NEM's Fall Industry Leadership Roundtable will be held November 15-26, 2007, in Green Bay, Wisconsin at the offices of NEM Executive Committee member Integrys Energy Services. This meeting is open to all NEM members and prospective members as well.

NEM negotiated discounted room rates at the Ramada Plaza Green Bay at the rate of $84/night. You must call the Ramada at 920-499-0631 and request the NEM rate (it is not available on the internet). Please register for the meeting using this hotlink.

Many thanks to Integrys Energy Services for hosting the meeting.

CFTC held a hearing this week pertaining to the oversight of trading on regulated futures exchanges and exempt commercial markets (ECMs). In its testimony, NYMEX (a designated contract market or DCM) discussed that due to technological advances in trading that NYMEX, the regulated DCM, and ICE, an unregulated ECM, have become "highly linked trading venues." This situation caused NYMEX to conclude that, "for those products trading on ECMs that have triggered public policy interests and concerns, NYMEX believes that the CEA [Commodity Exchange Act] should be amended to require routine mandated large trader reporting and position accountability requirements for financially settled ECM contracts that are highly linked to and functionally equivalent with regulated DCM contracts. Such ECMs also must be assigned self-regulatory organization duties to police their own markets and to submit applicable rule changes to the CFTC in a manner similar to other regulated entities."

In its testimony, ICE suggested that, "a heightened level of DCM-like regulation, including heightened reporting and a system of position accountability, may be appropriate for certain of ICE's cleared OTC swap contracts (those, like ICE's cleared Henry Hub swap contract, that settle on a futures market contract price and that are the true economic equivalent of an actively traded futures contract). However, applying a standard of 'DCM regulation' more broadly to all of the highly varied swap contracts traded on ICE, either through application of DCM-like core principles ill-suited for illiquid trading markets, or worse, by eliminating the category of exempt commercial markets altogether as some people have advocated, would be a serious mistake that would not only result in less market efficiency, but ultimately in harm to the constituency that the Commission is charged with protecting - the end users of the markets." The full texts of the meeting agenda and witness testimony is available at this hotlink.

In a related event, Senator Levin introduced S.2058, the "Close the Enron Loophole Act," in Congress this week. The bill was introduced to require government oversight of the trading of energy commodities by large traders to prevent price manipulation and excessive speculation. The major provisions of the bill would: 1) require Energy Trading Facilities (ETFs) to be subject to CFTC oversight; 2) require ETFs to establish position limits or accountability limits for traders; 3) define "energy commodity" as a "commodity (other than an excluded commodity, a metal or an agricultural commodity) that is (A) used as a source of energy, including but not limited to crude oil; gasoline, diesel fuel, heating oil, and any other product dervied or refined from crude oil; natural gas, including methane, propane, and any other gas or liquid derived from natural gas; and electricity; OR (B) results from the burning of fossil fuels to produce energy, including but not limited to carbon dioxide and sulfur dioxide;" 4) define "energy trading facility" to mean a trading facility that trades contracts in an energy commodity (not in the cash or spot market) between large traders and provides either a clearing function or a price discovery function in the futures or cash market for that energy commodity; and 5) require reporting of domestic trades on foreign exchanges by large traders to the CFTC. The full text of S.2058 is available on the NEM Website.

NEM submitted comments in FERC's inquiry into wholesale competition in organized electric markets supporting FERC's efforts to provide consumers with the benefits of demand response programs enabled by improved market-based pricing signals. NEM noted that demand response is an inherently competitive function and that the importance of informed energy usage for consumers cannot be understated. With regards to long-term contracting, NEM urged that FERC consider the implications of any policy recommendations or requirements for the continued development of competitive retail energy markets.

FTC suggested that FERC, "focus on the removal of regulatory obstacles to efficient real-time price signals and on the creation of performance incentives for market participants." Interestingly, FTC noted that, "one could argue that the large cross-subsidies inherent in traditional retail price regulation result in prices that do not satisfy the statutory requirement that they be 'just and reasonable.' Such subsidized prices accentuate wholesale price volatility, undermine reliability, and increase the average costs of the electric power system."

ELCON suggested that this inquiry proceed forward premised on the federal policy in support of competition and should focus on the question of, "the merits of continuing to rely on the Day-Two framework because that competitive model has failed to stimulate suitable new investment where it is needed and when it is needed."

Power in the Public Interest, led by Marilyn Showalter, suggests that FERC should undertake an, "on-going, active assessment of prices in RTO regions, and whether those prices would be lower, over the long term, under a more traditional, cost-based, bi-lateral market."

The full texts of the Comments of NEM, FTC, ELCON and PPI are available on the NEM Website. Comments of additional stakeholders are available from NEM headquarters.

FERC announced the creation of a new Energy Innovations Sector within the Office of Energy Market Regulation. The creation of this unit is intended to provide the Commission with expertise in the areas of demand response, energy efficiency, distributed generation, renewable energy issues, greenhouse gas emission and advanced technologies related to the grid and wholesale markets.

FERC also announced the creation of a new Office of Electric Reliability. This office was formerly a division within the Office of Energy Markets and Reliability. The office will focus on the development and implementation of mandatory and enforceable reliability standards for the bulk power system.