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September 2, 2005
NEM Fall Industry Leadership Roundtable - Dates Rescheduled

Please note that due to significant member scheduling conflicts, the NEM Fall Leadership Roundtable will no longer be held on October 13-14, 2005. The meeting will now be held the following week on 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. 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 Key Public Officials.

NEM Policy Chairs will be requested to update NEM members and guests on the state of the industry in the key states identified at the last meeting and the status of issues directly affecting the members. Policy Chairs are requested to send bullets for discussion to headquarters as soon as possible. A draft agenda is hotlinked here.

On Friday, October 21st, we will conclude our meeting in the Science Committee Room in Rayburn House Office Building, Room 2325.

Please mark your calendars and plan to join us!

PJM Files Reliability Pricing Model

PJM filed a Reliability Pricing Model (RPM) with FERC to reform its existing capacity rules. Under the RPM, PJM will conduct a series of auctions for each "Delivery Year" in order to match capacity needs with offers to sell, to set clearing prices to pay to capacity sellers, and to determine the reliability charges to be paid by load serving entities. Four years before each Delivery Year a Base Residual Auction will be held to be followed by Incremental Auctions as necessary to permit market participants to adjust capacity market positions. PJM will use a variable resource requirement curve to clear the RPM auctions. Generation, demand resources and transmission upgrades will be permitted to compete. PJM requests FERC approval by January 31, 2006, in order to achieve a June 1, 2006 implementation. The full texts of PJM's RPM Filing is available from NEM headquarters.

NYISO Filing on Netting Bilaterals Project

FERC previously required NYISO to increase reporting of activities related to its creditworthiness policy due to NEM recommendations. As a result, NYISO recently filed a report on its Netting Bilaterals Project. NYISO said it, "views the Netting Bilaterals Project as a potential improvement to its market structures, but has determined that it is not a project that merits the resources that would be required to implement it at this time," inasmuch as it "would benefit only a small number of Market Participants." It stated that efforts to complete the project likely will not begin before 2006 due to resource constraints.

A protest was recently filed requesting that FERC order NYISO to implement the Netting Bilaterals Project by March 1, 2006. The protestor complains of the disproportionate collateral requirements of the NYISO market, for example, the NYISO required collateral from the protestor of $30.3 million on 1,007,698 MWh sold versus PJM's requirement of $150,000 on 2,557,189 MWh sold. The full text of the NYISO Filing is available on the NEM Website.

California
Click here to view all past updates.
Staff Capacity Markets White Paper

Staff issued a Capacity Market White Paper. Based upon its review of models utilized in PJM, NYISO and ISONE, Staff recommends the following: 1) adopt a short-run organized capacity market approach with a downward sloping capacity-demand curve for the CAISO; 2) continue to investigate alternative availability metrics and ensure development of a metric that is applicable to hydro, wind, thermal and other generation technologies as well as appropriate demand response products; 3) consider subtraction of peak energy rents from the capacity payment; 4) adopt reasonable locational installed capacity requirements with locally varying demand curves; 5) use capacity prices that fluctuate seasonally; 6) investigate the dependability of capacity import contracts during times of high West-wide load; 7) make the fixed-cost recovery curve explicit; and 8) strive for regulatory credibility. Initial comments on Staff's White Paper are due September 23, 2005, and reply comments are due October 10, 2005. The full texts of Staff's Capacity Markets White Paper and the Notice Seeking Comments are available on the NEM Website.

Michigan
Click here to view all past updates.
Staff Proposal in Capacity Needs Forum

Commission Staff submitted a proposal in the Capacity Needs Forum arguing that, "electric reliability is a public good" and as such "is not likely to be provided by a competitive market alone." Staff discussed two methods of utility financing of new generation: 1) the utility can build the plant in the traditional manner, without public involvement and then request rate base recovery after the plant is completed; or 2) use a "reliability option." "Under the reliability option, the utility would file an application with the Commission containing the following: (1) details of its proposed plant, including expected cost and anticipated in-service date; (2) an analysis of why the proposed plant is the appropriate resource to meet the expected need and an analysis of the public benefits associated with the plant; (3) if desired, a request for placement of the plantís construction work in progress (CWIP) in rate base without an offset for allowance for funds used during construction (AFUDC); and (4) if desired, a request for a reliability charge on all customers receiving retail distribution service from the utility." Staff explained that, by virtue of the reliability charge, "all customers would be credited with their pro-rata share of the plantís reliability value in satisfying any regional reliability standard." Additionally, if customers of, "an alternative electric supplier (AES) pay a reliability charge, the AES shall have a one-time opportunity to make a pro-rata investment in the generating station." The full text of Staff's Proposal is available on the NEM Website.

New York
Click here to view all past updates.
ConEd Files Price Index Multiplier Mechanism

Pursuant to the Commission's Order approving its gas rate settlement, ConEd submitted proposed tariff changes to modify its Price Index Multiplier (PIM) mechanism for gas imbalances for marketers serving daily-metered interruptible customers and to provide for recovery of actual incremental costs associated with implementation of the mechanism through retention of firm customersí share of non-firm revenues. The proposed tariff changes the current three-tiered mechanism with a four-tiered mechanism as follows:

For Surplus Imbalances:
0-10% @ 100% of Price Index
>10-15% @ 90% of Price Index
>15-20% @ 85% of Price Index
above 20% (Summer) @ 70% of Price Index
above 20% (Winter) @ 60% of Price Index

For Deficit Imbalances:
0-10% @ 100% of Price Index
>10-15% @ 110% of Price Index
>15-20% @ 115% of Price Index
above 20% (Summer) @ 130% of Price Index
above 20% (Winter) @ 140% of Price Index

The changes are proposed to be implemented effective October 1, 2005. The full text of ConEd's PIM Filing is available on the NEM Website.

Virginia
Click here to view all past updates.
Commission Report on Status of Retail Competition

The Commission submitted its annual report to the legislature on the status of retail competition. The report finds that, "while retail access is widely available in many jurisdictions, vigorous retail competition has yet to develop," which causes "serious concern regarding the ability of retail electric competition to provide, at the present time, lower prices for Virginians than would have been charged under the traditional regulation of the industry." The Commission fears that, "after the end of capped rates in 2010, should Virginiaís homes and businesses face electricity prices based on, set by or primarily influenced by wholesale electric prices in PJM, prices for electric service could rise precipitously in the Commonwealth." The Commission cites the upward trend in wholesale price histories, PJM's practice of using a single price auction, a trend toward increased industry concentration in the power generation sector, new FERC capacity pricing constructs or relaxed market mitigation rules and the lack of an external market monitor for PJM as contributing factors. The full text of the Commission's Report is available on the NEM Website.



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