting place.

There is no charge to attend this meeting. Please help us thank John Talley, President, and Kyle Hupfer, General Counsel, of Proliance for their generosity in hosting this meeting.

The Meeting will start between 9 and 10AM on Tuesday morning, July 29th, and adjourn before noon on Wednesday, July 30, 2008. An agenda and draft leadership nominations will be circulated, and each member is requested to forward nominations for policy leadership positions as well as issues that NEM must address and prioritize for the coming year.

The Summer Executive Committee Meeting is where the Executive Committee members agree on mid course corrections on the priorities for NEM advocacy for the remainder of 2008 and members who wish to sponsor upcoming events give us an indication so we may start planning the meetings and events for the remainder of 2008 and 2009.

If you have questions or would like to help plan or co-sponsor an event for the members, please contact headquarters. The upcoming meeting should be very substantive, and your participation is encouraged and would be appreciated.

Columbia Utilities Nominated to NEM Executive Committee

NEM is pleased to announce that Columbia Utitilies has been nominated to NEM's Executive Committee. Columbia Utilities will be represented within NEM by Robert and Ronald Palmese.

Columbia Utilities is a Brooklyn, New York-based Energy Marketer. Owned by the same family for 70 years, Columbia Utilities began operations in 1938 selling Fuel Oil throughout the 5 boroughs of New York City. In the year 2000, Columbia Utilities entered the de-regulated natural gas market in New York. Following the success of their entry into Natural Gas, Columbia Utilities added the electric market to their portfolio, making them one of the few independent suppliers to sell electricity, natural gas and fuel oil in New York State.

FERC Adopts Capacity Release Rule

FERC adopted a final capacity release rule at its meeting this week deciding to: 1) exempt capacity releases made under state-approved retail access programs from the tying prohibition and bidding requirements; 2) permanently remove the rate cap on short term capacity release transactions but retain the rate cap on long term capacity releases and primary sales of capacity by pipelines; 3) exempt capacity releases made as a part of asset management arrangements (AMAs) from the tying prohibition and bidding requirements; 4) define exempt AMAs so as to allow supply side AMAs; and 5) not apply the tying prohibition to conditions associated with gas inventory held in storage for releases of firm storage capacity. The full text of the Rule will be posted on the NEM Website when made available electronically.

FERC Compliance Help Desk

As recently announced as part of its enforcement policy package, FERC has established an online compliance help desk. The compliance help desk is intended to field inquiries related to compliance with the statutes, rules, regulations, and tariffs administered by the Commission. The FERC compliance help desk is located at:

Columbia Gas Transmission MLI Proceedings

Columbia Gas Transmission previously made a proposed tariff filing the purpose of which it said was, "to clarify the historic nature of MLIs [Master List of Interconnect points], its historic practice regarding its use of those MLIs, and its ability to change the list of MLIs without first seeking Commission approval . . ." in conjunction with its announced plan to add nearly 120 MLIs. The "Columbia Shippers" group responded to the filing, characterizing it as contrary to the Natural Gas Act, FERC regulations and FERC policy and precedent. Columbia Shippers maintain that "Columbia seeks to alter fundamentally the basis on which it has historically used its Master List of Interconnections (MLI) points to designate delivery points on its system. In so doing, Columbia seeks to abrogate scores and possibly hundreds of firm contracts, by forcing shippers to revise their primary points and associated contract quantities. If approved by the Commission, Columbia's proposal . . . would deprive many of Columbia's firm shippers of the services for which they contracted. Moreover, Columbia's proposal would also increase substantially the costs and burdens of shippers seeking to schedule transportation services on Columbia's system. In turn, these burdens would reduce the flexibility and competitiveness of shippers on Columbia's system. Further, Columbia has failed to provide any explanation concerning operational harm that could ocur absent these MLI changes." The full text of the Columbia Shippers Protest is available on the NEM Website.

Interestingly, the NiSource distribution utilities filed comments on Columbia's tariff filing. The NiSource distribution utilities dispute Columbia's claim that MLIs are not essential to its system, arguing that, "MLIs constitute a critical component of the way in which business has been transacted by shippers on Columbia's system since Columbia's Order 636 restructuring. In fact, MLIs represent the only way in which gas deliveries can be nominated on Columbia's system." The NiSource distribution utilities urge the Commission to examine a number of issues associated with Columbia's filing including its operational, or other, justification for the change; whether the nature of the proposed changes is indeed only clarification or is in fact substantive; allocation of delivery point capacity; impact on gas transportation programs; are the changes consistent with shippers flexible use of the system; impact on secondary point allocation, capacity release, and maximum daily delivery obligations; and appropriate timing of the implementation of any such changes. The full text of the NiSource Distribution Utilities Comments is available on the NEM Website.

New York
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ALJ Recommended Decision on Iberdrola Acquisition of Energy East

The ALJ presiding in the proceeding of Iberdrola's proposed acquisition of Energy East, including its NYSEG and RG&E affiliates, issued a Recommended Decision on the transaction. The ALJ recommends that the transaction should not be approved by the Commission for failure to satisfy the statutory public interest standard. In the alternative, if the Commission approves the transaction, the ALJ recommends certain preconditions including: 1) a prohibition of Iberdrola or its affiliates owning electric generation interconnected with NYSEG or RG&E's system; 2) imposition of financial and structural safeguards to govern corporate relations between Iberdrola and the New York affiliates; 3) application of a $646.4 million "positive benefit adjustment" to NYSEG and RG&E customers; and 4) commencement of rate proceedings for NYSEG and RG&E pertaining revenue requirements, retail access programs and revenue decoupling mechanisms. The ALJ recommended that ESCO referral programs not be decided in the context of this merger proceeding. Briefs on Exception to the RD are due June 26, 2008, and Briefs Opposing Exceptions are due July 3, 2008. The full text of the Recommended Decision is available on the NEM Website.

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Commission Approves DEO Phase 2 Transitional Exit from Merchant Function

The Commission approved a settlement for DEO's Phase 2 transitional exit from the gas merchant function. In so doing the Commission found, "that phase 2 represents a reasonable structure through which to further the potential benefits of market-based pricing of the commodity sales by the company."

The settlement effectively extends the term of DEO's Phase I Standard Service Offer (SSO) period through March 31, 2009. The settlement sets forth the terms of a wholesale SSO auction for PIPP, choice-ineligible and transitional customers commodity requirements for the period April 1, 2009, through March 31, 2010. A subsequent wholesale SSO auction will be held in February 2010 for an additional one-year term to serve PIPP and choice-ineligible customers.

A retail Standard Choice Offer (SCO) auction will be initiated for choice-eligible customers for a one-year term running from April 1, 2009, to March 31, 2010. Of note, SCO service would be energy choice commodity service, not utility sales service, and therefore would be subject to applicable sales and use tax. A subsequent retail SCO auction will be convened in February 2010, for a one-year term commencing April 1, 2010.

Prior to moving from the SCO commodity service market to a full choice commodity service market, DEO would file an application and obtain Commission approval. In the event this has not occurred, additional SCO auctions will be held for subsequent annual periods. The full text of the Order and DEO Settlement is available on the NEM Website.

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