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February 27, 2004
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, at the Capitol Hill Hyatt in Washington, DC. The Senate VIP reception will be held on March 31 at 6PM in the Senate Russell Caucus Room 325. If you would like to invite a spouse or a VIP please contact NEM Headquarters for a special invitation.

House Energy and Air Quality Subcommittee Chairman Barton, FERC Chairman Wood, CFTC Chairman Newsome, FERC Commissioner Brownell, CFTC Commissioner Brown-Hruska, NARUC President Wise, NJBPU President Fox, NARUC BPL Committee Chair and MIPSC Commissioner Chappelle have all confirmed that they will be presenting public policy addresses at the NEM event.

If you wish to exhibit at this event please contact headquarters ASAP. You may view the agenda and register for the event by using this hotlink. Registration Information is also available on the NEM Website.

NEM Conference Call on Massachusetts

There will be a conference call Tuesday, March 2, 2004, at 2PM EST to formulate NEM's strategy on the Massachusetts market. Topics for discussion will include the Bosley plan for the post-transition Massachusetts market and NEM's position on the plan. A Post Standard Offer Power Point and Centrica's Roundtable Presentation Post Standard Offer are attached. The conference call number is 703-788-0600, and the passcode is 209353.

NEM's Summer Executive Committee Meeting and Fall Marketer/Utility Summit

NEM's Summer Executive Committee Meeting will be held during the last week of June in Colorado. NEM is exploring the possibility of holding a Marketer/Utility Leadership Summit during the second week of October. Please mark your calendars. Many thanks to HomePort and ESG for hosting the upcoming meetings.

NEM's Executive Committee Sets Agenda for 2004

The NEM Executive Committee and Policy Development Team met in Houston to review the issues currently facing the industry. CEOs from 40 member companies in the US and Canada prioritized NEM's advocacy agenda for the upcoming year. A summary of NEM Year End Review is available on the NEM Website. NEM's Retail Issues, Wholesale Issues, and Technology and Services Issues for 2004 are also available on the NEM Website. Comments, thoughts and suggestions, would be appreciated.

FCC Rulemaking on Broadband Over Power Line

FCC issued a rulemaking on Access Broadband Over Power Line (BPL) systems recognizing the potential benefits of Access BPL. FCC proposes to: 1) define Access BPL; 2) maintain existing Part 15 emission limits for Access BPL; 3) require Access BPL devices to use adaptive interference mitigation techniques; 4) require Access BPL providers to maintain a database of installation locations and technical information; and 5) adopt measurement methods for Access BPL and other carrier current systems.

FCC proposes to define Access BPL as a, "carrier current system that transmits radio frequency energy by conduction over electric power lines owned, operated, or controlled by an electric service provider. The electric power lines may be aerial (overhead) or underground." FCC requests comment on the definition as well as, "whether there are any entities that plan to own/operate Access BPL over the electric power lines but would not be electrical power providers or a subsidiary of the incumbent electric power provider." Initial comments are due 45 days and reply comments are due 75 days after the NOPR is published in the Federal Register. The full text of the NOPR is available on the NEM Website.

NEM members are urged to submit thier comments to headquarters no later than March 15, 2004.

The Reliable Electric Service Act Of 2004

Assembly Speaker Fabian Nunez introduced the Reliable Electric Service Act of 2004 (AB 2006). The measure allows larger customers to shop for power by establishing a "core/non-core" model in which utilities are obligated to meet the needs of customers with demands of less than 500 kilowatts. Larger customers would have the option to purchase power from a non-utility electric service provider. The measure also seeks to stimulate new investment in energy generation by directing the California Public Utilities Commission to establish clear rules on the ability of investors to recover the reasonable costs and investments associated with new power generation. In addition, the Reliable Electric Service Act would require utilities to make investments in cost-effective conservation, energy efficiency, renewables and other new supplies. The measure also seeks to reaffirm the state's commitment to renewable energy by accelerating the goal from 2017 to 2010 to achieve 20% of the energy mix from renewable power sources. The full text of AB 2006 is available on the NEM Website.

Commission Requests Proposals On Meeting Long-Term Natural Gas Needs

The Commission required California natural gas utilities to respond to data requests and to submit proposals addressing how California’s long-term natural gas needs should be met. The Commission established two phases in this rulemaking. Phase I addresses the following matters: (1) the utilities’ decisions concerning their existing interstate pipeline firm transportation contracts and subscription to new interstate pipeline capacity; (2) access on the intrastate pipelines to LNG supply in the future; and (3) additional access to or expansion of interconnecting facilities with interstate pipelines to increase California's access to natural gas supplies. The scope of Phase II is to adopt rules, which will provide guidelines on: (1) emergency reserves; (2) utility performance of a backstop function to secure enough additional firm transportation rights; and (3) new ratemaking policies.

On February 24, 2004, the utilities filed Phase I proposals for rules providing guidelines for how they should: (1) enter into contracts with interstate pipelines to meet core supply obligations; (2) provide access to liquefied natural gas supplies of natural gas; and (3) provide access to additional supplies of natural gas transported on interstate pipelines. Comments on Phase I issues are due March 23, 2004. On March 23, 2004, the utilities will file Phase II proposals. Comments on Phase II issues are due May 4, 2004. The full text of the Order is available on the NEM Website.

Bill on Distributed Generation Interconnection Standards Introduced

A bill has been introduced in the state senate, which would require the Illinois Commerce Commission to initiate a proceeding to establish generic standards for utility tariffs for the interconnection and parallel operation of on-site distributed generation (DG) of no more than 10 megawatts of interconnected capacity. The bill proposes to require each public utility to file a DG tariff and each municipal utility and cooperative electric association to adopt a DG tariff. The bill also proposes that the Commission may develop financial incentives based on a utility's performance in encouraging residential and small business customers to participate in on-site generation. The full text of the Bill (SB2571) is available on the NEM Website.

Commission Grants Detroit Edison Interim Rate Relief

The Commission granted Detroit Edison (DTE) interim rate relief of $248,430,000. The MPSC also will allow DTE to charge retail open access (ROA) customers a transition charge of 4 mills per kWh.

Under the Order, there will be no rate increase for residential customers. Although the order increases the basic residential rate by 0.299 cents per kWh, it requires an equal reduction in the Power Supply Cost Recovery (PSCR) factor. There will be no net rate increase for small commercial customers with a demand less than 15 kW. Larger commercial customers will see a surcharge of 7.243% and a reduction in the PSCR factors of 0.309 cents per kWh. Industrial customers will experience the same percentage surcharge and same reduction in power supply costs that large commercial customers experience.

ROA customers will have their distribution rates increased by approximately 0.1 cent per kWh and will be billed a transition charge of 0.4 cents per kWh to recover stranded costs. The MPSC stated that the effect of the interim order will not be just 4 mills per kWh on ROA customers. Rather, primary ROA customers will incur an additional 7 mills per kWh, for a total effect of 11 mills per kWh, while secondary customers will incur an additional 9 mills per kWh, for a total effect of 13 mills per kWh, which is due to the termination of the securitization and rate reduction offsets. The Commission stated that DTE’s lost margin approach to calculating stranded cost, which this order rejected, results in excessive transition charges. The MPSC, therefore, encouraged parties to suggest ways that stranded costs could be mitigated to reduce transition charges and to make recommendations regarding the relationship between stranded cost determinations and return to service provisions for ROA customers.

The full text of the MPSC Order is available on the NEM Website.

Commission Finds Detroit Edison in Compliance with Market Test

The Michigan Public Service Commission (MPSC) approved a settlement agreement that confirms that Detroit Edison (DTE) is in compliance with the Customer Choice and Electric Reliability Act's Market Test. Under the Market Test, if DTE has commercial control over generation capacity, less than that required to serve its retail sales load, that exceeds 30% of the market, it must take steps to divest, sell, or transfer generating capacity. On May 29, 2003, DTE filed an application requesting confirmation that it is in compliance with the test because its capacity did not exceed its sales load.

In the settlement agreement, the parties (DTE, NEM, and MPSC staff) agreed that DTE passes the market Test. The Commission will continue to monitor incumbent utilities' control of available electric generation capacity in the affected market.

New Jersey
Staff Meeting on Return of Suppliers' Customers In Arrears to Dual Billing

NJ BPU Staff will hold a meeting to discuss the policies concerning the return of Third Party Suppliers' (TPS) customers in arrears to dual billing and the Datacard to be developed by the TPSs and the Ratepayer Advocate. Staff supports uniform rules on consolidated/dual billing for both the electric and gas industries. The meeting will be held at PSEG’s Newark Office in room 205 at 9:30 AM on Friday, March 12.

Commission Revises Schedule for CG&E Standard Service Offer and Competitive Bid Process Proposal

Cincinnati Gas & Electric Company filed a proposal to modify its nonresidential generation rates to provide for market-based standard service offer pricing and to establish an alternative competitive-bid service rate option after the end of the market development period. The Commission revised the schedule for this proceeding. On March 2, 2004, a technical and procedural conference will be held at 10:00 AM. March 9, 2004, is the revised deadline for filing motions to intervene in the proceeding and for filing objections to CG&E's proposed rate stabilization plan. April 15, 2004, is the revised testimony due date for parties wishing to present testimony. The full text of the PUCO Order is available on the NEM Website.

NEM Submits Comments on Degree of Competition in Virginia

NEM submitted comments on whether there is a sufficient degree of competition such that the elimination of default service for particular customers in Virginia, will not be contrary to the public interest. NEM stated that the ratepayers of Virginia would be better served if the Commission eliminated the penalties under its current competitive market designs and permitted the marketplace to underwrite the high costs and financial risks associated with supplying commodity-related products, services, information and technologies. NEM urged the Commission to support the repeal of the barriers to and penalties on migration, and encourage Virginia utilities to focus their resources and credit on their obligation to promptly and efficiently connect, maintain and reliably deliver electricity. NEM submitted that the most important public interest that a utility has an obligation to serve is in the reliability of its transportation and delivery of energy, not the efficiency with which it purchases, meters, bills and collects charges for the sale of energy. These functions can be performed equitably and efficiently by a competitive marketplace. The full text of NEM's Comments is available on the NEM Website.

DVP Will Delay Start of Retail Access Pilots

The Commission allowed Dominion Virginia Power (DVP) to delay the start of three retail access pilot programs for two months. The pilot programs are as follows: (1) Competitive Bid Supply Service Pilot; (2)Commercial and Industrial Pilot; and (3) Municipal Aggregation Pilot. The pilots were to have begun in mid-February, but no qualified suppliers submitted bids or made offers to compete with Virginia Power for customers who had volunteered to participate. DVP stated that higher market prices for electricity, attributable to severe cold, and uncertainty created by proposed changes in the state's deregulation law discouraged competitors from participating. The Commission gave DVP until April 2, 2004, to submit proposed modifications in the programs. Responses to DVP's proposed modifications are due April 9,2004. The full text of the Order is available on the NEM Website.

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