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April 15, 2005
NEM's Annual Restructuring Conference

NEM's Annual Spring Restructuring Conference will be held at the Marriott Metro Center on April 26-27, 2005 in Washington, DC. The VIP reception will be held at the Canadian Embassy. A number of Senators and Ambassadors have confirmed attendance at the reception. Many thanks to Centrica, Commerce Energy Group, ESG, Excelergy, Interstate Gas Supply, Constellation NewEnergy, Proliance and SAP for offering to sponsor this event.

Speakers this year include FERC Chairman Patrick Wood, FERC Commissioner Kelly, CA Deputy Secretary of Energy Joseph Desmond, Orange and Rockland Utilities President John McMahon, MADTE Chairman Paul Afonso and Chairman Alan Schriber from Ohio. In addition to those mentioned above, Michigan PSC Chair Laura Chappelle, Ronald Cerniglia of the New York PSC, Jeanne Fox of the New Jersey Board of Public Utilities, and CA PUC President Michael R. Peevey have also confirmed.

Sessions will include: 1) Serving the Public Interest: Shifting Commodity Risks to the Marketplace, Modification of the Obligation to Serve and Incentives for Sustainable Growth; 2) Transition to a Competitive Market Cutting Edge Accelerated Customer Migration Strategies, Incentives and Timing of Utilities Exit from the Merchant Function. To sign-up for this conference or to view the agenda for the two day event, please click here.

Demand Response Meeting Planned

A meeting will be held in Washington, DC on June 21 by the Demand Response Coordinating Committee, FERC and the DOE to discuss demand response. Topics on demand response will include the role of policy; myths and misconceptions; customer responsiveness to price signals; identifying, valuing and allocating costs and benefits; ways to deliver; barriers; traditional regulation; and demand response as a long-term resource.

Michigan QFs File Complaint Against Michigan Commission Regarding Power Purchase Agreements

A group of Michigan QFs have filed a complaint against the Michigan Commission. The Michigan QFs have entered into long term PPAs with Consumers Energy. Under the terms of the PPAs, Consumers must pay capacity payments and energy payments based on avoided costs. Due to Consumers rebuilding its base plants, Consumers unilaterally changed the energy payments such that it is no longer paying avoided costs. The Michigan QFs sued Consumers, with the court transferring primary jurisdiction to the MPSC. The Michigan Commission found PURPA and the FERC regulations irrelevant. In addition, the Michigan Commission found that state law justified Consumers' failure to pay the Michigan QFs an energy rate based on avoided costs.

The Michigan QFs requested that FERC find the Michigan Commission order invalid because the Michigan Commission failed to implement PURPA and FERC regulations and because the order violates the Federal Power Act, the Public Utility Regulatory Policies Act (PURPA), and FERC rules.

Interventions and comments are due by April 20.

FERC Reviews RTO/ISO Reference Prices

FERC requested comments on the role of RTOs, ISOs or market monitors in establishing reference prices to mitigate bids in order to limit non-competitive results in wholesale electric markets. Comments are due by May 2.

FERC is interested in reference prices; market-clearing prices; the discretion used in setting reference prices; the consultation process for determining reference prices; frequency of setting reference prices; other methods to mitigate bids; etc.

Arizona
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APS Announces RFP for Renewable Resources

Arizona Public Service Company has issued a draft request for proposals for renewable energy resources for 2006. Specifically, APS requested renewable resources totaling at least 100 MW and at least 250,000 MWh/year for at least 5 years, beginning in 2006. The maximum price to be paid by APS may not exceed 125% of the estimated market price of a comparably structured conventional resource alternative.

Notices to bid are due May 25, with bids due by June 14.

Connecticut
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Connecticut Appeals FERC Decision on Electricity Rate Zones

The Connecticut Attorney General, Consumer Counsel and Commission have filed an appeal regarding FERC's ruling on Locational Installed Capacity charges and FERC's decision to split Connecticut into two electricity rate zones.

Connecticut L&P Increases Renewable Resource Supply Options

Connecticut L&P will offer 6 renewable resource choices to its customers, with four choices available through the state's Clean Energy Options program (which includes two suppliers) and two offered by an independent company.

Kentucky
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Commission Approves Extension of Columbia Gas Choice Program

Due to the efforts of NEM members Interstate Gas Supply and MX Energy, the Commission approved extension of the Columbia Gas choice program through March 31, 2009. The program permits customers with volumes of less than 25,000 Mcf annually to choose a third party supplier. Approximately thirty percent of eligible customers are participating in the program. The program has been modified regarding assignment of pipeline capacity to marketers and an increase in administrative fees to marketers.

Columbia will be permitted to establish an off-system sales program and a capacity release revenue sharing program in which it will share equally in the revenues with customers. Columbia will also use a hedging program to purchase a portion of winter gas volumes through futures contracts or by negotiating fixed prices in physical gas supply contracts with gas suppliers. Finally, Columbia will have a gas cost incentive mechanism to share with sales customers the difference in actual summer gas costs with benchmarked costs.

The full text of the Order Approving the Columbia Program is available on the NEM Website.

Maryland
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Suppliers' Complaint Regarding Customer Data Deficiencies Scheduled For Hearing

Suppliers filed a complaint against PEPCO regarding deficiencies in customer data information and in PEPCO's bills to the suppliers' customers based upon accurate and timely meter reads and in providing consistent historical customer usage data. A hearing has been scheduled for September 20-21.

At the same time, the Maryland suppliers and utilities continue to meet as part of the Competition Technical Implementation Working Groups in order to reach resolutions on billing and other issues.

New York
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Commission Seeks Comments on NYSEG/RG&E Request for Investigation

NYSEG and RG&E filed a request with the Commission to investigate the establishment of market monitoring measures and affiliate rules "to prevent potential gaming of the energy markets by companies which both own generation and sell electricity into New York retail markets." The utilities warn of a regulatory gap between FERC and the NYISO and the New York retail markets. The Commission has requested comments on NYSEG/RG&E's petition due June 18, 2005.

Commission Approves Central Hudson Hourly Pricing Program

The Commission approved Central Hudson's hourly pricing program proposal whereby the utility's largest customers will move to market-based pricing. The proposal had been highlighted in the Commission's Retail Policy Statement as a measure that would help to further competitive markets. The full text of the Order will be posted on the NEM Website when made available electronically.

Commission Approves Revised Flexible Rate Contract Guidelines

The Commission approved revised guidelines for flexible rate electric contracts offered by utilities to retain qualified large customers. The flexible rate guidelines favor the offering of flexible rate contracts for delivery service only, while retaining the option of a utility providing supply service as a last resort. The focus on flexible rate discounts for utility delivery service is intended to provide competitive suppliers with increased opportunities in the supply market. The full text of the Commission's Order will be posted on the NEM Website when made available electronically.

New York Formally Approves Renewable Resources Portfolio Requirement

New York has adopted the policy to increase renewable resources to at least 25% of retail demand by 2010. Specifically, the Commission formally approved the renewable portfolio standard, which was adopted as an emergency rule in December.

Meeting on ConEd Demand Management Program

Pursuant to the recently approved ConEd electric settlement, a comprehensive energy efficiency/demand management program will be established for ConEd. An action plan is to be developed to encourage participation in existing energy efficiency/demand programs and identify new program opportunities. A meeting will be held on April 20, 2005, at the Commission New York offices on 90 church Street, 4th floor, Hearing Room A beginning at 10:30AM to commence collaborative discussions on the action plan. Those interested in attending should RSVP to mariea@dps.state.ny.us or 518-486-2780 by April 18, 2005.

North Carolina
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Dominion North Carolina May Join PJM Under Certain Conditions

North Carolina approved Dominion North Carolina Power's request to join PJM; however, North Carolina consumers must receive certain benefits and protections. Among other things, Dominion may not pass along the direct or indirect costs of joining or being a member of PJM to North Carolina customers. In addition, Dominion's customers must continue to received cost-based rates, with the generation and transmission costs no greater than the lesser of (i) the costs determined on the basis of historical, embedded costs or (ii) the marginal costs of generation and transmission supplied into or purchased from PJM.

Ohio
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DEO Files Plan to Restructure Commodity Service Obligation

DEO filed a transition plan to "restructure its commodity service obligation." By the terms of the plan, during Phase 1 DEO would use an interim wholesale auction model through March 31, 2007, to procure wholesale supplies, and DEO would function as the provider of last resort. In a measure meant to improve price signals, DEO will also eliminate its Gas Cost Recovery Rate and implement a new Standard Service Offer Gas Cost Rate.

DEO proposes to issue a Request for Quote under the auction process within 30 days of Commission approval of the plan, "with the intent of receiving supply from the winning bidders and rendering bills reflecting the restructured commodity service within 60 days, preferably by September 1, 2005." DEO will conduct two auctions. In the first auction DEO will bid out half of the requirements for the entire term of the pilot and the other half for the term covering the initial months of the pilot. The second auction will be to receive bids for the half of the requirements for the remainder of the pilot. The auction is proposed in this manner to address the competing needs of price certainty and establishing a price that is representative of current market conditions.

If Phase 1 meets agreed upon performance goals, DEO intends to submit an application by September 6, 2006, for Phase 2 in which it will randomly assign remaining customers to direct retail marketer relationships based on average market share for non-aggregation customers throughout 2006.

The full texts of Part 1 and Part 2 of DEO's Application are available on the NEM Website.



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