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July 13, 2007
NEM Summer Executive Committee and Policy Development Meeting

NEM held its Summer Executive Committee and Policy Development Meeting this week in Naperville, Illinois. Many thanks to the Goeken Group Corporation for sponsoring and hosting the meeting. At the meeting, NEM elected its Executive Committee leadership for 2007-08. The full text of the 2007-08 NEM Fact Sheet is hotlinked here. Harry Warren, President of Washington Gas Energy Services, and Steven Boss, CEO of Commerce Energy, were elected Chair and Vice Chair, respectively. Bill Kinneary, VP of Market Development for Infinite Energy, will serve as Chair Emeritus .

NEM's national policy leadership is as follows:

Wholesale Electricity Policy: Stephen Fabiani (President, Freedom Energy), Chair

Wholesale Natural Gas Policy: Steve Sherman (Attorney for Proliance Energy), Chair

Retail Natural Gas Policy: Scott White (President, Interstate Gas Supply), Chair

Retail Electricity Policy: Mark Radtke (President, Integrys Energy Services), Ron Cerniglia (Director-National Advocacy, Government and Regulatory Affairs, Direct Energy), Co-Chairs

Advanced Metering, Demand Response, Energy Efficiency and Market-Based Pricing: Tom Tamarkin (President, USCL Corporation), Chair

Retail Consumer Products, Innovations and Economic Development: Chris Hendrix (General Manager, Competitive Energy, Wal-Mart Stores, Inc., General Manager, Texas Retail Energy, LLC), Carl Scianna (President & CEO of PolyBrite International and Borealis Lighting), Co-Chairs

Consumer Information Access and Best Practices: Rob Roy (Vice President, Sales, Excelergy), Chair, Rick Boyer (National Sales, Haines), Co-Chair

Advanced Carbon and Renewable Technology Policies: Bill Mahoney (President and CEO, South Carolina Research Authority), Bob Block (Board Member, USCL), Co-Chairs

Consumer Education and Public Relations: Sandra Goeken-Miles (President, Goeken Group Corporation), Chair, Linda Ames (Corporate Communications Manager, Commerce Energy), Co-Chair

At the meeting, the Executive Committee assesses the advocacy priorities for NEM for the remainder of the year. The following state priorities were identified: Top Tier - Pennsylvania, Delaware; Second Tier - New York, Maryland, California, Ohio, Illinois; and Third Tier - Michigan, New Jersey, DC, Texas, FERC, and Congress.

Discussion was also had on utility and Commission interest in metering infrastructure investments. It was discussed that so long as utilities remain in the merchant function, and they are permitted to upgrade their metering infrastructure: 1) customers must have access to the data on a real time basis (information follows the customer); 2) metering hardware must permit open access with standard architecture to permit competitive entities to bring software innovation; and 3) energy efficiency and conservation should not be sole sourced to the utility (competition yields innovation).

NEM Comments on Gas Price Reporting NOPR

FERC proposed revisions to its regulations intended to facilitate market transparency in natural gas markets that would: (a) require daily posting of some natural gas flow information by intrastate pipelines; and (b) require annual filings by buyers and sellers of natural gas in U.S. wholesale markets (that transact more than de minimis volumes) of aggregate annual purchase and sale information. The latter proposal is meant to, “permit the annual estimate of (a) the size of the physical domestic natural gas market, (b) the use of index pricing in that market, (c) the size of the fixed price trading market that produces price indices from the subset reported to index publishers, and (d) the relative size of major traders.” NEM submitted comments on the proposed rulemaking urging that the promotion of natural gas market transparency can be achieved with a voluntary price reporting regime. NEM requested that the Commission clarify that retail transaction data is not intended to fall within the scope of the proposed reporting requirements and is exempt. NEM urged that any reporting requirements be narrowly tailored so as to minimize marketer record-keeping and compliance costs and risks. NEM also requested clarification and/or modification of elements of the proposed reporting form - pertaining to the proposed filing deadline, proposed form terminology, effect of inadvertent reporting errors, and impact of border transactions - to maximize the usefulness and relevancy of data collected and to minimize associated reporting burdens. The full text of NEM's Comments is available on the NEM Website.

New York
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National Grid and Keyspan File Merger and Revenue Requirement Joint Proposal

National Grid and Keyspan filed a joint proposal (JP) on their merger and revenue requirements. The JP provides for five year rate plans for Keyspan NY (KEDNY) and Keyspan LI (KEDLI), with KEDNY receiving no increase in delivery revenue requirement during that time and KEDLI receiving a $60 million delivery revenue requirement increase in year one of the rate plan and no further increases for the remainder of the term. The JP states that retail access programs and rate unbundling are reserved issues to be addressed in on-going efforts in the Keyspan rate cases.

With respect to KEDNY and KEDLI's Gas Adjustment Clause (GAC), certain commodity related costs will be moved from delivery rates into the GAC. Commodity-related uncollectible expense, purchased gas working capital and return on gas in storage will be assigned fixed factors and be reconciled to actual gas costs. Additionally, 100% of net savings attained by KEDNY/KEDLI in its combined gas portfolio as a result of the merger will be flowed through to gas commodity customers through the GAC.

With respect to Keyspan's Ravenswood Station, National Grid commits to the goal of divestiture, and in the period prior to divestiture, National Grid agrees to take steps "to assure it is financially indifferent to the price of energy in Zone J with respect to the output of the Ravenswood Station." National Grid agrees that by January 1, 2008, it will enter into a single forward financial sale contract for all of the energy output from the entire Station for up to a three year term. Fourteen months prior to the end of the term of this agreement, National Grid will issue an offering document requesting bids for the Ravenswood Station, and may also simultaneously solicit bids for an alternative backstop long-term bilateral physical or financial contract of at least 15 years for all of the products of the entire Ravenswood Station. If National Grid has not accepted a proposal for a divestiture or long-term contract, then at the end of the financial sale agreement, the revenues from all of the products of the entire Station that exceed the cost of service, including an allowed return on investment, will be applied to the benefit of electric ratepayers in Zone J.

The full texts of the Joint Proposal and Summary of the Joint Proposal are available on the NEM Website.

NYSEG Electric Joint Proposal Filed

NYSEG filed a joint proposal on its electric commodity offerings. By the terms of the JP, NYSEG's current Default Service Option and Variable Price Option would continue as presently calculated. NYSEG's Fixed Price Option would also continue with two components of the calculation methodology updated - a 6 mill/kWh adder would replace the current 4 mill/kWh adder and the conversion factor to derive the retail market supply price would be reduced from 17.5% to 16.9%. The FPO would be offered by NYSEG for a three year term beginning on January 1, 2008.

The Joint Proposal includes a number of provisions affecting retail access. For instance, it provides that parties will develop an ESCO Introduction Program applicable at customers' initiation of service in replacement of NYSEG's previously-filed ESCO Referral Program that the Commission has not acted upon. The parties will also develop a "price to compare" methodology for customer bills. NYSEG will continue its Purchase of Receivables program, and the discount will be fixed at 1.15% for a three year period beginning January 1, 2008. NYSEG will utilize a fixed nonbypassable charge for all customers that will be trued up annually and reset annually.

The JP sets forth a timeline for moving large C&I customers to mandatory hourly pricing. By the terms of the JP, customers with a peak demand of 500KW or larger would move to mandatory hourly pricing in 2008, customers with a peak demand of 400kW or more would move in 2009, and customers with a peak demand of 300kW or more would move in 2010, subject to certain exemptions.

The full texts of the Executive Summary and the Joint Proposal are available on the NEM Website.

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FirstEnergy Competitive Bidding Process Proposal

FirstEnergy has filed for Commission approval of a competitive bidding process (CBP) to procure supply for its Standard Service Offer (SSO) electric customers to be applied beginning in January 1, 2009. FirstEnergy proposes two CBP alternatives for consideration. The CBP would utilize a descending clock format to procure supply in 100MW tranches. Bidders would provide a full requirements product. Solicitations will be conducted for delivery periods of varying lengths to smooth price volatility. One approach would solicit bids on a load class basis. The other approach would solicit bids on a slice of system basis. FirstEnergy affiliates would be permitted to participate in the CBP. Supplier participation would be capped at 75% of the SSO supply for any class in the load class alternative for each solicitation and 75% of the system load under the slice of system alternative.

If the load class alternative is utilized, the avoidable charge for each load class will be equal to the SSO generation charge plus the reconciliation charge. If the slice of system alternative is utilized, the avoidable charge for each load class will be equal to the lower of the blended competitive bid price multiplied by the supplier seasonal billing factor adjusted for average distribution line losses and applicable taxes, or the customer SSO generation charge.

FirstEnergy will use a quarterly reconciliation mechanism to adjust the retail price to reflect difference between SSO generation service revenues and SSO supply costs. Reconciliation charges will be included in charges to SSO customers approximately sixty days after the conclusion of the calendar quarter.

FirstEnergy proposes to implement an optional hourly pricing service for customers with appropriate interval metering and communication capabilities. FirstEnergy proposes to eliminate demand charges and declining block rates. FirstEnergy also proposes that market pricing for residential customers be phased in if the average customer would experience an increase of greater than fifteen percent.

FirstEnergy requests Commission approval of its application by November 1, 2007. Accordingly, it proposes the following procedural schedule:

Technical Conference - July 31
Interested Parties Comments - August 14
Staff Comments - August 21
Reply Comments - August 31
Commission Decision - by November 1

The full text of FirstEnergy's CBP Proposal (Part 1, Part 2, and Part 3) is available on the NEM Website.

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