Earlier this year, the Commission opened a proceeding to examine the utilities' provision of standard offer service (SOS) to residential and small commercial customers and to consider the competitive process for procuring SOS supply. The Commission has now begun a Phase II proceeding to examine: 1) requiring utilities to build, acquire or lease peak load or other generating plants to avoid reliability problems; and 2) bid solicitation processes for energy efficiency and demand response programs. The impact on retail competition of both of these options is to be considered. Initial testimony is due October 12, 2007, and reply testimony is due October 26, 2007. A hearing in the case will be held November 5, 2007, at 10AM. The full text of the Notice Initiating Phase II Proceeding is available on the NEM Website.

The Commission will hold a conference to review upcoming preparations to meet winter gas demand and expected market conditions for the upcoming winter. Implementation of gas hedging programs will also be discussed. The Commission welcomes supplier participation in the conference, "to the extent competitive conditions allow." The conference will be held October 17, 2007, in the Commission's 16th floor hearing room. Written materials to be used at the conference should be filed by October 12, 2007. The full text of the Notice of Retail Gas Market Conference is available on the NEM Website.

NEM and its members Direct Energy and Interstate Gas Supply filed a motion to reopen, petition for rehearing and motion for stay of the Commission's recent Order approving a settlement of MichCon's proposed gas storage enhancements and related GCR adjustments. The Commission approved a settlement related to MichCon's request for approval of the sale of excess system gas supply and related accounting changes resulting from enhancements made to its gas storage system. The settlement provides that, "MichCon shall make a total decrement to its gas storage balance of 17 Bcf. 7.2 Bcf of the 17 Bcf decrement shall be to native base gas and 9.8 Bcf shall be to working gas. . . GCR customers will receive the benefit of the 9.8 Bcf decrement to working gas." It was argued that rehearing was necessary to receive further evidence that NEM was precluded from providing when its intervention was denied as well as a policy statement and letter submissions, filed by NEM and competitive suppliers respectively, that the Commission did not consider in its Order. NEM met the criteria for standing and should have been permitted to participate in the case as a representative of choice suppliers serving customers that will be directly impacted by the outcome of the case. It was also argued that the Commission's approval of the settlement has unintended consequences, by providing benefits to GCR customers to the exclusion of choice customers. The full text of the Petition is available on the NEM Website.

The Commission approved, with certain modifications, ConEd's gas rate settlement. The settlement pertains to the period October 1, 2007, through September 30, 2010. By the terms of the settlement, ConEd will continue its Purchase of Receivables program, ESCO referral program and market match website but is, "under no obligation to, continue any other elements of the Retail Access Program established in the 2004 Gas Rate Plan." The POR discount rate applicable to receivables on bills issued on and after October 1, 2007, through December 31, 2007, will be 1.69 percent. ConEd will notify ESCOs on or about December 15 of the POR discount rate applicable in the next calendar year. Commodity uncollectibles and working capital on gas in storage will be recovered through ConEd's Merchant Function Charge and Monthly Rate Adjustment, instead of base delivery rates. The Commission also directed ConEd to contine to work with Staff on its unbundled bills format to ensure consumers receive bill containing accurate price signals. The full text of the Order Approving ConEd's Settlement is available on the NEM Website.

SB221 was introduced in the Senate this week on the structure of retail electric service in the State and conforms to the Governor's energy plan announced earlier this month. As a general matter, the bill provides that, "the commission may so supervise and regulate competitive retail electric service provided to consumers by an electric utility in this state if the commission determines the supervision and regulation is necessary to implement the state [electric] policy." In effect, it permits the Commission to return to pre-restructuring law (SB3) utility regulation.

The bill retains the electric utility standard service offer, which can be provided under a cost-based electric security plan, or a market rate option, through which prices would be determined by a competitive bidding process. The market rate option can only be offered premised on a Commission finding that, "relevant markets are subject to effective competition."

The bill would require the Commission to develop advanced energy portfolio standards applicable to electric utility SSOs to encourage "development and implementation of next-generation energy technologies." The Commission would also be required to establish energy efficiency standards for electric utilities. The Commission would be required to have a federal energy advocate to monitor FERC proceedings and examine the value of participation of state utilities in RTOs.

The full text of SB221 is available on the NEM Website.

The Ohio Supreme Court affirmed the Commission's decision approving Phase 1 of DEO's planned exit of the gas merchant function. Ohio Partners for Affordable Energy had challenged the Commission's Phase 1 Decision that approved a bid process for the establishment of a retail price adjustment, which in conjunction with the NYMEX natural gas price, sets the standard offer service price for DEO customers. The Court found that the Commission's decision was consistent with state policy goals to promote competition, to promote adequate, reliable and reasonably priced natural gas, to promote availability of unbundled gas services to meet consumer needs and to promte supplier diversity. The Court relied on the Commission finding that, "a move to purer market pricing will provide customers with better comparative information to make more informed decisions about their commodity service alternatives, eliminate pricing distortions in the gas cost recovery system rate, and encourage conservation in response to more accurate price signals." The full text of the DEO Decision is available on the NEM Website.