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February 6, 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, in Washington, DC at the Capitol Hyatt. 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, ICC Chair Hurley, NARUC BPL Committee Chair and MIPSC Commissioner Chappelle have all confirmed that they will be presenting keynote addresses at the NEM event.

If you wish to sponsor this event, please use this hotlink and contact headquarters. 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 Held Its Winter Executive Committee Policy and Planning Meeting

The Winter Executive Committee Policy and Planning Meeting was held January 20th and 21st, 2004, in Houston, Texas. CEOs from 40 member companies in the US and Canada attended the meeting to address the industry's priorities for 2004. Separate retail, wholesale, and technology issue identification break out sessions provided a number of significant insights into the current state of the industry and its likely direction for 2004. Reports from NEM members were very encouraging and the upcoming year looks promising. A summary 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. A detailed report on NEM's issues and priorities for 2004 will soon be available.

FERC Held A Conference on Compensating Reliability Must-Run Generators

FERC held a two-part technical conference on compensation of must run generating units in organized markets. The first part of the conference held on February 4, 2004, focused on broad general principles for pricing of must-run generating units and the general framework FERC should use to address this issue. The second part of the conference held on February 5, 2004, focused on PJMís specific proposal regarding compensation for must-run generating units. The Agenda for the FERC meeting is available on the NEM Website. A NEM Analysis of this conference will soon be available from Headquarters.

Many thanks to NEM's Norteast Wholesale Policy Chair Stephen Wemple who testified at this conference.

FERC Budget Request for FY 2005

FERC requested $210 million for FY 2005 which is a 2.7% increase over its 2004 budget. According to FERC, the increase is to support the Commission's reliability efforts. In its Budget Request, FERC stated its three main goals for the year: (1) Adequate Infrastructure to promote a secure, high-quality, environmentally responsible infrastructure; (2) Competitive Energy Markets to create and maintain competitive energy markets by advancing competitive market institutions and establishing balanced, self-enforcing market rules; and (3) Vigilant Market Oversight to protect customers and market participants through vigilant and fair oversight of energy markets.

In its Budget Request, FERC stated that it expects to act on several reliability initiatives in the coming months. In 2003, FERC issued a Proposed Pricing Policy for Efficient Operation and Expansion of Transmission Grid. The proposed policy would reward transmission owners for joining RTOs and turning their assets over to RTOs. It also would reward transmission owners for forming independent transmission companies. The Budget Request stated that further FERC action is needed to implement this proposed policy. The Budget Request also discussed FERC's efforts on two Energy Market initiatives: (1) Wholesale Power Market Platform; and (2) Market Oversight and Investigations.

The Budget Request details FERC's plans to meet each of the goals in the Commissionís strategic plan. The full text of FERC's Performance Budget Request is available on FERC's website.

Consumer Protection Regulations for Suppliers

The Public Service Commission is planning to promulgate consumer protection regulations for Electric Suppliers and Gas Suppliers. Staff will file proposed regulations on April 2, 2004. Interested persons may file comments on Staff's proposal by April 23, 2004.

Department To Investigate Capacity Assignment

The Department is investigating whether the upstream capacity market is sufficiently competitive to warrant the voluntary assignment of interstate capacity to other entities. Currently in Massachusetts, capacity is assigned under a mandatory approach.

In 1999, the DTE required local distribution companies to continue planning for and procuring upstream pipeline capacity to serve all firm customers for the next five years. Now that competition in the upstream capacity market has had the opportunity to develop, the Department is reviewing this slice-of-system assignment. Its review will consider the number of transportation customers, the number of marketers, the percentage of the market that has converted to transportation service, and developments at FERC.

Comments on whether the market is sufficiently competitive to modify the existing method for upstream capacity are due March 1, 2004. The full text of DTE's Order is available on the NEM Website.

NEM Submits Comments on FirstEnergy's Competitive Bid Process and Rate Stabilization Plan

NEM submitted comments on FirstEnergy's Competitive Bid Process and Rate Stabilization Plan for after the Market Development Period. NEM stated that the goal of FirstEnergy's transition should be to outsource functions that can be delivered more efficiently and at a lower cost by Competitive Retail Energy Suppliers (CRES) and to promote FirstEnergy's financial stability by freeing up scarce capital and credit resources from high-risk commodity trading and permitting their vital resources to be used to upgrade reliability and modernize FirstEnergy's infrastructure and the security of the Midwest grid.

NEM submitted that the Commission's additional objectives of ensuring price certainty and furthering competitive market development can both be met by encouraging CRES to provide competitive alternatives, particularly fixed price offerings. NEM stated that the Commission should encourage that these offers and their benefits be made available equally to all customers without the limitations of contract deadlines, contract length or that customers belong to an aggregation group. The full text of NEM's Comments is available on the NEM Website.

DVP Wants To Postpone Start of Retail Pilot Programs

Dominion Virginia Power filed to postpone the start date of its energy choice pilot programs for two months until April 7, 2004. DVP is requesting the extension for the following reasons: (1) double the number of volunteers expected have signed up for the program; (2) current legislative bills before the General Assembly have proposed significant changes to Virginia's electric industry restructuring program; and (3) high wholesale electric prices due to extreme weather making it hard for competitive suppliers to put together bid packages and offers to customers. Response to DVP's request are due by February 10, 2004. DVP's reply to the responses is due by February 13, 2004. The full text of DVP's Motion is available on the NEM Website.

Virginia Senate Passes Bill To Extend Rate Caps Until 2010

Last Friday, the state Senate passed a bill (SB 651) extending rate caps until the end of 2010. The bill would allow the State Corporation Commission to end a utility's market development period if there is sufficient competition. The bill has provisions which allow Commercial and Industrial customers returning to utility supply to choose a market-based rate option. The bill is now on its way to the House of Delegates. The full text of the bill will be on NEM's Website as soon as it is available in electronic form.

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