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August 1, 2003
NEM Upcoming Meetings and Conferences

NEM's Fall 2003 Leadership Roundtable will be held October 7-8, 2003. Centrica has generously offered to host the meeting at the fabulous Queen’s Landing Inn and Conference Resort at Niagara-on-the-Lake in Ontario. The NEM rate will only be available through August 18, 2003. Please reserve your room early at (905) 468-2195.

The easiest way to arrive is to fly into Buffalo and drive across the border. However, there is shuttle service available at the Toronto Airport. Given the size, diverse expertise and desire of the group to develop detailed advocacy positions there will be break out sessions for (1) Wholesale, Trading, Credit, Clearing, Price Reporting/Manipulation issues, (2) Retail, National Consumer Education, and PR issues, (3) Technology Standards and Implementation issues. Detailed agendas for each policy team will be available on the NEM Website shortly. All members are encouraged to attend. Prospective members are also invited subject to space availability.

A block of rooms will be reserved for October 6-7, 2003, at the rate of $265/night (Canadian). Registration Information is available on the NEM Website.

The Winter Executive Committee Policy and Planning Meeting is scheduled for January 20th and 21st, 2004, in Houston, Texas.

Please also mark your calendars for March 31 and April 1, 2004, for NEM's Annual Membership Meeting and National Restructuring Conference. It will be held in Washington, DC at the Capitol Hyatt. Chairman Wood, NARUC President-elect Wise, NJBPU President Jeanne Fox and a number of other important speakers have already confirmed. If you wish to be listed as a sponsor of this event, please contact headquarters ASAP as advertisements are coming out shortly. Registration Information is available on the NEM Website.

NEW Section On NEM Website For Technology Policy Issues

NEM is now providing a a special section on its Website to be used for the NEM Technology Policy Development Team. The purpose is to assist members and government agencies in providing information and discussing the development of standards for data exchange in the energy industry. Members will have the ability to submit information on such things as standards, discussion papers, any information on relevant pilot projects, and so on. The site also provides a template to submit documents as well as agendas and minutes of Team meetings. The Technology Policy Section of the Website can be accessed using this hotlink. There will be a conference call of all those interested in Technology Policy Development on August 21, 2003, at noon eastern time. The dial in number will be 703-788-0600 and the pass code will be 209353.

NEM To Meet With Chairman of NYPSC

The meeting with Chairman Flynn has been scheduled for 10:30 AM on September 30, 2003, in Albany. NEM will hold pre-meeting conference calls to discuss the Agenda items for the meeting. The first conference call will be held on August 26, 2003, at Noon Eastern Time. The last conference call will be held on September 23, 2003, at Noon Eastern Time. The dial in number will be 703-788-0600 and the pass code will be 209353. Please mark your calendar for the meeting and the conference calls and let Headquarters know as soon as possible if you plan to attend. Also please send any suggestions for the agenda that you think can properly be added. The attached Agenda has passed ethics review.

Senate Passes Energy Bill

The Senate approved an energy policy outline (84-11) Thursday night identical to a bill that was approved by a Democratic-controlled Senate a year ago. To win Democratic agreement, Republicans promised to allow separate votes this year on strengthened enforcement of energy-market manipulation and on climate control. Senate Republicans said they agreed to adopt last year's bill because they plan to write provisions of their choosing when they meet with House negotiators later this year to work out differences between House and Senate energy bills.

Important provisions of the 2002 bill include: 1) FERC's authority to a) determine just and reasonable market-based rates, including consideration of market power, market nature and response mechanisms, and reserve margins, b) order retroactive refunds, and c) approve mergers; 2) incorporation of the Western Governors' proposal on an electric reliability organization providing greater authority to NERC; 3) requiring FERC to issue rules establishing an electronic information system to disseminate information on the availability and pricing of wholesale electric energy and transmission services, including the requirement that brokers, exchanges and other market-making entities provide statistical information about the amount and sale price of wholesale electric energy sales; 4) requiring access to transmission by intermittent generators; 5) repealing PUHCA but providing for FERC and state commission access to holding company and affiliate books and records; 6) establishing an Electric Energy Market Competition Taskforce; 7) setting forth amendments to PURPA such as a) requiring electric utilities to provide service under real-time pricing and/or time of use rates upon customer request, b) requiring electric utilities to provide access to the local distribution grid and competitive pricing for distributed generation, combined heat and power, and district heating and cooling systems, c) ending the mandatory obligation for electric utilities to purchase and sell electric energy from a qualified cogeneration facility or small power production facility if the facility has access to an independently administered, auction-based day-ahead and real-time wholesale electric market, and d) requiring electric utilities to make net metering available upon consumer request; 8) requiring FTC to issue rules that a) require electric utilities to make consumer information disclosures on the nature and price of services rendered as well as access, exit, stranded cost and customer service charges, b) prohibit electric utilities from disclosing customer information without approval except when information is shared to facilitate customer switching, c) prohibit slamming and cramming of electric customers, and d) may include requirements that electric utilities provide access to aggregate consumer information; 9) establishing a renewable portfolio requirement to be phased in from 1% to 10% of a retail electric supplier's annual amount sold beginning in 2005 through 2020; 10) providing for construction of a natural gas pipeline from the Alaskan North Slope into the U.S.; and 11) providing a deduction, not to exceed $30, for qualified new or retrofitted energy management devices.

In jettisoning this year's Republican energy bill, Senate GOP leaders would give up some measures they had insisted on after control of the Senate shifted back to their party this year. These include loan guarantees for half a dozen new nuclear power plants. Domenici said he will not offer that proposal in the House-Senate conference. A few issues have bipartisan support, including doubling production of ethanol, a corn-based gasoline additive, and restrictions on the Federal Energy Regulatory Commission's attempts to open the nation's power transmission system to more long-distance deliveries of electricity. The full text of the 2002 Senate Energy Bill is available on the NEM Website. The full text of the senate bill as passed this week will be available on the NEM Website when it is available in electronic form.

FERC May Withdraw Authority to Sell Power at Market Based Rates From 40 Companies

FERC announced its intent to withdraw the authority to sell electric power at market-based rates from 40 power marketers that have failed to file their Electric Quarterly Reports unless they file the missing reports by August 27, 2003. On April 24, 2003, FERC sent letters to 423 companies reminding them that they were required to file the quarterly reports. None of the 40 companies addressed in this order responded to the letter.

GAO Urges FERC to Get Market Monitor Authority

The General Accounting Office (GAO) released a report that urged FERC to tell Congress the specific data the agency needs to adequately monitor wholesale electricity markets and ask for the authority to get it. The Report stated that restructuring has substantially changed the collection, use, and sharing of electricity information at some agencies and has exposed gaps in the federal government’s collection of this information. The Report stated that restructuring has most profoundly affected FERC by dramatically changing how FERC performs its mission of ensuring fair and reasonable prices and by shifting its focus from periodic reviews of cost information to monitoring current market conditions. In order to monitor current market conditions, FERC needs to access market information on wholesale transactions; however, no federal agency, including FERC, has access to complete and timely information on the operations of electricity markets and market participants, exposing gaps in key information. According to the Report, such information gaps exist primarily because FERC is limited in its authority to collect information for full and effective market oversight and because it lacks specific authority to collect current information that may lead to market participants challenging these collection activities. The GAO stated that as long as these information gaps persist, FERC will be unable to oversee electricity markets in a comprehensive manner. Because of the importance of having timely, reliable, and complete information, the GAO recommended that FERC take action to resolve its information gaps. As part of this action, the GAO recommended that FERC present its findings to Congress because information-related issues raised by restructuring may require congressional action to ultimately be resolved. FERC generally agreed with the conclusions, specifically that its authority to collect information has not kept pace with the changing electricity market, and added that it will have the results from its information assessment at the end of 2003. The full text of the GAO Report is available on the NEM Website.

PSC Approves Plan for Assignment of Natural Gas Interstate Pipeline Assets

The Georgia Public Service Commission approved a plan for assignment of interstate pipeline capacity assets held by Atlanta Gas Light Company (AGL). The plan assigns interstate capacity assets to all marketers who desire assignment and who are qualified technically and financially to manage interstate capacity assets. The Commission approved an amendment put forth by Commissioner David Burgess to seek a declaratory ruling from FERC regarding the PSC’s jurisdictional concerns of preemption by FERC if the PSC were to permanently assign pipeline capacity assets.

PSC Approves Voluntary Green Energy Program

The Georgia Public Service Commission approved the state’s first Green Power Pricing tariffs for the Green Energy Programs submitted by Georgia Power Company and Savannah Electric and Power Company. The entirely voluntary programs will allow electric utility consumers to purchase part of their electric power generated by renewable resources, such as landfill gas, solar, wind, limited hydro and limited biomass. Georgia Power customers who are interested in participating in the utility’s Green Energy Programs would be able to do so at a premium rate of $5.50 per 100-kilowatt hour block per month for a minimum of 12-month period of time. Savannah Electric and Power customers who are interested in taking part in the Green Energy Program will be able to do so at a rate of $6 per 100-kilowatt hour block per month for a minimum of 12-month period of time. The Green Power Pricing tariffs will be effective August 1, 2003. The Commission will conduct an annual review of the Green Energy Programs.

MPSC Sets a Zero Transition Charge for DTE for 2003

The Michigan Public Service Commission determined that retail access customers would not pay a charge for recovery of stranded costs to Detroit Edison during 2003 and once again set the transition charge at zero. In addition, the MPSC directed Detroit Edison to issue credits to its retail open access customers for excess securitization savings that are equal to the sum of their securitization surcharges and the amount necessary to fund the continuation of a mechanism that ensures these customer enjoy the benefits of the rate reduction required by the Customer Choice and Electricity Reliability Act of 2000. If any excess securitization savings remain after funding these credits, they will be deferred to future stranded cost determinations. NEM supported the continuation of the securitization and rate reduction equalization credits. The full text of the MPSC Orderis available on the NEM Website.

New York
NEM Submits Comments on NFG's Joint Proposal

NEM submitted comments on NFG's Joint Proposal to Extend Terms of its Rate Plan (JP). NEM submitted that the back-out credits proposed in the JP should be increased to more accurately reflect the fully allocated embedded costs associated with serving retail customers. NEM recommended that the incentive mechanism in NFG's proposed Outreach and Education (O&E) Program be modified to more effectively encourage NFG to promote the benefits of competition in the natural gas market. NEM submitted that a more accurate gauge for measuring consumer awareness and the effectiveness of the O&E programs is actual switch rates rather than customer surveys. Additionally, NEM supported extending the benefits of real-time meters to as many customers as practical as soon as reasonably possible. The full text of NEM's Comments is available on the NEM Website.

PSC Approves New Rates for Standby Electric Service

The NYPSC approved new, standby rates for utilities' standby electric delivery service to customers that produce some of their own electricity through on-site generation (OSG, or distributed generation) and standby service to independent wholesale electric generating plants that import electricity as "station power" to support their operations. The new standby rates approved today for ConEd, O&R, NYSEG, and RG&E are largely based on guidelines previously approved by the Commission. The new standby rates would apply to both OSG customers and wholesale generators to the extent they rely on the electric utility to deliver power to replace or supplement what they generate themselves. The standby rate Guidelines previously adopted called for rates that recover the cost of standby service through per-kilowatt (kW) charges based on the standby customer's demand, rather than per-kilowatt-hour (kWh) charges based on the volume of energy delivered to the customer. Further, the Guidelines favored cost recovery from standby customers through the combination of a customer charge; a fixed, "contract" demand charge; and a variable, "daily as-used" demand charge.

For certain categories of standby customers, the Commission voted to approve a series of options for the transition to the new rate structure. Specifically, pre-existing OSG customers are offered two options. They can either shift immediately to the new standby rate or continue under the existing rate for four years and then phase into the standby rate over the next four years. Customers that start OSG operations between August 1, 2003 and May 31, 2006, using certain environmentally beneficial technology or small, efficient combined heat and power applications of less than one megawatt, can choose among three options. They can elect to remain on the current standard rate indefinitely, shift immediately to the new standby rate, or opt for a five-year phase- in period beginning on the effective date of the new standby rates. Under the standby rate decision, environmentally beneficial technology would include wind, solar, biomass, fuel cell technology, tidal, geothermal, and methane waste.

Standby rates will not apply to customers whose OSG capacity is less than 15% of their maximum demand, regardless of when the OSG becomes operational. The new standby rates will take effect on or about February 1, 2004. The NYSEG, RG&E, and ConEd and O&R Orders are available on the NEM Website.

VEDO Extension on Testing Monthly Adjustments to GCR

Vectren Energy Delivery of Ohio (VEDO) got a three month extension on testing monthly expected gas costs (EGC). PUCO already allowed VEDO to make monthly adjustments to the EGC component of the GCR on a trial basis for the period of May 1, 2003, through July 31, 2003. In Vectren's application to continue the trial of monthly-determined GCR rates, the Commission rejected the Ohio Consumers' Counsel's (OCC's) argument that Vectren should be required to file the monthly price more than one day in advance of the effective date and that the Commission should be more specific in defining the pricing methodology used by Vectren. The full text of the PUCO Order is available on the NEM Website.

NEM and Marketers Submit Comments on GCR

Interstate Gas Supply, Vectren Retail LLC, and WPS Energy Services, (Ohio Gas Marketers’ Group) and and NEM submitted comments on revisions to the calculations of the GCR. NEM and the Marketers Group submitted that ad hoc changes to the GCR creates uncertainty, and prevents long term planning by both retail customers and competitive suppliers. NEM and the Marketers Group stated that the better response to addressing unacceptably high levels of GCR adjustments is to make the GCR track the authorized costs better so that the adjustments will be small. The Marketers Group and NEM both approved of adjusting the historic sales figure used to calculate the Expected Gas Cost (EGC) adjustments as long as the weather normalization formula uses reliable, publicly available data. NEM and the Marketers Group supported both the monthly pricing of the GCR, and the ability of the LDC to amend their 30 day pre-implementation GCR filing. As to this later point, the Marketers Group and NEM submitted that they would both like to still see the GCR filing made 30 days in advance, but with appropriate caveats that describe the gas supply costs that are tied to intra-month pricing adjustments. Then up to a few days prior to implementation the LDC could file adjustments that stem from the caveats. Additionally, NEM and the Marketers Group advocate not assessing customers for adjustments upon return to GCR service for some significant period of time. The full text of the GCR Comments are available on the NEM Website.

SCC Order on Default Service

The SCC issued an Order on default service finding that: (1) on January 1, 2004, the components of default service will include all elements of electricity supply service; and (2) on January 1, 2004, Virginia's utilities will provide default service to all retail customers requiring such service within their respective territories under capped rates. The Commission requested comment on: (a) whether the Commonwealth and its municipalities are "retail customers" and are entitled to default service and (b) if so, how should the Commission determine default service rates for this class of customers. Comments are due August 4, 2003. The full text of the SCC Order is available on the NEM Website.

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