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June 8, 2007
NEM Summer Executive Committee and Policy Development Meeting

Save the Dates: NEM's Summer Executive Committee and Policy Development Meeting will be hosted by The Goeken Group Corp. and PolyBrite International at their headquarters near Chicago, Illinois, on July 9th and 10th, 2007. An agenda with hotel information will be sent shortly.

NEM Policy Chairs who may wish to be invited to participate in the high-level policy discussions at the Aspen Institute after NEM's meeting should contact headquarters immediately as invitations are very limited.

Proposed Rulemaking to Promote Natural Gas Market Price Transparency - Workshop and Comment Extension

FERC decided to institute a proposed rulemaking under its EPAct authority to promote price transparency in wholesale natural gas markets. The NOPR proposes: "a) a daily requirement for intrastate pipelines to post the capacities and volumes of natural gas flowing through their major receipt and delivery points and mainline segments, and b) an annual requirement for certain buyers and sellers of natural gas to report the numbers and volumes of relevant transactions for the previous calendar year." Additionally, holders of blanket marketing certificate authority or blanket unbundled sales services certificate authority would be required to notify FERC as to whether they report transactions to price indices publishers.

FERC Staff will convene an informal workshop in the proceeding on July 24, 2007. The purpose of the workshop is to discuss implementation and technical issues associated with the proposals. The workshop will be held in Meeting Room 3M-2A&B from 9:30AM to 5PM EST.

The comment deadline on the NOPR has been extended. Initial comments are now due July 11, 2007, and reply comments are due August 9, 2007. The full text of the NOPR is available on the NEM Website.

Click here to view all past updates.
Electricity and Energy Efficiency Legislation Signed by Governor

The Governor signed HB7432 as amended (exercising the line item veto on two budget-related items) entitled "An Act Concerning Electricity and Energy Efficiency." The legislation: 1) modifies electric utilities last resort service to require procurements at least quarterly and to eliminate one year return-to-service requirements; 2) requires electric companies to provide residential and small commercial customers with information about competitive supplier introductory offers (that must be at a fixed price and at least one year) when these customers begin service, reinstate service, inquire about utility rates, or seek information about energy efficiency and requires the Commission to institute a proceeding to develop the terms of the program; 3) requires electric companies to provide consolidated billing and make transfers of the customers' payments for generation services, less a percentage deduction of uncollectible bills and overdue payments; 4) requires the Commission to conduct a proceeding on electric supplier billing transparency; 5) requires the electric companies to submit advanced metering deployment plans; 6) directs the Commission to examine the feasibility of different standard service options; 7) requires electric utilities to submit plans for building peaking generation plants; 8) requires electric companies to engage in integrated resource planning and procurement; 9) requires the Commission to authorize electric companies to buy and operate plants offered for sale in the state upon a determination that it is in the public interest; 10) permits electric companies to meet the RPS with renewable energy certificates purchased under long-term contracts and requires the Commission to institute a proceeding to examine the practice; 11) requires to the Commission to finalize interconnection standards by January 1, 2008, that meet or exceed national standards; 12) steadily increases RPS requirements to 8% in 2011 through 20% in 2020; and 13) extends distributed generation incentives.

New Jersey
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PSEG BGSS Residential Rate Filing

PSEG submitted its 2007-08 BGSS Commodity Charge filing that is applicable to residential gas customers. PSEG is requesting an increase in the current BGSS-RSG rate from 98.0852 cents per therm (including SUT) to a charge of 101.0008 cents per therm (including SUT). The increase is sought because of PSEG's estimate of a $38 million increase in revenue requirement. PSEG also notes the rate "may be subject to self-implementing rate increases of up to 5% on the ensuing December 1st and Feburary 1st." The full text of PSEG's Application is available on the NEM Website.

New York
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NEM and Stakeholder Comments on Utility Long Term Contracting

In its comments to the Commission in its inquiry on long term utility contracting, NEM urged the Commission to permit competitive market forces, rather than regulatory intervention, to identify and meet the need for new capacity resources. NEM cautioned that regulatory mandates inevitably lead to higher costs than competitive market-based supply and demand-side investments. If utilities are forced into making long-tem generation investments rather than or in addition to needed infrastructure investments, they should do so via an arms-length competitive affiliate, and subject to Commission-administered compliance with utility codes of conduct.

NEM suggested that there is a complex set of issues that are determinative of whether new generation gets built and recommended that addressing these other issues would create the framework necessary for competitive entities to bring new capacity resources into the State without requiring utilities to enter into long term contracts. These issues include, amongst others: a) inadequate pricing signals; b) siting difficulties; c) regulatory uncertainty; d) lack of settled national policy on environmental standards; e) sanctity of contracts; f) lack of long-term firm transmission rights; and g) expectations of the financial community.

NEM recommended that the Commission need not duplicate FERC, NYISO and NERC processes for assuring the adequacy and reliability of our electric infrastructure by requiring utilities to enter into long-term capacity contracts and engage in integrated resource planning. NEM also noted that utility long term contracting is inconsistent with sending market-based pricing signals necessary to support consumer demand response. Utility long term contracting would also add an unnecessary layer of potential stranded costs and risks to the retail marketplace.

If, contrary to NEM’s recommendations, the Commission decides that a long-term utility contracting mandate is the means it decides to use to encourage new capacity investments, NEM recommended the following suggested safeguards to the public interest:
1. A rebuttable presumption that the market can and should be relied upon first to meet the need for new capacity resources;
2. If a utility elects to remain a sole source, non-competitive, default supplier during its bona-fide transition to a full exit from competitive functions, and the Commission finds sufficient evidence to support a finding that the market has not, or more importantly, cannot satisfy this otherwise competitive function, the utility(ies) should be required to use a competitive solicitation for commodity so as to provide both transparency to the process that avoid potential anti-competitive, market-share and/or market-power issues;
3. The competitive solicitation process should be conducted in strict, good faith compliance with affiliate rules and standards of conduct;
4. All resources – generation, transmission and demand response – should be permitted to participate in the solicitation and receive market-based compensation;
5. The full costs plus all financial, regulatory and migration risks associated with all long-term contracting as well as hedges should be borne by utility shareholders and reflected in the commodity price for full service customers (who should have the right to opt out without penalty);
6. Choice customers should not incur an exit fee/choice penalty or other charge for shopping for non-utility generation, regardless whether it is paid for via long-term contracts or otherwise;
7. The extent of utility participation in the competitive supply function should be phased out as consumers migrate into the competitive supply market so that long-term contracts at today’s historically high prices do not become stranded costs of tomorrow or non-bypassable charges that merely increase total energy costs for everyone without an end time specified;
8. NEM urges the Commission to avoid the unintended consequences, high economic costs and significant investment risks associated with regulatory market intervention, particularly in a well functioning market that has proven itself to be “workably competitive” and quite successful for more than a million New Yorkers; and
9. The Commission should reiterate its commitment that utilities will exit competitive functions during a well defined period with quantifiable or at least observable service/reliability and/or other landmarks that will allay fears, lack of adequate public education and importantly, the higher costs and risks that result from regulatory mandates as well as regulatory uncertainty. The full text of NEM's Comments is available on the NEM Website.

Staff proposes a two part Dynamic Electric Planning Process (DEPP), to be directed by Staff in collaboration with affected stakeholders. "The DEPP would accommodate various public policy goals established by the Commission or propounded by the stakeholders, and would be submitted to the Commission for its review and approval. Following approval of the DEPP, utilities would implement specific recommendations through targeted procurement mechanisms. The proposed mechanisms would be submitted to the Commission for its approval, and, once approval is obtained, the utility would proceed to procure the electric infrastructure enhancement or resource in conformance with the mechanism. Where a long-term contract is the most effective means of acquiring a needed resource, a mechanism can be directed towards the creation of such a contract." Staff argues that "a long-term contracting process is better suited than IS0 capacity pricing arrangements to both ensuring reliability and advancing public policy goals." The full text of Staff's Comments is available on the NEM Website.

CPB argues that little new investment in electricity infrastructure has been made despite high prices and policies intended to encourage new generation. CPB recommends the use of integrated planning to identify State resource needs and to achieve public policy goals. CPB argues that additional use of long-term contracts (longer duration than five years) would be in the public interest. The full text of CPB's Comments is available on the NEM Website.

According to the Energy Association of NYS (comprised in part by electric delivery utilities), "long-term contracts can be a useful tool for energy delivery companies in assembling supply portfolios to meet their customer’s needs, but the utilities should not be directed or required to enter into such contracts." NYSEG/RGE argue that, "Where there is an identified need for additional resources, electric utilities, which have the statutory obligation to provide distribution and commodity service, should have the opportunity to meet their load obligations through a portfolio of resources, including utility-owned generation. . . . While many merchant generators continue to struggle to recover their financial health, electric utilities generally have the financial strength to secure the necessary long-term financing, provided they have the support of the state and federal regulatory bodies. NYSEG and RG&E are prepared to invest in new rate-based generation assets under appropriate regulatory conditions and have the financial strength required to do so." Relatedly, Central Hudson argues that, "regulated utility construction of new generation offers potential cost, and other advantages to consumers that generating companies are unlikely to provide." ConEd/O&R urge that, "the Commission should make clear in this proceeding that a utility built facility will be allowed as an alternative to entering into long-term contracts. A utility built facility can be a better option than a long-term contract because there would be increased operational flexibility as conditions change, i.e., no need to amend a contract, and the increased stability and reliability that comes from the actual owner being a creditworthy entity." The full texts of the Energy Association of NYS, NYSEG/RGE, Central Hudson and ConEd/O&R Comments are available on the NEM Website.

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