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June 23, 2006
NEM Summer Executive Committee Meeting

Mark your calendars for NEM's Summer Executive Committee meeting to be held July 25-26, 2006, in Chicago, Illinois at the Congress Plaza Hotel and Convention Center. Please contact the hotel at 312-427-3800 and request the NEM reservation rate of $119/night.

It is at the Summer Executive Committee where we elect new leadership for the year and identify midcourse corrections for our regulatory advocacy strategy. Your participation in this meeting is critical. We will also discuss: 1) post-transition period regulatory/legislative reactions to consumer rate “shock” including rate stabilization plans; 2) short and long-term best practices to facilitate consumer migration – what’s new, what works and what doesn’t; 3) design and implementation of cost-effective regulated and deregulated price and usage reporting practices that do not mislead consumers, or undermine new and innovative customer-focused product development and competitive pricing; 4) market-based utility rates to encourage demand response and state-of-the-art enabling technologies; 5) defining a “competitive market”; 6) bottom line business practices and rules that must be standardized on a national basis; 7) pro-active public relations strategies; 8) designing and implementing “retail wheeling rates”; and 9) identification of independent quantitative analysis that NEM teaming partners can provide that would be of maximum value to the members on the anti-competitive impact of utility long-term fixed prices, laddered contracts and competitive market alternatives.

Please register at this hotlink.

New Jersey
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Basic Generation Service Implementation

Subsequent to receiving utility filings on how they will serve BGS-CIEP tranches, Staff concluded that "by passing the costs and revenues through the Reconciliation Charge, all CIEP customers would be paying the DSSAC for the EDC-served tranches, but the net of costs and revenues would only be applied to BGS-CIEP customers. This did not appear to be the Board’s intention when it approved the DSSAC as the bid product for 2006." Staff has proposed that the utilities account for the costs and revenues associated with serving the unsecured CIEP tranches in a deferred account. Any credit/debit from this account will be applied, with interest, to the provision of BGS-CIEP service for the period beginning June 1, 2007. The method of applying the credit/debit to the provision of BGS-CIEP service for the period beginning June 1, 2007, will be part of the Phase II BGS proceeding that Staff expects will commence July 10, 2006. Comments on Staff's proposal should be submitted to the listserver by June 28, 2006.

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DEO Auction Information Session

A Preliminary Information Package describing DEO's Standard Service Offer Auction that it plans to conduct in August 2006 has been prepared. The package will be discussed at an information session for potential bidders to be held June 29, 2006, from 10AM to 2PM at DEO's offices located at 1201 East 55th Street, Cleveland, Ohio. Teleconference capabilities are also available by dialing 866-740-1260 and passcode 7366376.

RSVP via e-mail to Kim Manning at by June 23, 2006. General information related to whether to participate in the meeting should be directed to Scott Beckett at (216) 736-6642 or The full text of the Preliminary Information Package is available on the NEM Website.

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Equitable-Dominion Initial Testimony in Acquisition Case

Equitable and Dominion submitted initial testimony in support of their acquisition proposal. They maintain that the transaction will result in potentially lower gas cost rates as well as an enhanced customer choice program. Equitable notes that its, "plan is to run Peoples as a separate company for at least the near term. During this interim period, we will analyze where consolidation can occur and synergies can be created, with a focus toward an eventual filing to merge the two gas systems." Equitable has offered to drop its request for a blended gas cost rate in exchange for an expedited procedural schedule in the case. Equitable estimates a $50 million benefit to ratepayers as a result of the transaction. It argues that the benefit would be derived from: "1) a consolidation of upstream capacity for both Equitable Gas Company and Dominion Peoples so that our capacity mix aligns appropriately with the combined customer base; and 2) a change in accounting for storage inventory on the Dominion Peoples’ system that would make available to our customers various “layers” of lower cost gas."

Equitable maintains that the proposal to blend gas cost rates "would have sent clearer pricing signals to marketers and consumers, further enhancing retail competition." It also notes that, "Pipeline capacity and/or storage reductions attributable to Equitable’s and Dominion Peoples’ combined gas supply portfolio may result in a reduction in mandatory capacity assignment to NGSs [Natural Gas Suppliers]." No changes to choice program tariffs are proposed. However, Equitable argued that, "one consistently applied Choice program for a combined pool of 568,000 potential residential choice customers provides an opportunity for NGSs to benefit from economies of scale such as, reduced transactional costs e.g. nominations, accounting, etc. and reductions in the cost to acquire customers." Equitable also argues that the combination of the utilities will improve access to locally produced direct feed gas thereby reducing NGSs need to contract for expensive upstream capacity.

The full text of Equitable and Dominion's Testimony is available on the NEM Website.

NEM Comments in Electric Price Mitigation Proceeding

NEM submitted comments in the Commission's inquiry into measures to mitigate potential electric price increases at the expiration of utility rate caps. NEM supported a number of Commission-identified measures including consumer education pertaining to the existence of below market rate freezes and the impact of bringing market forces to bear on rates, improved market-based pricing signals, and the corresponding availability of energy technologies that permit meaningful demand response. NEM argued that the key to the effectiveness of the measures is that they be implemented in a competitively neutral manner that facilitates retail competition.

NEM urged the Commission to consider that the ultimate form of price mitigation is competition. An unintended consequence of the prolonged, below market rate caps has been the prevention of the development of meaningful retail competition. The rate caps did more than impede retail competition. When consumers are insulated from accurate, market-based pricing signals, meaningful energy conservation and demand response cannot be expected to occur. A superior method of mitigating prices is to foster a competitive retail market that supports the ability of competitive suppliers to make offerings tailored to meet consumers’ needs.

NEM recommended that the Commission investigate and institute market structures and reforms that facilitate retail competition including: 1) instituting embedded cost based unbundled utility rates and market-based commodity pricing signals; 2) encouraging the non-recourse purchase of receivables by the utility at the utility’s bad debt rate; and 3) instituting market referral programs. NEM argued that these suggestions represent best practices that minimize consumer migration costs, minimize duplication of infrastructure and permit alternative providers to aggregate sufficient numbers of customers to build economies of scale and scope. The full text of NEM's Comments is available on the NEM Website.

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