April 13, 2001


 NEM National Restructuring Conference, Stakeholder Summit and Capitol Reception was an Important Milestone in the Restructuring Debate.

Approximately 250 CEO's, lawmakers, regulators, and CEO's from the U.S., Canada and Western Europe attended NEM's Annual Membership Meeting, National Restructuring Conference, Capitol Reception and Restructuring Stakeholder Summit held last week in Washington, DC. The two-day event addressed how to competitively restructure U.S. energy markets and bring lower energy prices, real-time information and world class energy-related technologies to all consumers in the shortest possible time. Members and media representatives who wish briefings of the presentations and policy dialogues are encouraged to contact headquarters.

 NEM Summer Policy Development Meeting

NEM Executive Committee members are reminded that the summer policy development meeting will be held June 28-29, 2001, at the Hotel Boulederado in Boulder, Colorado. Please mark your calendars. Rooms at the Historic Bolderado are very limited. Agenda items will include the development of National Guidelines for Advanced Metering and Distributed/Self Generation, strategies for upcoming "bottoms-up zero rate base utility unbundlings", long-term fixed price programs and the next steps on National Energy Technology Policy development and implementation. Please also send headquarters your nominations for next year's Regional, State and National Policy Chairs and Co-Chairs.

 NEM Conference Call Schedule

NEM members and invited prospective members are urged to join important conference calls next week as follows:

  • April 16, 2001, at 2PM EST - Strategy session for conference call with Michigan PSC
  • April 17, 2001, at 2PM EST - Conference call with Michigan PSC
  • April 18, 2001, at 2PM EST - Strategy session for prehearing conference in NY unbundling proceeding
  • April 19, 2001, at 2PM EST - Strategy session for meeting with FERC.

The dial-in number is 303-248-1820 and the passcode is 428358 for all of the calls.

Federal Issues

 EIA Electric Power Surveys

EIA is seeking comments on electric power surveys revised to reflect competitive markets. The proposed revised surveys are available on the NEM Website as follows: EIA-411-Coordinated Bulk Power Supply Program Report; EIA 412-Annual Electric Industry Financial Report; EIA-423-Cost and Quality of Fuels for Electric Plants; EIA-826-Monthly Electric Sales and Revenue Report with State Distributions; EIA-860-Annual Electric Generator Report; EIA-861-Annual Electric Power Industry Report; and EIA-906-Power Plant Report. Members should forward their comments to headquarters by COB April 20, 2001. The Notice of the Proposed Surveys is also available on the NEM Website.


 PJM Proposed Load Response Pilot Program

PJM has filed a Proposed Load Response Pilot Program to be effective June 1, 2001, through May 30, 2002. The program is comprised of two options. The Emergency Option is intended to provide a means of compensating end-use customers for reducing load in an emergency. Under the Emergency Option, a PJM member that nominates load reduction will be paid the higher of the appropriate zonal Locational Marginal Price (LMP) or $500/MWh by PJM and will also be assessed a $10 transaction fee per account for each event.

The Economic Option is intended to provide a means by which qualified market participants can offer end-use customers the opportunity to reduce the load they draw from the PJM system during high prices and share the relative savings. Under the Economic Option, load reduction is arranged by a Curtailment Service Provider or an end-use customer. PJM will bill the Load Serving Entity (LSE) serving the needs of the customer the appropriate LMP for the entire amount of energy needed to meet the customer's load, without the reduction. PJM will refund the LSE an amount equal to the retail generation and transmission charge that the LSE would have received from the retail customer had the load not been reduced. The difference between the zonal LMP billed to the LSE for the customer's load without the reduction and the retail rate "refunded" to the LSE for the actual reduced load will be paid to the third party or end use customer that contracted for the reduction.

NEM has circulated draft comments in support and members are requested to forward mark-ups on the filing to headquarters ASAP. The full text of the Transmittal Letter, Revised OATT, Revised OATT (Redlined), Revised Operating Agreement, and Revised Operating Agreement (Redlined) are available on the NEM Website.

 NYISO Economic Load Curtailment Program

NYISO submitted a filing to implement an Incentivized Day-Ahead Economic Load Curtailment Program to be effective May 1, 2001. The program will allow demand side resources in the New York Control Area, including certain curtailable loads and "behind the fence" generators, to submit day-ahead demand reduction bids. Under the proposal, Demand Reduction Providers will be paid the product of: (a) the Day-Ahead hourly LBMP at the applicable Demand Reduction Bus; and (b) the hourly demand reduction scheduled Day-Ahead (in MW). In addition, Demand Reduction Providers that reduce demand by Curtailing Load will receive a Demand Reduction Incentive Payment from the ISO equal to the product of: (a) the Day-Ahead hourly LBMP at the Demand Reduction bus; and (b) the lesser of the actual hourly Demand Reduction or the scheduled hourly Demand Reduction (in MW). The full text of the NYISO Filing is available on the NEM Website.

 Technical Conference on Interregional Coordination

A motion has been filed requesting the Commission convene a technical conference on RTO seams issues and interregional coordination. Comments on the filing are due April 27, 2001. The full text of the Motion is available on the NEM Website.

State Issues

New York

 NEM Brief in POLR Proceeding

NEM has filed a brief in the POLR proceeding arguing that: 1) a date certain should be set for transition to a competitive market; 2) the POLR function can and should be a competitively bid function that reflects all of the political, social and reliability concerns of providing Last Resort service; 3) utilities should perform only natural monopoly functions, i.e., utilities should sell regulated distribution services on a "no frills" cost of service basis; and 4) POLR service should not be designated as a subsidized rate to address low income concerns, but rather programs could be developed to bid out aggregated low income groups as part of POLR service or a separate service. The full text of NEM's Brief is available on the NEM Website.

 Order in ConEd Electric Phase 4 Proceeding

The Commission approved the proposed settlement in the ConEd electric phase 4 proceeding with modifications. The settlement provides for a $65 one-time payment to ESCOs for each new non-demand billed customer that signs up for retail access, and $25 of the payment must be passed on to the customer. Demand billed customers will receive a retail access reduction of 2 mills/kwh effective May 1, 2001, that will be reduced to 1 mill/kwh effective September 1, 2001. Non-demand billed customers will receive a reduction of 2 mills/kwh effective May 1, 2001. The Commission ordered that ConEd must demonstrate that it could not avoid the costs associated with the retail access reductions in any request for cost recovery. The full text of the Order is available on the NEM Website.


 FirstEnergy-GPU Merger Briefs

The Consumer Advocate, Staff and FirstEnergy-GPU have filed briefs in the merger proceeding. The Consumer Advocate argues that the proposed merger should not be approved as proposed but rather should be subject to the condition that FirstEnergy be required to meet GPU's POLR obligation within the agreed upon rate caps. The Consumer Advocate argues that GPU's request for a deferral or rate increase should be denied because GPU has not demonstrated it will not be able to earn a fair rate of return. The Brief of the Consumer Advocate is available on the NEM Website.

Staff argues the merger should not be approved unless a portion of the merger savings is returned to ratepayers by a reduction in CTC liability or some other alternative. Staff also maintains that approval of the merger should not be predicated on FirstEnergy's assistance with satisfying GPU's POLR obligation because the record reveals FirstEnergy cannot provide meaningful on-peak assistance due to transmission difficulties. The Brief of Staff is available on the NEM Website.

FirstEnergy-GPU maintain they have satisfied the legal standard for approval of the merger, and the other parties list of conditions for approval should be rejected. They also maintain that MetEd and Penelec must be permitted to implement generation rate increases effective January 1, 2001, to avoid serious financial harm. The Brief of FirstEnergy-GPU is available on the NEM Website.


 Gas Marketer Certification Law

The Governor has signed HB9 on gas marketer certification. The law gives the Commission authority to certify gas marketers operating within the state, authorizes the Commission to require a natural gas company having 15,000 or more customers to provide distribution service on a fully open, equal and nondiscriminatory basis to gas marketers, and requires the Commission to adopt rules on additional consumer protections such as contract disclosure requirements, bill contents, and terms for disconnection and service termination. The full text of the Gas Marketer Certification Law will be posted on the NEM Website when made available electronically.


 Order on Phase-In of Retail Choice

The Commission has ordered that all retail electric customers in the Delmarva, AEP Virginia, and Allegheny service territories can choose a competitive service provider on January 1, 2002. Retail choice is to be phased in for the Virginia Power service territory by January 1, 2003. The full text of the Order is available on the NEM Website.

 AEP-VA Corporate Separation Plan

The Commission has set a schedule for review of AEP-VA's corporate separation plan as follows:

AEP-VA Files Prefiled Testimony and Unbundled Rates - May 29, 2001; Notice of Protest Due - June 5, 2001; Prehearing Conference - July 13, 2001; Comments on Corporate Separation Plan - August 29, 2001; Protests and Prefiled Testimony of Protestants - September 7, 2001; Staff Prefiled Testimony - September 21, 2001; AEP-VA Rebuttal Testimony - October 1, 2001; and Public Hearing - October 29, 2001.

The full text of the Order on the AEP-VA Schedule is available on the NEM Website.

Other Issues

 UIG-UBP Coordination

UIG is planning to develop electronic transaction sets to comply with UBP standards. It is important that this process be monitored by participants in the UBP process to ensure the UBP standards are implemented as was originally intended. UIG will be conducting a conference to discuss next steps.

 Excepts from NEM's National Restructuring Conference

Following a "closed-door" briefing by Karen Knudsen, Deputy Director of the White House Energy Policy Team, Texas PUC Chairman Pat Wood discussed competitive market principles underlying restructuring in Texas that he termed the "Texas Ten," including, taking the time to do it right, stimulating generator investment, motivating transmission investment, standardization, watching market power, ensuring reliability, and don't forget the customer. NYPSC Chairman Helmer discussed why New York is not like California since; "NY has had a public power authority for decades. NY's administrative approach has allowed for mid-course corrections, and NY has an 18% reserve margin for capacity." Helmer also highlighted NY's real need for new generation. PA PUC Commissioner Brownell discussed the need to address uniform business rules "at the very least at a regional level."

Graham Huggins, Chairman of Prebon Energy moderated a panel that addressed when small customers will benefit from competition. Clem Palevich, President of AES New Energy, stressed the need to, "eliminate utility default service, but if you can't, any default retail service price must include all retail service costs." Gerald Rhodes, President of Exelon Energy, discussed that, "in order to bridge the gap between wholesale and retail, customer demand must become responsive to price signals."

Professor William Hogan discussed how, "the PJM (and NY, soon NE) success stands in sharp contrast to the California meltdown," and cautioned that, "the success of the RTO Millennium Order depends on two big "ifs." Market reform can work if FERC means what it says, and if FERC follows through." Michigan PUC Commissioner David Svanda agreed with Hogan that, "the challenge is not to run out of time," and that "investments in competitive models need to be given enough time to operate." Professor Hogan also addressed ERCOT, contrasting the good news - excess capacity, with the bad news - adoption of many features of California AB 1890.

Congressman Barton disagreed that deregulation efforts would be freezed because of California, arguing that the, "energy problems enhance the likelihood of advancing restructuring legislation." Barton also plainly stated that, "price caps don't work," and won't increase supplies.

Andy Hopkins, Vice President of Alliance Data Systems, in a panel on lower energy costs with competitive billing and information services urged adoption of "uniform business practices, transaction standardization, data transport standardization and investments in new technology." John Gaus, President and CEO of Enermetrix, discussed key principles to make markets work such as, "technology investment across the value chain, automate front and back offices, standardization and automation from market to meter, customers must programmatically buy, contract and curtail, traders and suppliers must programmatically price and contract, and the utility must manage POLR load to create liquidity and transparency."

Speaking on a panel on distributed generation and advanced metering, Leroy Nosbaum, President and CEO of Itron Inc., argued that, "advanced metering systems and the information they deliver are required to optimize the delivery and use of energy." Tony Prophet, President of Honeywell, discussed the benefits of distributed generation such as, "clean baseload power, outage risk mitigation, and peak shaving-arbitrage opportunities," and said that the, "real value of distributed generation is dispatching against the market, not against a tariff."