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September 23, 2005
NEM Fall Industry Leadership Roundtable

The NEM Fall Leadership Roundtable will be held October 20th and 21st. All NEM members are invited to attend the Leadership Roundtable. Companies that have expressed an interest in joining NEM will also be invited as guests of the association. NEM is hosting the event - there is no attendance fee. Use this hotlink to register.

The Roundtable will begin in the Small Business Committee Room, located in the Rayburn House Office Building, Room 2360, on Thursday, October 20th at 10AM. A working lunch will be served and a cocktail reception will follow the conclusion of the day's events. Invitations have been extended to Maryland PSC Chair Schisler as well as other MDPSC Commissioners and Staff. Maryland's Lieutenant Governor Michael Steele has confirmed his attendance. On Friday, October 21st, we will conclude our meeting in the Science Committee Room in Rayburn House Office Building, Room 2325. The Agenda is hotlinked here.

NEM National and Regional Policy Chairs are scheduled to update the General Membership on the issues of import and present updates on each region. Topics for NEM leadership discussions and membership briefing include: 1) Federal/Wholesale issues - a) implementation of Energy Policy Act, b) Order 888 reform, c) best practices for ISO credit policies, d) capacity constructs; 2) Retail issues - a) impact of gas and electricity prices on restructuring policies, b) standardized retail contracts and retail referral programs, c) gas storage and pipeline capacity allocations, d) proper role of utilities in a competitive marketplace - when is a utility an agent of the state - protected conduct under state action doctrine - utility offerings of competitive products - modification of obligation to serve; 3) Technology issues - a) real time meters and pricing, b) demand response solutions.

Please mark your calendars and plan to join us!

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Order on Type II Standard Offer Service

The Commission issued an Order accepting the Standard Offer Service (SOS) Type II Settlement with two modifications. The Type II Settlement divided current Type II customers into two new groups, Type I-A and Type II-A. "Type I-A customers are those not eligible for Type I SOS whose PJM capacity peak load contribution (PLC) is 100 kW or less, excluding existing utility special generation contract customers, while Type II-A customers are all other Type II SOS customers (those with a PLC greater than 100 kW but less than 600 kW), excluding special generation contract customers." Utility service under the settlement would have run through May 31, 2008. The settlement provided that Type I-A SOS would be provided in the same way Type I SOS is currently provided. Type II-A would be provided in the same way Type II is currently provided except it would be procured for two periods each year with no volumetric risk mechanism. Interval meters would be provided to all customers with a PLC of 550 kW or greater and standby service customers by June 1, 2007, and to customers with a PLC of 500 kW or greater by June 1, 2008.

The Commission modified the settlement so that Type I-A customers will be eligible for SOS based on the current Type II procurement procedures. The duration of the settlement was shortened to expire on May 31, 2007, except for AP customers, for which it will expire on December 31, 2007. The Commission found that the proposal with respect to Type I-A customers would "retard the development of competitive choices" for these customers by its use of blended one and two-year SOS contracts. The Commission felt it was more appropriate for these customers to have a SOS product based on the current one-year procurement process. The Commission found that, "an SOS product which is characterized by a price that remains unchanged for undue periods of time can deter entry and deprive customers of the varied contract terms which would be available with greater entry. . . . In order for entry to occur, the opportunity to compete against the SOS product must be sustained and continuous, not intermittent."

The Commission also directed the parties to discuss proposals for "expeditiously implementing customer choice." The discussion should not be limited to Type II customers, and should include all feasible program designs, including multiple procurements of SOS power per year, various potential indexing methods for pricing SOS and potential provision of SOS by a retail bidding regime. Quarterly updates on the parties progress are required. The full text of the Order is available on the NEM Website.

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Comments Sought on Consumers Energy Securitization Offset for Retail Access Customers

In a 2002 Order, the Commission required Consumers Energy to issue credits to retail access customers from excess securitization savings that were equal to securitization and tax surcharges in 2003. The Michigan Court of Appeals subsequently found that "qualified costs are not identical to stranded costs" and that the Commission erred in "allowing the securitization offset for ROA customers at issue to the extent that it was based on qualified costs that did not constitute stranded costs." The Court remanded this issue to the Commission. However, the Court also noted that, "none of these arguments require the PSC to completely abolish the securitization offset at issue as opposed to limiting it to providing an offset for only that portion of qualified costs constituting stranded costs."

The Commission has requested briefs on the following issues: 1) whether it should determine the part of the securitization offset for retail access customer attributable to stranded costs and only provide an offset for the portion of the charge based on stranded costs; 2) whether it should abolish the securitization offset for retail access customers completely; 3) what redress is appropriate with respect to amounts already paid to retail access customers from excess securitization savings. Initial briefs are due October 21, 2005, and reply briefs are due November 4, 2005. The full text of the Order is available on the NEM Website.

New York
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Commission Orders Utility Real Time Pricing for Large Customers

In response to upward energy price pressure caused by Hurricane Katrina, the Commission allocated an additional $500,000 to customer outreach and education to give consumers information needed to conserve energy, manage heating costs and understand market forces that affect the price of natural gas and electricity. Relatedly, "In an effort to put downward pressure on wholesale electricity prices in the short term, the Commission today ordered the utilities to file draft tariffs within 60 days to make real-time hourly pricing mandatory for the largest customer classes. Real-Time Pricing programs can provide significant value by assisting utilities and their customers in reducing peak-load demands and in shifting load to off-peak, less expensive time periods. It has been demonstrated that even a modest level of demand reduction in response to hourly prices can reduce the need to operate the most expensive gas and oil-fired generators, thus lowering wholesale power prices to the benefit of all customers. Both Niagara Mohawk Power Corporation, Inc. and Central Hudson Gas and Electric, Inc. require hourly real-time pricing for their largest customers." The Commission also noted that "the price of gas reflected on customers' bills is not based solely on current market prices," and that, "increased fuel costs are eventually recovered from customers regardless of whether utilities operate in a competitive wholesale market or under a traditional, regulated rate of return regime." The full text of the Commission's Order requiring real-time pricing will be posted when made available electronically.

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