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June 28, 2007
NEM Summer Executive Committee and Policy Development Meeting

NEM's Summer Executive Committee and Policy Development Meeting will take place on July 9-10, 2007. The meeting will be hosted by The Goeken Group Corp. and PolyBrite International. The meeting will take place at the Spring Hill Suites Chicago/Naperville and will be followed by a reception and tour at the Goeken Group Corp. headquarters. Many thanks to Jack Goeken, Carl Scianna and Sandra Goeken-Miles for offering to host our meeting. At this meeting, we evaluate our advocacy priorities for the remainder of the year and elect our Executive Committee leadership.

Please contact the Springhill Suites Chicago/Naperville for the preferred NEM accommodation rate at 630-393-0400 (which has been extended for reservations made through July 4th). Please register at this hotlink. The final agenda is available here.

ANOPR on Wholesale Competition in Organized Electric Markets

FERC issued an ANOPR on potential reforms to improve the operation of wholesale power markets administered by RTOs/ISOs. The ANOPR is in response to information received in two prior technical conferences and pertains to demand response, long term power contracts, market monitoring units, and responsiveness of RTOs/ISOs. The Commission has outlined its proposals for consideration as follows:

"Demand Response and Pricing During Power Shortages - proposals
1) Require RTOs and ISOs to allow demand resources to provide certain ancillary services in their markets unless not permitted by state law, modify tariffs to let demand resources provide spinning and supplemental reserves without being required to sell into the energy market.
2) Modify RTO and ISO tariffs to eliminate certain charges for purchasing less energy in real time than in the day ahead market during a system emergency.
3) Amend market rules to permit an entity that aggregates the demand responses of individual retail consumers to bid the aggregate demand reduction directly into an RTO or ISO energy market, unless not permitted by state law.
4) Modify market power mitigation rules so that pricing during an emergency can elicit more demand response.

Long-term Power Contracting - proposals
1) Require RTOs and ISOs to post information that would facilitate long-term contracts.
2) Require or encourage efforts by RTOs and ISOs to develop standardized forward products.
3) Dedicate a portion of the ISO’s or RTO’s website for market participants to post long-term buy/sell offers.

Market Monitoring Policies and Information Sharing - proposals
1) Remove the market monitoring unit from RTO/ISO operations.
2) Require that the MMU advise the Commission and other stakeholders of any design flaws and report to the Commission any tariff violations it believes may have been committed by the RTO or ISO.
3) Regular conference calls among the market monitor, interested state commission and FERC staff.
4) Release of offer and bid data, with a lag period. Release would mask market participants’ identities.
5) Subject to certain limitations, state regulatory commissions within an RTO or ISO may request and receive information from the RTO’s or ISO’s market monitoring unit.
6) Develop a pro forma tariff provision to address all sections relating to market monitoring.

Responsiveness of RTOs and ISOs - proposals
1) Provide RTO and ISO customers with direct access to the board of directors."

Comments on the ANOPR are due 45 days after publication in the Federal Register. The full texts of the ANOPR and ANOPR Fact Sheet are available on the NEM Website.

Rule Reforming Market Based Rate Program

The Commission issued Order 697, reforming its market based rate program. The significant elements of the new rule include: 1) changing the Commission's four prong analysis of whether a wholesale seller of electric energy, capacity or ancillary services qualifies for market based rate authority into a two part test of vertical and horizontal market power; 2) eliminating the exemption for generation built after July 9, 1996; 3) allowing a seller to use the entire RTO-ISO geographic footprint as the default relevant geographic market if the RTO/ISO has sufficient market structure and a single energy market, unless the Commission determines there is a submarket within the RTO/ISO, in which case the submarket becomes the default relevant geographic market; 4) for sellers that have not demonstrated a lack of market power, the Commission will decide appropriate mitigation on a case by case basis, including whether a "must offer" requirement is needed to mitigate market power; and 5) permitting mitigated sellers to make market-based rate sales "to the border" if the seller commits that the power will leave home and not ricochet through an affiliate. The full text of Order 697 is available on the NEM Website.

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Investigation into Rate Structures that Promote Deployment of Demand Resources

The Department initiated an investigation into current rate structures that may disincent the utilities deployment of demand resources. The inquiry will be focused on how to better align utility financial interests with the needs to: "1) capture all available and economic system and end-use efficiencies and their associated reliability, economic and environmental benefits, and 2) foster the advancement of price-responsive demand in regional wholesale energy markets." The Commission noted that the, "inherent conflict between the incentive to increase sales promoted by current revenue-collection mechanisms and the reduced consumption resulting from the use of demand resources creates a significant barrier to the efficient deployment of these important resources, one that must be addressed expeditiously."

The Department offered a straw proposal for consideration for a base revenue adjustment mechanism intended to sever the link between utility revenues and sales, and, in the alternative, link utility revenues to the number of customers served. At the customer level, unit-based energy and demand pricing would be retained to preserve the link between consumer costs and consumption levels. The Department is seeking comments on issues raised by the straw proposal including allowed revenues per customer, use of an annual reconciliation calculation, base rate adjustments, reconciliation filings, changes in risk, inclusion of a shared earnings provision, performance based regulation and an appropriate implementation schedule. Comments are due August 10, 2007. Public hearings will be convened the weeks of September 17 and September 24, 2007. Requests to participate in the hearings are due August 10, 2007. The full text of the Order is available on the NEM Website.

New Jersey
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BGS 2008 Procurement

The Board instituted a proceeding to examine how the remaining 1/3 of the Basic Generation Service (BGS) Fixed Price (FP) and the annual Commercial and Industrial Energy Pricing (CIEP) requirements for the period beginning June 1, 2008, should be procured.

The Board issued a preliminary 2008 BGS auction schedule as follows:

7/2/2007 - Utilities and other stakeholders file BGS proposals and/or modifications
7/20/2007 - Discovery request deadline
8/3/2007 - Discovery response deadline
8/24/2007 - Initial comments on proposals due
TBD - Legislative-type Board hearing
TBD - Public hearing
9/28/2007 - Final comments due
mid-October - Expected Board decision on BGS proposals
end of October - EDC compliance filing
mid-November - Expected Board decision on compliance filing
February 2008 - BGS auctions

In addition to the submission of BGS program proposals, commenters were asked to address the recommendations of Boston Pacific in its BGS Final Report pertaining to RPM and CIEP, Three One-Year Products, and Random Element of Decrements. The full text of the Order is available on the NEM Website.

Demand Response Working Group

The Board has ordered Staff to oversee a demand response (DR) working group. The goal of the working group is to design a pilot DR procurement program for Board review by October 1, 2007. The first meeting is to be held July 12, 2007, at 1PM at the Board's 8th Floor Hearing Room in Newark. The working group is to be informed by Demand Response Proposed Program Guidelines which provide: 1) key dates for submission of the program proposal, initiation of procurement process and commencement of demand response; and 2) program design characteristics such as use of a competitive procurement format, procurement of DR by utility service territory, size of procurement process, a DR measurement and verification protocol, three year term, time frame for DR participation, penalties for non-delivery, and contracts. Parties may submit program proposals in advance of the meeting via the electric list server. The full text of the DR Meeting Notice and Proposed Pilot Program Guidelines is available on the NEM Website.

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Smart Metering Workshop

Pursuant to the Commission's inquiry into implementation of the federal EPAct, Staff will convene workshops to examine the costs and benefits of deployment of an advanced metering infrastructure (AMI). The first workshop will be held July, 26, 2007, at 10AM in the Commission's Hearing Room 11E. The first workshop will be held to discuss the scope, topics and dates of future workshops and to start the dialogue on available models for analyzing AMI costs and benefits. Those interested in attending should contact

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