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.

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 plant’s 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 plant’s 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.

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 customers’ 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.

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 Virginia’s 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.