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February 13, 2004
NEM's Annual Membership Meeting and National Restructuring Conference

Please register early for NEM's Annual Membership Meeting and National Restructuring Conference. It will be held on March 31 and April 1, 2004, in Washington, DC at the Capitol Hyatt. House Energy and Air Quality Subcommittee Chairman Barton, FERC Chairman Wood, CFTC Chairman Newsome, FERC Commissioner Brownell, CFTC Commissioner Brown-Hruska, NARUC President Wise, NJBPU President Fox, ICC Chair Hurley, NARUC BPL Committee Chair and MIPSC Commissioner Chappelle have all confirmed that they will be presenting keynote addresses at the NEM event.

If you wish to sponsor this event, please use this hotlink and contact headquarters. Harts Magazine has offered to do a special section featuring our VIP sponsors. You may view the agenda and register for the event by using this hotlink. Registration Information is also available on the NEM Website.

NEM Held Its Winter Executive Committee Policy and Planning Meeting

The Winter Executive Committee Policy and Planning Meeting was held January 20th and 21st, 2004, in Houston, Texas. CEOs from 40 member companies in the US and Canada attended the meeting to address the industry's priorities for 2004. Separate retail, wholesale, and technology issue identification break out sessions provided a number of significant insights into the current state of the industry and its likely direction for 2004. Reports from NEM members were very encouraging and the upcoming year looks promising. A summary NEM Year End Review is available on the NEM Website. NEM's Retail Issues, Wholesale Issues, and Technology and Services Issues for 2004 are also available on the NEM Website. A detailed report on NEM's issues and priorities for 2004 will soon be available.

Member Opportunity

Starks Gas Storage is seeking customers to contract for storage capacity at its planned storage facility in Louisiana. An open session is planned from February 17 to March 5, 2004. Additional information is available at (403) 645-3044 or (713) 320-0561 or at www.encanastorage.com.

FERC Proposes Standards For Assessing Shipper Creditworthiness

FERC proposed a rule to require interstate natural gas pipeline companies to follow standardized procedures for determining the creditworthiness of their shippers. The proposal would incorporate by reference 10 standards developed voluntarily at the Commissionís request by the Wholesale Gas Quadrant of the North American Energy Standards Board (NAESB). The proposed rule also would adopt additional regulations pertaining to the creditworthiness of the pipelines.

FERC stated that pipeline tariff provisions on creditworthiness are not consistent or uniform and that such differences could be at odds with the goals of creating a seamless and integrated pipeline grid. The proposed rule addresses a range of creditworthiness issues including: (1) standards for financial data and other information that shippers will be required to provide pipelines to establish creditworthiness; (2) a requirement that pipelinesí creditworthiness determinations be made on the basis of objective and transparent criteria; (3)collateral requirements for service on existing facilities as well as service obtained through pipeline construction; (4) timelines for suspension and termination of service; and (5) proposed standards governing capacity release transactions.

Comments are due 30 days after publication in the Federal Register. The full text of FERC's Proposed Standards will be on the NEM Website as soon as it is available in electronic form.

ALJ Initial Decision Approves Ameren Energy Generation Asset Transfer

In an initial decision, administrative law judge (ALJ) Cintron approved the proposed sale and transfer from Ameren Energy Generating Company (AEG) to AmerenUE of transmission and generating facilities associated with certain of AEG's generation assets. AEG is an exempt wholesale generator and AmerenUE is a franchised utility. The ALJ held that the transaction does not have an adverse effect on competition. The ALJ found that there is no evidence of affiliate abuse and that AmerenUE's proposed purchase of its affiliate's plants is on terms similar to any other competitive alternatives available.

It was argued that AEG prevailed over more efficient competitors not on the merits of its product, but because of its affiliate relationship with AmerenUE. It was also argued that the proposed transaction would remove 540 MW of capacity from competition. ALJ Cintron held that the proposed transaction does not affect the relevant market concentration merely because demand is removed from the wholesale market and that the argument that wholesale competitors have lost the ability to compete for the load which will be served by the acquired plants is misguided. The ALJ noted that: (1) FERC has already granted both AmerenUE and AEG market-based rate authority indicating that Ameren's wholesale markets are workably competitive; and (2) Ameren has demonstrated that it will not be able to recover an acquisition premium from its ratepayers. Therefore, the ALJ found that the proposed transfer does not have an adverse affect on competition.

It was also argued that by transferring excess generation from AEG to its regulated affiliate, Ameren could serve captive retail load without "fear of competition." ALJ Cintron, in light of the fact that FERC's merger policy is that it will not consider issues of retail competition unless the state regulatory body affected is unable to do so, found that the proposed transaction did not create a "safety net" for affiliated merchants. The full text of ALJ Cintron's Initial Order is available on the NEM Website.

FERC Approves South Power Pool's Proposed RTO

FERC approved with conditions the Southwest Power Poolís (SPP) proposed RTO. FERCís approval is conditioned on SPP taking the additional steps required to complete the details of its plan.

To better conform to the provisions of Order No. 2000, the Commission directed SPP to: (1) Implement its independent board and modify its governance structure; (2) Expand the coverage of SPPís tariff to assure that SPP is the sole transmission provider; (3) Obtain clear and sufficient authority to exercise day-to-day operational control over appropriate transmission facilities; (4) Have an independent market monitor in place; (5) Obtain clear and precise authority to independently and solely determine which project to include in the regional transmission plan; and (6) Have a seams agreement with MISO on file.

Arkansas-based SPP has 50 members, including a broad range of participants, from investor-owned utilities, a federal power marketing agency, independent power producers and power marketers. SPP serves more than 4 million customers in all, or parts of, Arkansas, Kansas, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, and Texas. The full text of the FERC Order is available on the NEM Website.

Illinois
Meetings Planned To Examine Future of Electric Market

The Illinois Commerce Commission is planning a series of meetings and workshops to examine the future of the stateís electric market and identify public policy issues surrounding deregulation of the electric industry in Illinois. Commissioner OíConnell-Diaz has been asked to lead the Commissionís Post 2006 Initiative. The stateís legislatively mandated transition period from a fully regulated electric market to a largely deregulated electric market concludes at the end of the year 2006. Commissioner OíConnell-Diaz intends to call a meeting of interested stakeholders, including electric utilities, consumer advocates, independent power producers, energy marketers and others, to identify all the issues that require resolution. The meetings will be used to develop a schedule of workshops designed to explore solutions to market structure challenges, and determine what regulatory or legislative changes may be needed to address the new marketplace in Illinois.

Maryland
Maryland Staff Proposes Draft Gas and Electric Supplier Consumer Protection Regulations

The Maryland Public Service Commission ordered Staff to file proposed electric choice and gas supplier consumer protection regulations by April 2, 2004. Staff will hold three stakeholder meetings to gather input. The meetings will be as follows: February 17 at 9:30 AM at BGE RBC-South; March 5 at 9:30 AM at BGE Spring Gardens; and March 15 at 9:30 AM at BGE RBC-South. Staff prepared draft regulations based on various Commission orders on electric and gas consumer protections, which it will use as the starting point for stakeholder input. Staff encourages interested parties to bring forward modifications and alternatives to these draft regulations. Comments on Staff's April 2, 2004 draft regulations are due April 23, 2004.


Staff's draft proposed Electric Choice Consumer Protection Regulations and Gas Supplier Consumer Protection Regulations encompass the following areas: (1) Credit History; (2) Geographic Marketing; (3) Unauthorized Enrollment or Service; (4) Advertising; (5) Supplier Contracts; (6) Consumer Disclosure; and (7) Notice of Contract Termination or Renewal. The full text of the draft Electric Choice and Gas Supplier Consumer Protection Regulations are available on the NEM Website. A NEM Alert is available from headquarters for members.

Michigan
Customers Participating in Electric Choice Increases by 70 Percent in 2003

The Michigan Public Service Commission (MPSC) released its annual ďStatus of Electric Competition in MichiganĒ report. The report documents that Michiganís electric choice markets have continued to expand, with the number of customers increasing by 70 percent since last year. Highlights of the report include the following: (1) Over 13,000 customers are now participating in Michiganís Retail Open Access (ROA), growing by 70 percent to a total of 2,728 megawatts (MW). (2) While the number of licensed Alternative Electric Suppliers (AESs) increased by only two, the number of AESs actively serving customer grew significantly. (3) Suppliers active in Consumers Energy territory doubled from 4 to 8, and those active in the Detroit Edison service territory grew from 12 to 18. (4) All transmission assets formerly owned by CMS Energy and DTE are now part of MISO. (5) In 2003, MISO developed a plan to implement reliability tools on an accelerated schedule, and delayed the implementation of the energy market until December 1, 2004. The full text of the Competition Report is available on the NEM Website.

New York
Schedule for ConEd Gas Rate Case

On November 21, 2003, ConEd filed its proposals to increase gas rates by $105.7 million (about 9.5%). The Commission adopted the following schedule for this proceeding: Staff and Intervenor Testimony is due March 16, 2004; Rebuttal Testimony is due March 30, 2004; Evidentiary Hearings begin April 26, 2004; Initial Briefs are due May 21, 2004, and Reply Briefs are due June 4, 2004. The full text of the Order is available on the NEM Website.

Niagara Mohawk Conference on Standard Interconnection Requirements

Niagara Mohawk scheduled a telephone conference for Wednesday, February 25, 2004, at 10AM to discuss IEEE Standard 1547. The agenda includes the following: Federal and State efforts: (1) respective proposed rules by FERC and PSC; (2) IEEE 1547 - technical issues of concern; (3) ESB 756B; and (4) Other issues. The dial in number is 888-333-0879 and the passcode is 991630#. Persons interested in participating must reply by February 20, 2004 at 315-428-9638 or Angela.Ziemba@us.ngrid.com.

Ohio
DEO Meeting To Discuss Issues Involved With DEO's Possible Exit From The Merchant Function

Dominion East Ohio (DEO) has continued to experience a substantial migration of GCR customers to its Energy Choice program. Currently, 56% of DEO's former sales customers participate in DEO's Energy Choice program, and the largest supplier pool has a customer base that is about 40% as big as DEO's remaining GCR market. Given the supplier-of-last-resort issues already faced by DEO and the prospect of continued migration, DEO concluded that it should explore issues specifically related to a restructuring that could potentially lead to DEO leaving the GCR business. Therefore, DEO is holding a meeting at the Public Utilities Commission of Ohio offices on March 4 at 10:00 AM. DEO stated that their intent is to solicit information from various stakeholders, over the course of several meetings, as to what issues an exit from the merchant function might raise. Attached is a White Paper prepared for DEO and a Power Point presentation that will be reviewed at the meeting.

NEM has rescheduled a conference call to Wednesday, February 18, 2004, at 2 PM EST to discuss these issues. The call-in number is 703-788-0600, and the passcode is 209353

PUCO Order on FirstEnergy's Transmission Service Tariffs

The Public Utility Commission of Ohio (PUCO) approved FirstEnergy's tariffs, which require competitive retail electric service (CRES) suppliers to arrange for and schedule their own transmission services through MISO. PUCO declined to require FirstEnergy to reimburse CRES suppliers for additional MISO costs above the transmission cap. However, PUCO did agree with Staff and the marketers that CRES providers should be reimbursed the full amount of transmission revenues received from customers when the charges paid by CRES providers to MISO is less that the amount collected from customers. PUCO also held that transmission revenues FirstEnergy receives from customers should be forwarded to the CRES providers in a manner similar to CRES energy charges - they should be forwarded to the CRES provider on the next business day following customer's payment, when possible, but at least every two weeks. The full text of the PUCO Order is available on the NEM Website.

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