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June 3, 2011
NEM Summer Executive Committee Meeting

There will be a Summer NEM Executive Committee Policy Development & Planning Meeting at the Georgetown Club in Washington, DC on Thursday, July 28, 2011. The Agenda will include a review and discussion of NEM advocacy priorities for the remainder of the year. Members who are interested in volunteering for National, State or Regional Leadership roles within NEM for 2012, should contact headquarters at theiryour earliest convenience. Further details will be forthcoming.

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NEM Comments on POR

NEM filed comments in response to the Commission's investigation as to, “whether, and to what extent, our rules should be revised to permit or require POR for retail electric suppliers.” NEM strongly supports the availability of a Pepco POR program in the District of Columbia and also recommended the Commission’s simultaneous consideration of a natural gas utility POR program in this proceeding as well. A coordinated approach to developing electric and gas POR programs would be an efficient use of stakeholder resources upfront and facilitate suppliers’ competitive offerings of both energy commodities. Indeed, the availability of POR programs at electric and natural gas utilities has been perhaps the most determinative factor in supporting retail market development in other jurisdictions. NEM noted the many factors that argue in favor of POR: amelioration of the competitive inequities associated with the current payment processing order; limiting the competitive disadvantages that result from guaranteed utility bad debt cost recoveries and the ability, often the exclusive ability, to collect bad debts by shutting off a captive ratepayers’ energy supply; enhancing the ability of the competitive marketplace to serve credit-challenged customers; and avoiding duplicative billing, credit and collection systems costs to consumers. The full text of NEM's Comments is available on the NEM Website.

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Proposed Order on BGE Standard Offer Service

The Hearing Examiner in the case to review BGE's Standard Offer Service cash working capital revenue requirement case issued a Proposed Order. The Hearing Examiner in the PO stated, "I therefore find that the Administrative charge shall be eliminated; that the return component shall be eliminated; that all SOS costs and revenues will be considered as part of the Companies’ standard operations in the next rate case; and that until the next rate case, CWC costs shall be recovered dollar for dollar for cost recovery and shall earn a rate of return set at the authorized overall rate of return as set in BGE’s last rate case.

I find that the SOS cannot exist without distribution services, and it is a part of a normal utility service, with the same level of risk as the Companies’ overall risk level, and therefore any return on SOS should be at the level of the Companies’ overall rate of return, as is set in their most recent rate cases.

I find that since all customers must use distribution services, there is no overcharge or substation of non-SOS customers by having the SOS rate of return as set above. I further find that continuing the Administrative Charge causes the rate paid for SOS to be artificially too high. Since the market is fully mature and functional, there is no need to have any adjustments to try to keep SOS rates too high and no need in a competitive market to try to benefit any segment of the competitive market at the expense of competitors. Since all customers pay the same distribution rates, suppliers who can operate efficiently will still be able to be profitable. It is the utilities who must accept customers that suppliers reject as not worthy or as to high a business risk to take on as a customer. It is time to see if the end game objectives of the move toward competition will present themselves or whether the market can’t sustain itself without artificial supports." The Proposed Order will become a final order of the Commission on July 1, 2011, unless an appeal is filed prior thereto. The full text of the Proposed Order is available on the NEM Website.

Treatment of Early Termination Fees in POR Programs

The Commission is requesting comment on the issue of whether competitive suppliers’ early termination fees should properly be deemed “commodity charges” and therefore within purchase of receivables regulations adopted by the Commission. Commission Staff argues that ETFs are non-commodity charges, which the utilities will not bill under their POR tariffs.

The following specific questions were issued for comment by the Commission:
“(1) whether an ETF should be deemed a ‘commodity charge;’
(2) if the ETF is a “commodity” and subject to purchase by the utility, should it be reflected as a distinct charge from the electricity supply charge; and, if so, what is the cost to the utility to program its billing system to be able to bill a commodity charge separately from an ETF;
(3) if the ETF is a distinct charge, should the utility be able to terminate the service of a customer who refuses to pay the ETF;
(4) if the customer disputes the ETF, what is the process for the dispute (for example, should the retail supplier be required to remove the charge from the bill and refund the payment for the ETF to the utility, until the matter is resolved); and
(5) if an ETF is purchased, and later waived by the retail supplier, what is the method for crediting the amount and reimbursing the utility for the amount purchased from the retail provider.“

Comments are due June 20, 2011, and reply comments are due July 6, 2011. The matter will be considered at the Commission’s July 13, 2011, Administrative Meeting. The full text of the Notice of Opportunity to Comment is available on the NEM Website.

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NEM Comments in Default Service Investigation

NEM filed comments in the Commission's investigation into retail electricity markets. At the outset, NEM recognized the leadership the Commission exhibited in identifying barriers to retail competition and acting to remove those barriers as it has yielded increased energy choice opportunities for consumers and facilitated supplier entry and participation in the Pennsylvania market. Just as the Commission foresaw the need for retail market measures to jump start retail competition at the expiration of rate caps, the Commission has also foreseen that certain overarching market design issues have been and will continue to prevent the realization of a fully competitive market. These market design issues include the provision of true market-based pricing signals as well as the proper allocation of costs between the utility’s no-notice, default commodity service rate and its delivery service rate. Additionally, a truly competitive market cannot be attained so long as utilities remain in the merchant function with the associated level of regulatory intervention required to attempt to maintain a level competitive playing field. The full text of NEM's Comments is available on the NEM Website.

Secretarial Letter on Unit Pricing Information and Sales Tax on Customer Bills

A Secretarial Letter was issued by the Commission pertaining to unit pricing information and sales tax on customer bills. Specifically, the Commission reminded electric generation suppliers (EGSs) of the requirement to include the unit price (kWh) on bills for residential and small commercial customers. The Commission additionally clarified that the residential use of electricity is excluded from Pennsylvania sales tax, but electricity purchased for use in an office or business within a home is subject to sales tax. EGSs are requested to inform the Commission's OCMO as to, "whether the companies are including unit pricing on bills and refraining from incorrectly charging state sales taxes to residential customers, identify any problems and planned corrective measures that are necessary, along with projected timeframes, and whether the EGSs have had any consumer complaints or media inquiries about these issues." Responses are requested by June 10, 2011. The full text of the Secretarial Letter is available on the NEM Website.

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