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April 25, 2003
NEM Conference Call on Retail Marketing and Related Technology Implementation Issues

NEM is convening biweekly conference calls to discuss retail marketing and related technology implementation issues as well as public relations issues. The next call will be held Thursday, May 1, 2003 at 3PM EST. The call will focus on the NEM public relations campaign and retail matters in the various states. The dial-in number is 703-788-0600, and the pass code is 209353. An Agenda for the conference call is available on the NEM Website.

New York Mercantile Exchange 2003 Derivatives Symposium

The New York Mercantile Exchange's 2003 Derivatives Symposium will be at the Embassy Suites Hotel, 102 North End Avenue, New York, NY (across from the Exchange). The symposium is open to anyone that has interest in learning more about futures and options. The seminars, workshops and exhibition booths are designed to educate attendees from every facet of the futures industry from the novice trader to the seasoned professional trader. All seminar and workshop sessions are free, but advanced registration is required. In addition, there will be a luncheon daily with a keynote speaker. To make a luncheon reservations, please contact Diana Femia at 212-299-2359 or e-mail For each luncheon you attend, there is a cost.

OM Presents PASS (an Accelerated Settlement Initiative) at FERC

OM met with FERC staff to discuss the Nordic electricity market and OM's Predictive and Accelerated Settlement Solution and Central Clearing Initiative (PASS).

OM's industry initiative, PASS, was created to improve market efficiency and accelerate the settlement process. PASS addresses the current credit and collateral problems in the energy market. Specifically, PASS reduces the extended period-of-time between dispatch and settlement in the physical markets. Currently, there is a 30 to 90 day time period between dispatch and final settlement. PASS uses estimated meter data and a predictive shadow settlement process to shorten the time between dispatch and payment. OM believes that accelerated settlements can significantly reduce collateral requirements and risks in the physical electricity market. OM believes that PASS can bring improved cash flow into the industry, minimize credit exposure and reduce overall corporate risk.

Geir Reigstad, Managing Director of NordPool Clearing ASA (both an exchange and clearinghouse), discussed: (1) the evolution of the market clearing industry and factors contributing to its success in the Nordic Electricity Market; (2) how NordPool clearing handles anomalous market conditions in Nordic countries; and (3) if the NordPool Clearing model could work in North America. The exchange in Nordic countries is geographically expansive (i.e. goes across ISOs) and has a day-ahead market (DAM). The Nordic market is 50% hydropower, which makes it somewhat unique. NordPool has direct membership in its exchange and clearinghouse and only trades listed standardized products. Additionally, the government acts as a support system for NordPool. In NordPool almost 100% of OTC contracts are being cleared.

FERC Staff was told that the precursors to a good financial market are stability in the spot market and a reliable index. Reigstad said that NordPool collects information and then creates its own index. Reigstad suggested that a transparent DAM will solve the problems of trade published indices.

FERC Held Technical Conference on Natural Gas Price Indices

William Henderman, Director, Office of Market Oversight & Investigation, moderated FERC's technical conference on Natural Gas Price Formation. Henderman stated that the price indices of the last decade are “mortally wounded.” FERC called this meeting to gather information about the following possible solutions to the current index problem: (1) fix the existing system, (2) make use of the information gathered by the exchanges; or (3) use a Third Party to collect and disseminate the data. The conference panelists focused on the following questions: (a) How do we arrive at good reliable natural gas prices?; (b) What are the different models for natural gas price reporting? and (c) What should be the minimum standards for price information collected for use by the Commission in tariffs and Orders? The Agenda for the meeting is attached here. A Summary of the testimony is available from NEM Headquarters.

GPSC Issues Final Order on Service Quality Standards for Marketers and the Regulated Provider

The Commission adopted Service Quality Measures for Marketers and Regulated Providers. The measures established benchmarks for: (1) the level of call center calls answered that must be answered within 180 seconds of a request to speak to an agent; (2) billing accuracy; (3) responsiveness to consumer inquiries and complaints; (4) meter reading accuracy; (5) meter reading timeliness; and (6) transmittal of meter reading data to the EDC. According to the standards if a benchmark has not been met, the service provider will have thirty days from the Notification Filing to file with the Commission a Remedial Action Plan (“RAP”). The standards require that all remedial activities must be completed within ninety days. If the deficiencies are not eliminated and the established benchmarks are not met then the service provider is considered to be in violation of the service quality standards. The presumptive penalty for non-compliance with any standard and approved benchmark for a recording period shall be $25,000 due thirty five days after the filing of the Remediation Report. The effective date in this program is July 1, 2003. The full text of the Final Order is available on the NEM Website.

Electric Companies Propose Standard Offer Service Fuel Adjustments

Massachusetts Electric Company and Nantucket Electric Company (together Mass. Electric), Boston Edison Company, Cambridge Electric Light Company and Commonwealth Edison (together NSTAR), and Fitchburg Gas and Electric Light Company (FG&E) filed proposed standard offer service fuel adjustments (“SOSFA”) with the Department of Telecommunications and Energy. The proposed SOSFA is $0.00902/kWh and is to go into effect May 1, 2003. FG&E's current SOSFA is $0.00660/kWh. Mass Electric and FG&E’s current Standard Offer Service base rate is $0.04700 per kWh. The adjusted base standard offer rate for Mass Electric would increase to $0.05602/kWh.

Alternate Power Source, Inc (APS) submitted a letter to the Department suggesting that use of historical data understates the actual market costs of standard offer power and will give cutomers inaccurate price signals. APS urged the DTE to reject the use of historical data and use forecasted data for the SOSFA. APS suggested that the SOSFA be set at $0.01633/kWh. The full texts of Mass Electric, NSTAR, and FG&E's SOSFA Proposals and APS Letter are available on the NEM Website.

NEM Submits Comments on Staff's Stranded Cost Strawman #2

NEM submitted comments on Staff's Second Stranded Cost Strawman. NEM submitted that it was concerned that the proposed fluctuating charge based on monthly switch rates will force consumers and retailers to continue to face even greater risks and uncertainties than the current stranded cost process affords. NEM comments stated that the scheduled charges do not represent actual "net stranded costs" incurred by the utilities but are rather a presumption that as customers switch, the incidence of "net stranded costs" will escalate. NEM submitted that the utilities should not collect charges for costs that may not be incurred. NEM recommended that net stranded costs be computed and recovered after a reasonable migration rate has been achieved. NEM urged the Staff and Commission to implement a more equitable and competitively neutral alternative. Specifically, NEM recommended that net stranded cost charges should be recovered by a de minimus charge on all customers and not just ROA customers. The full text of the NEM comments are available on the NEM Website. The next collaborative meeting on stranded costs in Michigan will take place April 30, 2003.

New York
NYPSC Authorizes ConEd Phase 4 Recovery

From May 1, 2001 through April 30, 2002, ConEd provided Energy Service Companies (ESCOs) with a one-time $65 payment for each new non-demand billed customer that remained in the retail access program for three consecutive billing cycles. Con Ed also provided a two mill/kWh credit to all retail access customers (reduced to one mill/kWh on September 1, 2001 for demand billed customers). One half of the retail access bill credits were assumed to be costs avoided by the company as a result of customer migration to retail access. ConEd was authorized to recover the remaining costs of the retail access bill credits upon a demonstration that the costs were unavoidable. Con Ed deferred $5.2 million of costs associated with the incentive payment and $9.5 million in costs related to retail access bill credits.

NYPSC Staff concluded that Con Ed properly recorded the accurate amount of costs incurred in providing the $65 incentive and that Con Ed's calculation of unavoided costs associated with the retail access bill credits in Phase 4 were accurate. The Commission held that Con Ed may recover $14.7 million of deferred costs related to Phase 4 of its retail access plan. The full text of the NYPSC Order is available on the NEM Website.

NYPSC Postpones Hearing for O&R

The NYPSC postponed the May 5, 2003 hearings regarding the rates, charges, rules and regulations for O&R for gas service. The active parties have scheduled settlement discussions on May 1 and May 2, 2003. O&R and Staff expect to know by May 9, 2003 whether or not they will submit a Joint Proposal in this case. A properl executed proposal could be filed as early as May 23, 2003.

DVP Proposes Three Retail Access Pilots

Dominion Virginia Power (DVP) filed an application to implement three new retail access pilot programs from January 1, 2004 through December 31, 2005. The pilots will make available to competitive service providers (CSPs) up to 500 MW of load. The three proposed pilots are: (1) Municipal Aggregation Pilot (for aggregation of residential and small business customers); (2) Default Service Pilot (default service will be offered to residential and small business customers in four blocks of load approximately 50 MW each; and (3) Commercial and Industrial Pilot. DVP proposes to reduce wires charges for participants during 2004 and 2005 by an amount equal to one-half of the wires charges approved for DVP by the Commission for 2003. The default pilot includes a process in which CSPs will bid on serving blocks of customers. DVP proposes that the Commission determine the qualification of the bidders, administer the bidding rules and manage the selection process for awarding the bids. The Commercial and Industrial pilot will be used to gather information about developing market-based pricing of electricity supply service provided by a distribution company. In each of the proposed pilots customers are free to return to the DVP's capped rate service at any time; however, certain commercial and industrial customers would be subject to minimum stay requirements as per Commission rules.

Parties interested in participating in this proceeding should file a notice of participation with the clerk of the Commission by June 4, 2003. Comments should also be filed by June 4, 2003. The full text of the Request for Comments is available at NEM Headquarters. An electronic copy of the Request for Comments will be posted on NEM's Website as soon as one is availbale.

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