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July 11, 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. The Draft Agenda is available at this hotlink.

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.

Regulatory Compliance Workshop

This week FERC Staff convened a regulatory compliance workshop the purpose of which was to identify and discuss elements of a sound compliance program. The passage of the Energy Policy Act of 2005 significantly expanded the penalty assessments that FERC can impose against a violating company. In the Commission's Revised Policy Statement on Enforcement issued in May of this year, it noted that a company's internal compliance measures in place at the time of a violation would be one of the considerations in determining the amount of civil penalty assessed. In the Policy Statement, the Commission identified certain factors indicating the presence of a robust compliance program including: 1) existence of a formal program; 2) support of senior management; 3) frequency of program review and modification as well as employee training; 4) on-going process for auditing compliance with FERC regulations; and 5) company response to previous wrongdoing.

Stakeholders at the workshop representing different segments of the industry discussed their experiences with implementing a compliance program and what they deemed important elements of a good compliance program. Compliance program elements identified by the participants included: 1) "tone at the top" (top-level company support of the compliance program); 2) comprehensive identification of risk; 3) accountability and reporting; 4) communication (for example, issuance of regular company compliance bulletins); 5) creating a culture of compliance (for example, having compliance staff on-site on the trading floor to respond to questions); 6) tying performance objectives to compensation; 7) employment of skilled staff. It was also noted that examples of compliance programs utilized in other industries were useful. Some noted that reference to DOJ sentencing guidelines and OCEG guides were useful as well. The Presentation of BP North America given at the workshop is available on the NEM Website.

Commissioner Moeller attended the workshop. His questions were focused on the difficulties of cross-jurisdictional (FERC, CFTC, SEC) regulatory challenges for companies. For example, what the different regulatory bodies consider prohibited market manipulation or information sharing. Commissioner Moeller was also responsive to the stakeholders request for further FERC guidance on what it deems to be more and less serious offenses.

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Utilities to File Long-Term Procurement Plans for SOS

In the course of the Commission's examination of ways in which the electric utilities can provide Standard Offer Service (SOS) to residential and small commercial customers subject to the requirements of SB400 that SOS be provided to customers "at the best possible price" utilizing a supply portfolio "at the lowest cost with the least volatility," the Commission has ordered the utilities to file an evaluation of a long-term procurement plan (10 to 15 years) for providing SOS to residential and small commercial customers. The plans must: 1) evaluate different resource mixes and procurements of different time lengths; 2) include a proposal for new utility-owned generation; 3) examine expected prices and volatility under different scenarios, including the effect on migration to competitive suppliers; 4) examine the impact of new transmission; 5) forecast expected annual costs; and 6) recommend a portfolio mix to best accomplish the mandate of SB400. The utility filings are due October 1, 2008. The Commission did also state that the, "Order should not be construed as a decision by the Commission to adopt the recommendations submitted, or as a decision to modify in any way, the current SOS procurement practice - we will make that decision after reviewing the evaluations and recommendations the IOUs file and after any further proceedings conducted thereafter." The full text of the Order is available on the NEM Website.

New Jersey
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Utilities 2009 BGS Filing

As required by the Board, the electric utilities filed a proposal for the 2009 Basic Generation Service (BGS) procurement. The utilities made a joint filing with company-specific addenda. The utilities propose to continue the current BGS procurement methodology. Accordingly, BGS-Fixed Price (BGS-FP) and BGS-CIEP (Commercial and Industrial Pricing) Supply will be procured through the conduct of descending clock auctions. The BGS-FP auction will be for the supply of full requirements tranches of each utility's BGS-FP load for a three-year period. The BGS-CIEP auction will be for the supply of full requirements tranches of each utility's BGS-CIEP load for a one-year term.

In response to the Board's inquiry into lowering the CIEP threshold from 1,000 kw to 750 kw, the utilities noted that they "do not foresee and technical problems" with doing so. However, they encouraged the Board to continue its policy of "gradually expanding the CIEP class." The full texts of the Joint Utilities BGS Filing and Utility-Specific Addenda are available on the NEM Website.

New York
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NEM Comments on Draft Scope of 2009 State Energy Plan

Earlier this year the Governor issued an Executive Order requiring that the State Energy Planning Board be convened with the task of developing a State Energy Plan by June 30, 2009. A Draft Scope of the plan was released this spring. NEM submitted comments on the Draft Scope suggesting that an important element that is missing is the explicit recognition of the role competitive retail natural gas and electric markets have and will play in the realization of the State’s long-term energy planning goals. While possible to infer this theme throughout the Draft Scope, NEM recommends that such a critical component of this State’s energy policy for over ten years should be prominently considered and highlighted throughout the Draft Scope and eventual final 2009 Energy Plan. This is appropriate given: 1) the energy planning objectives set forth in previous State Energy Plans and retail market development realized as a result thus far; 2) New York Public Service Commission policy leadership that has encouraged significant retail market development and removed barriers to participation for consumers and marketers; 3) the high attendant costs and risks associated with regulatory market intervention; and 4) the role of competitive markets as catalysts for energy product and service innovation. The full text of NEM's Comments is available on the NEM Website.

ConEd Report on Expansion of ESCO Referral Program

As was required in its recently issued electric rate case Order, ConEd filed a report on the feasibility of expanding its ESCO referral program to include those contacting the utility for new service. ConEd concluded that is is feasible to expand the program and that it could do so by changing its existing new service initiation process. As one of the options offered to a customer at turn on, eligible customers would be asked to choose a company to provide electric or gas supply. Eligible customers are defined by ConEd as residential and small non-residential electric service applicants and all firm service gas service applicants in connection with initiating service (excepting retroactive service initiations under certain circumstances). ConEd notes that modification to UBP requirements on customer notice and rescission periods would be needed. ConEd estimates implementation costs of the program expansion of $167,762, and ongoing operations and maintenance costs of $310,274. These costs are proposed by borne by ESCOs participating in the program. Based on the current participation of 20 ESCOs in the program ConEd estimates that would equate to $8,388 for implementation and $15,514 for ongoing operations and maintenance charged to each ESCO. ConEd suggests it would take seven months to implement the program expansion. Comments on ConEd's Filing should be filed by August 18, 2008. The full text of ConEd's Referral Program Report is available on the NEM Website.

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