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December 19, 2003
NEM Winter Executive Committee Policy and Planning Meeting

The Winter Executive Committee Policy and Planning Meeting is scheduled for January 20th and 21st, 2004, in Houston, Texas. The meeting will be held at the Pennzoil North Tower, 700 Milam, 20th Floor, Room 20014 (Pennzoil Conference Tower) Houston, TX 77002. The Executive Committee will prioritize the states, issues, utilities and advocacy positions for NEM in 2004. Please use this hotlink to sign up.

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. Energy Subcommittee Chairman Barton, FERC Chairman Wood, FERC Commissioner Brownell, CFTC Chair Newsome, CFTC Commissioner Brown-Hruska, NARUC President Wise, NJBPU President Fox, Illinois Chairman Hurley, Michigan Commissioner Chappelle, Ohio Commissioner Mason, Massachusetts Commissioner Keating and a number of other important speakers have already confirmed. If you wish to sponsor this event, please use this hotlink and contact headquarters. The exhibit space for this year is three times larger than last year's space, and 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 Met With FCC To Discuss Energy and Related Information Transmission Issues

NEM met with the FCC on December 16, 2003, to discuss legal regulation and policy implications of advanced powerline technologies to transmit energy, information and content to consumers (large and small). The meeting was ex parte as there is an ongoing Notice of Inquiry into Broadband Over Power Lines (BPL). Representatives from FCC's Media Bureau, Office of Engineering and Technology, and Wireline Competition Bureau, met with representatives from NEM and NEM member companies Unified Technologies Group, Inc., The SPi Group, and PTS Technologies. A representative from FERC and a representative from DOE were also present. Meeting Minutes will soon be available from Headquarters.

FERC Issues Order to Clarify Price Index Policy

FERC clarified its Policy Statement on Natural Gas and Electric Price Indices. In July 2003, FERC established minimum practices for price index developers and data providers, and provided a safe harbor for data providers that can demonstrate they have adopted the minimum practices. FERC made clarifications including the following: (1) the time of a transaction is an optional data item in reporting energy trade data, however, the date must be reported; (2) price index developers should communicate to the industry the specific character of the price locations used in their indices, and market participants should report all trades to match or closely match the characteristics defined by the index developer(s) to which they choose to report; (3) generally, a market participant need not report to more than one index developer, so long as the relevant data for all reportable transactions are given to that developer. If a participant executes some trades electronically, but others through other means, then for the purposes of the safe harbor provision, the participant must report all transactions, including platform-facilitated transactions, to at least one index developer; and (4) an "independent" audit does not require an "external" audit. The full next of the FERC Order is available on the NEM Website.

FERC To Require Reporting Of Reliability Violations

FERC directed Staff to develop an Order that will require transmission system operators to report violations of the industryís power-grid reliability standards. This is the first step in FERCís exploration of its authority to assure power grid reliability. The filings at FERC would be required contemporaneously with reports of violations to NERC. The FERC Commissioners agreed to continue to explore what additional measures it can take under its existing statutory authority.

Chairman Wood noted that Congress gave FERC a $5 million spending increase for 2004 with instructions that the additional funding support power grid reliability efforts.

FERC is inviting public comment on the extent to which it can address grid reliability under existing law. NEM members are asked to forward comments to Headquarters ASAP. The full text of the FERC Press Release is available on the FERC Website.

FERC Issues Guidance on Accounting and Reporting On Financial Instruments

FERC issued guidance on the accounting and reporting of financial instruments with characteristics of both liabilities and equity under SFAS No. 150, including which of FERC's entities under FERC's Uniform Systems of Accounts should record and report these instruments. FERC issued Guidance on accounting for liabilities; interest expense; disclosures; cost of service tariffs/formula rates; and accounting for the cumulative effect of a change in accounting principle. The full text of FERC's Guidance is available on the NEM Website.

NEM Admitted to MichCon Gas Rate Case

On September 30, 2003, Michigan Consolidated Gas Company (MichCon) filed an application to increase and amend its rates. MichCon seeks to implement a new transportation rate, increase sales and transportation rates, continue offering rate discounts to certain customers, allow storage capacity pricing, increase the maximum storage charge rate for third party storage service, and institute a demand and commodity-based charge for third party transportation service. NEM intervened and was admitted as a party in the MichCon gas rate case. A conference call will be held Monday, December 22, 2003, at Noon, EST for members to advise Headquarters on the proper course of our intervention and issues we should prioritize. The dial in number is 703-788-0600, and the pass code is 209353.

MPSC Authorizes Consumers Energy to Increase Annual Gas Revenues

The MPSC issued an Order authorizing Consumers to increase its annual gas revenues by $19,340,000 and to place into effect interim surcharges. In March 2003, Consumers filed an application seeking authority to increase its rates for the transportation, storage and distribution of natural gas. The average monthly bill of a typical residential customer will increase approximately $1. The MPSC Order will be on NEM's Website as soon as it is available in electronic form.

New Jersey
NJBPU Amends Utility Welcome Letters and Supplier Credit Standards

The NJBPU ordered the Electric Distribution Companys (EDCs) to amend the language in their Third Party Supplier (TPS) Agreements and welcome/rescission letters to make it clear that only residential customers have the right to rescind their selection of a TPS in the 14-day confirmation period.

The NJBPU also found that the current credit requirement for TPSs should be reduced from its current level of 60 days of summer peak usage to 30-days of summer peak usage. The Board directed Staff to continue to review these creditworthiness standards and by May 1, 2004, to initiate a process to further analyze alternative methodologies for determining creditworthiness. The revised credit standards will be effective February 1, 2004, or after the amended TPS Agreement is received from the TPS. The full text of the NJBPU Order is available on the NEM Website.

Order on Market-Based Standard Service Offer and Competitive Bidding Process

The Public Utility Commission of Ohio (PUCO) adopted rules for processing applications for a market-based standard service offer ("standard offer") and a competitive bidding process for the provision of electric service in Ohio following the end of the market development period (MDP). The Commission adopted staff's proposed rules, which include the following: (1) The standard offer must be a market-based, variable rate based upon a transparent forward market, daily market, and/or hourly market; (2) A fixed-rate, established through a competitive bidding process, must be available to all customer classes; (3) The competitive bidding process process will bid out the load of customers; (4) The contract terms of the competitive bidding process must be between one and three years.

Customers that have not switched to a competitive retail electric service supplier by the end of the MDP period (December 31, 2005, for most utilities) will have the choice of selecting the standard offer or the competitive bidding process. Residential and small commercial customers that take no action will be served by the competitive bidding process.

Customers returning to the utility from a supplier that has failed to provide service and customers opting-out of a government aggregation program will default to the utility's standard offer. New customers moving into the electric distribution utility's service territory or relocating within the service territory after the end of the market development period period may choose between the standard offer and the competitive bidding process. Additionally, PUCO found that there may be Provider of Last Resort-related costs that the utility may charge to more than just non-switching customers, but that this issue will be looked at in each utility application. PUCO also found that if a utility proposes minimum stays or exit fees it must provide an analysis for the restrictions on switching. The full text of the Order is available on the NEM Website. Many thanks to NEM's Midwest Policy Team for helping obtain this result.

PUCO Requests Market-Related Information in FirstEnergy Case

FirstEnergy filed an application proposing two options for generation service after the market development period (MDP) starting January 1, 2006. Option One is market-based pricing at the end of the MDP and Option Two is the establishment of a "Rate Stabilization Plan." PUCO requested that all active parties planning to provide generation service to retail customers after 2005 file market-related information as part of their testimony due January 21, 2004. Specifically, PUCO requested that these parties file: (1) the quantity of power that they would be willing to supply from January 1, 2006 through December 31, 2008; (2) a reasonable range of the prices for their generation service; and (3) the standard of creditworthiness that they will be willing to put in place. The full text of the PUCO Order is available on the NEM Website. NEM members are urged to contact Headquarters on this case.

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