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June 13, 2003
OM Nominated to Executive Committee

NEM is pleased to announce that OM has been nominated to the Executive Committee. OM is a world leading provider of transaction technology to the energy and financial services industries. OM will be represented within NEM by Chris Crosby, Senior Vice President for Energy Markets, Gerry Vurciaga, Vice President for Business Development, and Dariush Shirmohammadi, Vice President of Business Development and Solution Consulting. Gerry has also volunteered to help Co-chair NEM's Wholesale Technology Policy Development Team.

NEM Summer Executive Committee and Policy Meeting

NEM Summer Executive Committee Meeting to be held in Chicago at Constellation NewEnergy's Headquarters (Click here for map), on June 30, 2003 and July 1, 2003. The meeting will start at 9AM on June 30 and all attempts will be made to finish business in one day. This meeting will be for NEM Executive Committee Members only. A block of rooms has been reserved at the rate of $159 per night at the W Chicago City Center. Place your reservations at (312) 917-5640 or (866)833-9330. Reservations must be received by June 18, 2003, in order to guarantee the discounted rate.

Also, Please Register on the NEM website so we may have your meeting materials sent and ready for you in Chicago.

There are significant wholesale, retail, legislative, trading and technology issues currently facing NEM, and the industry. All Executive Committee Members are requested to attend. A Revised Agenda is available on the NEM Website.

NEM Member Opportunity

The Energy Litigation conference invites NEM members to speak at a conference on November 17 & 18, 2003, in San Diego. The topic they would like addressed is: The Need for Future Regulation of Energy Traders: To what extent is it desirable or necessary? The audience will consist of lawyers, industry executives, and government officials. A Draft Outline for the program is available on the NEM Website.

Conference Call to Discuss Michigan Stranded Cost Issues

NEM will convene a conference call on Tuesday, June 17, 2003, at 2PM EST to discuss strategy in the Michigan stranded cost collaborative proceeding. The dial-in number is 1-703-788-0600 and the pass code is 209353.

NAESB Wholesale Gas Quadrant Considers Creditworthiness Standards

The wholesale gas quadrant (WGQ) Executive Committee of the North American Energy Standards Board (NAESB) considered standards related to the creditworthiness of parties involved in interstate pipeline capacity release. The WGQ Executive Committee identified areas of industry agreement as well as policy differences on creditworthiness, and agreed to forward to the Federal Energy Regulatory Commission (FERC) by June 15 a complete record of their deliberations. Approved at the last meeting were standards covering: (1) acknowledgment of a request for creditworthiness evaluation information from a transportation service provider (TSP) to a service requester (SR); (2) notification by a TSP that it has received all creditworthiness information requested from an SR; (3) designation by a TSP and an SR of representatives authorized to send and receive creditworthiness notices; and (4) the obligation of a TSP to provide the reasons for a request to an SR for additional information to be used for creditworthiness evaluation after the initiation of service. The full text of the NAESB Press Release is available on the NEM Website.

Greenspan Testifies at Committee on Energy and Commerce Hearing

At an Energy and Commerce Committee hearing, Federal Reserve chairman, Alan Greenspan, stated that the "updrift and volatility of the spot price for gas have put significant segments of the North American gas-using industry in a weakened competitive position." Greenspan said the United States should prepare to increase imports of the fuel, which is increasingly in demand. Greenspan's testimony focused on the need to increase the ability to import liquefied natural gas as a "safety valve" against flat domestic production of natural gas and rising demand. He said the nation should consider building terminals to accept deliveries of liquefied natural gas from other countries as the quickest way to address the supply needs. Greenspan stated that if "North American natural gas markets are to function with the flexibility exhibited by oil, unlimited access to the vast world reserves of gas is required." Greenspan's testimony stated that access to world natural gas supplies will require a major expansion of LNG terminal import capacity. The full text of Greenspan's Testimony is available on the NEM Website.

FERC Chairman Pat Wood, stated that “Greenspan is to be commended for highlighting concerns about the cost and supply of natural gas in this country. He is to be applauded for pointing out the potential to increase supplies quickly through imports of liquefied natural gas (LNG).” Wood emphasized that LNG imports can become a more important part of meeting the nation’s demand for natural gas, particularly given the time it will take to build a pipeline to bring Alaska gas to the lower 48 states. In an effort to enhance domestic supplies, FERC has decreased the time needed for approval of new pipelines and in December 2002 exempted LNG terminals from FERC’s open-access requirements.

CPUC Issues Draft Decision to Maintain Exit Fee Caps

The California PUC issued a draft decision holding that the existing Direct Access (DA) cost responsibility surcharge (CRS) cap of 2.7 cents/kWh applicable to each of the three utilities shall continue to remain in effect for the period beginning on and after July 1, 2003. The Draft Decision stated that the 2.7 cents cap will be subject to possible future adjustment, as deemed necessary to pay off DA CRS undercollection by 2011, through periodic review in annual DWR revenue requirement proceedings. The final recorded confirmation of the DA CRS undercollection for 2001-2002, together with the adoption of the final adopted allocation of 2003 DWR power charges to the DA CRS will be determined and implemented on a parallel basis in coordination with the implementation of the 2003 DWR revenue requirement redetermination. The exit fee cap draft decision matter is set for consideration at the June 19, 2003, meeting. The full text of the CPUC Draft Decision is available on the NEM Website.

SB 888 Passed in the Senate and AB 428 Passed in the Assembly

SB 888 passed the Senate by a vote of 21-16. Many lawmakers supported the bill only after voicing their concerns that the measure needs more work. Critical to the bill’s passage was a provision added just before the floor vote that SB 888 “shall not become operative” and is “for display purposes only.” Senator Dunn told fellow lawmakers that the change ensures that discussions with industry stakeholders about the bill would continue.

SB 888 had 108 amendments before it was heard in the Appropriations Committee. Senator Jim Battin (R-La Quinta), vice chairman of appropriations, complained that the late flurry of changes rendered the committee unable to fully grasp the possible effects of SB 888. Dunn stated that this week’s large number of amendments came from mere renumbering and reordering of various passages. Other substantive changes included new wording to promote renewable technologies and “environmentally clean, efficient” power applications.

Dunn also claimed confirmation that Governor Gray Davis would sign SB 888. “We’ve had three face-to-face discussions about the bill,” Dunn said in an interview with California Energy Markets.

By a vote of 63-0, the California Assembly also gave their approval to AB 428 (Richman). The bill would keep competition alive in the state’s electric markets. AB 428 calls for all customers of an investor-owned utility—both core and noncore—to pay for energy reserves.

It is reported that Richman and CPUC president Michael Peevey have held discussions about how best to implement direct access. Richman’s Chief of Staff stated that, despite a recent article indicating that Davis will support SB 888, he believes that AB 428 will be signed into law by Governor Gray Davis. He also predicted that AB 428 and SB 888 could end up in conference committee later this year so the bills’ similarities and differences could be addressed together.

Other Energy Legislation in the Assembly

Other energy bills acted on in the Assembly include: (1) AB 808 (Canciamilla) to put an end to the California Energy Commission and the California Power Authority and make the CPUC subsidiary to a new Department of Energy. The bill passed 75-0 on May 29;(2) AB 151 (Vargas) to impose a fee of $0.001/KWh on power shipped north from plants in Mexico with insufficient emission controls. This bill passed by a vote of 45-31; (3) AB 426 (Richman) to allow solar panels to be erected over state water conveyances. This bill passed by a vote of 71-4; (4) AB 1685 (Leno) to extend until 2008 the state’s incentive program for distributed generation resources. This bill passed by a party-line vote of 54-25.

Assembly energy bills are now eligible to be taken up in the Senate starting next week.

New York
Notice of Workshop on Cost/Benefits of RPS

A workshop will be held on June 27, 2003, from 2:00 p.m. to 4:00 p.m., at the Albany offices of the Public Service Commission. The purpose of the workshop is to discuss the scope of appropriate methodologies for assessing the costs and benefits of various retail renewable portfolio designs, weighing these against other factors. Consultant Robert Grace, of Sustainable Energy Advantage, will participate in this workshop. Department of Public Service Staff will discuss the scope of its cost and benefit analyses. A telephone bridge will be made available. The full text of the NYPSC Notice is available on the NEM Website.

PUCO Examiner Denies Marketer Request for Emergency Relief From Onerous Security Requirements

PUCO denied Volunteer Energy Service's motion for emergency relief from Columbia Gas of Ohio's secusrity requirements. In April, Volunteer Energy Services filed a complaint against Columbia alleging that its imposes onerous security requirements as a prerequisite to providing service in Columbia's territory. Volunteer asked the Commission to rule that the untariffed security formula is unlawful and unreasonable and wanted emergency relief suspension of the security requirements. PUCO did not grant Volunteer's motion but did set this matter for a settlement conference on June 24, 2003, to determine if the matter could be informally resolved. The full text of the PUCO Order is available on the NEM Website.

PAPUC Releases Summer Competition Report

The Pennsylvania PUC released its Summer 2003 Keystone Competition Report. The Report discussed the next steps on various competition issues including the following: (1) The Commission intends to hold another meeting for the POLR Work Group this summer to begin developing proposed regulations; (2) Staff is developing a Strawman proposal for circulation to the SOLR Working Group this summer; (3) The Demand Side Response (DSR) Working Group will meet on June 18, 2003, to develop principles on DSR programs implemented by electric distribution companies.

Additionally, the Report stated that on May 1, 2003, service commenced for those small commercial PECO customers that accepted their assignment to alternative generation suppliers under the Market Share Threshold (MST) processes. The MST program provides for a price-based competitive bidding process for the assignment of specific classes of PECO customers to alternative electric generation suppliers. In addition to the commercial program, there is a residential MST process that was organized into 2 phases. No eligible suppliers submitted bids on May 15 to participate in the first phase. A second auction for residential customers will occur in September 2003. The full text of the Keystone Competition Report is available on the NEM Website.

Texas PUC Proposes Amendment Relating to Capacity Auctions

The Public Utility Commission of Texas proposed an amendment relating to Capacity Auctions. The proposed amendment will require that two-year strips be auctioned for the 2004 through 2005 time period. In addition, the proposed amendment delay the September 2003, auction until October 2003. Comments on the proposed are due June 20, 2003. The commission requested specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed section. The full text of the Proposed Amendment is available on the NEM Website.

DVP Extends Wires Charge Discount for Pilot Participants Until 2007

A DVP representative stated that the utility will continue to offer a wires charge discount to C&I pilot participants beyond 2005 when the pilots end until 2007. NEM and other parties submitted comments on the DVP pilots last week. NEM submitted multiple comments in Virginia that the current wires charge is a major factor inhibiting competition in the state.

At a meeting this week on DVP's pilots, the name of the default service pilot was changed to "competitive bid supply service (CBSS)" to more accurately reflect that the pilot will test the competitive bid process for choosing default suppliers. The CBSS pilot will include about 43,000 customers in four 50-mw blocks that will be bid out to suppliers on a retail basis.

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