On December 23, 2004, BGE filed a residential electric fixed bill option pilot program.

The filing will be discussed at the Administrative Meeting on January 19, 2005 and has an effective date of January 24, 2005. Comments are due by January 10, 2005. The full text of BGE's filing is available on the NEM web site.

In its comments, NEM encouraged the Commission to implement direct competitive access for consumers. Arguing that though portfolio diversification would be a step in the right direction for the post-transition period, NEM posited that public interest is better served if competitive utility provided products, services, information and technology are outsource and funded with private “at-risk” capital, not with ratepayer guarantees. Next, in terms of the proper length of term for supply, NEM suggested that the duration of terms of supply chosen for an auction should also be closely examined to prevent a no risk "fixed price" utility offering from undermining competitive suppliers.

NEM supported the Department's consideration of a state-wide, uniform method of procurement in place of a Request for Proposals process for each utility. A properly structured auction process, based on a monthly formula tied to a widely known and credible index, such as the published indices, will send more accurate market-based price signals to consumers. This, in turn, permits consumers to make more accurate consumption decisions based on current market-conditions. The full text of NEM's Comments is available on the NEM web site.

In its testimony, NEM elaborated on Comments submitted in support of the Commission's August 2004 Policy Statements. NEM focused on accelerated migration and embedded cost unbundling. In terms of accelerated migration, NEM posited that the public interest is best served when competitive functions are outsourced, freeing up utilities to reinvest these savings into upgrades in infrastructure to improve their core competency - reliability.

Next, NEM argued that transparency is critical to competition as it provides the only way for consumers to see and respond appropriately to price signals. The more information provided consumers about how much each element of a utility bill really costs, the better and more informed resulting consumption decisions will be. NEM requested that the Commission require utilities to unbundle rates on a fully allocated embedded cost basis and to prevent cost-shifting from competitive to monopoly functions. The full text of NEM's testimony is available on the NEM web site.

The Ohio Office of Consumer Counsel (OCC)is reviewing the benefits of of natural gas prices established through a competitive auction process versus traditional gas cost recovery (GCR)regulations. The paper concludes that the benefits of informed current consumption decisons based on current market prices should always yield higher benefits than consumption decisions based on retroactively adjusted prices determined by a regulatory process.

A regulatory “GCR” pricing process necessarily causes current consumption decisions to be based on past market conditions inflated by regulatory compliance costs. Accelerating the migration of current consumption decisions to rely on current price signals reduces (1) both public and private regulatory costs, (2) the utility’s regulatory and financial risks of disallowance, (3) a significant number of consumption decisions based on incorrect pricing signals by weather sensitive consumers who can least afford it, (4) the increased costs and risks shifted onto current market-based supplies financed with at risk capital that results from competition against past utility purchases financed with “no risk” ratepayer guarantees, (5) the costs to consumers of ill-informed consumption decisions as will as (6) the unnecessary costs to both the consumer and taxpayer of a government determination of “market prices.” Properly structured auctions of either "pre-aggregated demand or customers" is a lower-cost means of ensuring that accurate market based pricing minimizes each of these costs and risks.

Retroactive price adjustments (e.g. "true ups") misinforms a customers' current consumption decisions, and if in hindsight the utility is deemed to have made an imprudent purchase it might be disallowed, causing the utility losses as well. On the other hand, if energy marketers are unable to compete successfully to serve retail customers economically and efficiently under an auction process, it is private - not ratepayer - funds that are lost. The full text of the paper is available on the NEM web site.

Dominion Virginia first requested bids for retail electric service to its three geographic sub-blocks beginning in March 2005 on November 19, 2004. As of December 14, 2004, when responses were due, all sub-blocks remain open.

The process will take place in two steps: first, interested entities will submit their qualifications to serve retail customers participating in the pilot program and, after reviewing submissions, Dominion Virginia will request qualified entities to respond to a request for bids. Those suppliers previously qualified are not required to submit qualifications again.

Responses to the Request for Qualifications are due by January 11, 2005 to Supplier_Relations@dom.com or by mail. The full text of the Request for Qualifications as well as the Certification Form is available on the NEM web site.