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January 9, 2004
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. The Meeting Agenda, Year End Report to Members, NEM Issues List for 2004, NEM Proceedings List and Accomplishments in 2003, and Table of Contents to the January 2004 Book are available on the NEM Website for members to review before the meeting. Please use this hotlink to sign up.

Vectren Source Elected to NEM Executive Committee

NEM is pleased to announce that Vectren Source has been elected to NEM's Executive Committee. Vectren Source concentrates its efforts on residential and small business customers allowing them to provide value-added energy product and service solutions that are specific to the needs of homeowners and entrepreneurs. Vectren Source will be represented within NEM by Greg Collins, President, and Lawrence K. Friedeman, Vice-President of Commodity Operations and Regulatory Affairs for Vectren Retail LLC, d/b/a Vectren Source.

Ontario Energy Savings Corp. Nominated to NEM's Executive Committee

NEM is pleased to announce that Ontario Energy Savings Corp. has been nominated to NEM's Executive Committee. Ontario Energy Savings Corp. is an independent natural gas and electricity marketing company committed to reducing and stabilizing energy costs for consumers. Ontario Energy Savings Corp. provides an attractive alternative to customers who have traditionally had no choice when purchasing their natural gas and electricity supply. Ontario Energy Savings Corp. has grown since its inception in 1997 to become one of the largest independent energy marketers in Canada. Currently, over half a million households and businesses in Ontario purchase their energy from Ontario Energy Savings Corp. under long-term fixed price contracts. Ontario Energy Savings Corp. will be represented within NEM by David Ellis, Vice President, Operations, Christopher J. Gaffney, Vice President and General Counsel, Paul DeVries, Chief Operating Officer, and Debbie S. Wernet, President U.S. Energy Savings Corp.

NEM's Annual Membership Meeting and National Restructuring Conference

Please register early for NEM's Annual Membership Meeting and National Restructuring Conference. It is cherry blossom time, and the hotel will likely be sold out. 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, FERC Commissioner Brownell and 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. 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.

Report on NEM Meeting With FCC, FERC, & DOE Regarding Advanced Power Line Technologies

NEM briefed the FCC, FERC, and DOE on a Case Study to be conducted by NEM Executive Committee Member Unified Technologies Group, Inc. The FCC plans to address power line communications in April 2004 and wants to determine whether the technology to be fielded in this Case Study would impact current policies governing the use of power lines to transmit and deliver both electrical energy "commingled" with other spectral energy in the forms of high speed telecom, information and media products and services. This Case Study is seeking to transmit this commingled energy at speeds greater than, distances farther than and at emission levels lower than any other currently known technologies.

Ubiquitous, interoperable, "hyper speed" transmission and delivery in interstate and international commerce of bundled sales of spectral energy in the form of commingled digital quality electrical energy and radio frequency energy should qualify for a number of favorable tax and regulatory provisions under existing state and federal laws. The full text of NEM's Analysis of FERC, FCC, and Public Utilities Commissions' jurisdiction over pricing, access and taxation issues involving advanced power line technologies is available upon request.

Conference on Supply Margin Assessment

FERC will hold a Technical Conference January 13 and 14, 2004, at 9:30 AM to 4PM to discuss Staff's proposals to modify the Supply Margin Assessment (SMA), a market power screen for generators that are not members of an RTO/ISO. A NEM Analysis of Staff's Paper modifying the SMA is available from Headquarters. The full text of the Notice of Conference and Staff's Paper is available on the NEM Website.

FERC Clarifies Order on NYISO's Creditworthiness Provisions

FERC clarified its Order on NYISO's creditworthiness requirements to make it clear that a NYISO customer may not net "possible future earnings" against the amount of collateral that the customer is required to provide. Only "current amounts due" may be netted against a customer's collateral.

Additionally, the Commission discussed NYISO's proposed Prepayment Agreement provisions which would allow a transmission customer that has executed a prepayment agreement to reduce the Energy Component of its collateral by half, so that it will only need to supply 25 days of security instead of 50. A Prepayment Agreement requires the customer to make weekly prepayments in amounts determined by NYISO for all purchases of Energy and Ancillary Services. NEM previously submitted that requiring customers to prepay 25 days of energy charges as security substantially increases the cost of doing business. FERC stated that it appears that NYISO has minimal exposure in the energy market when a prepayment agreement is in effect and therefore FERC directed NYISO to either eliminate or modify the Energy Component for customers with prepayment agreements to reflect only NYISO's actual risk of non-payment. The full text of FERC's Order is available on the NEM Website.

DG Interconnection Workshop

The Staff of the Illinois Commerce Commission will hold an informal workshop process to create a draft rule for the interconnection of distributed generation. Initial documents generated in this proceeding include a proposed draft rule governing distributed generation interconnections, a draft interconnection agreement and two interconnection applications. One is a Short Form Application for Single Phase Attachment of Parallel Generation Equipment 20 kV or Smaller and the other is a Standard Application for Attachment of Parallel Generation Equipmentfor single phase equipment larger than 20 kV or for three-phase equipment of any size.

Staff is soliciting comments on any and all aspects of these documents and any other issues related to distributed generation interconnection in Illinois. Comments are due January 30, 2004. The full text of the Notice of Workshop is available on the NEM Website.

MPSC Order to Rehear Consumer's Securitization Case

The MPSC Has accepted NEM's recommendation and decided to re-examine Consumer's securitization case. A prehearing conference has been scheduled for January 13, 2004. In the June 2 Order, the Commission determined that all customers, including retail open access (ROA) customers, should pay for the portion of the total securitized costs represented by implementation costs, but that only full service customers should bear responsibility for the Clean Air Act costs. Consumers proposed that the Commission either: (1) amend the Order to provide for a uniform charge applicable to all customers (including ROA), or (2) implement a plan that as customers switch to ROA, the ROA securitization and tax charges would be recalculated and increased to produce the same amount of revenue as would have been produced had the customer not switched to ROA. The Commission held that it would focus on whether the entire securitization charge should be paid by both tariff and retail open access customers and whether ROA customers would be "double-charged" for Clean Air Act compliance costs. The full text of the Order is available on the NEM Website.

New Jersey
NJBPU Expands Commercial & Industrial Energy Price Class

The NJBPU expanded the Commercial & Industrial Energy Price (CIEP) class for the next Basic Generation Service (BGS) auction on June 1, 2004. The new cutoff for mandatory inclusion in the CIEP will include those customers that have a peak load share of 1500 kw. This expands the CIEP class by approximately 128 accounts, which is a 7.2% increase. CIEP customers that remain on BGS are priced on an hourly basis. The Board also directed the utilities to provide new and existing CIEP customers that remain on BGS with the opportunity to release their contact information and to make these customers aware of the list of Third Party Suppliers. The Board will consider further expansion of the CIEP class for future procurement periods. The full text of the NJBPU Order is available on the NEM Website.

New York
NEM Submits Comments on Requiring NFG To Purchase ESCO Receivables

A November 12, 2003, Notice of Agency Action stated that the Commission was considering whether to require NFG to purchase the accounts receivable of ESCOs as suggested in NEM's Petition for Rehearing. NFG submitted comments alleging that the NYPSC could not order it to purchase receivables because it had not originally issued a SAPA notice and that the Commission's late SAPA notice (November 12, 2003) did not correct this problem.

NEM submitted comments that the Commission possesses the requisite authority and has taken the proper regulatory steps to include the purchase of ESCO receivables in NFG's just and reasonable rates. NEM also submitted that NFG was on notice that the Commission would be considering this action. NEM argued that the recent HEFPA Order supports the purchase of receivables in this case. Additionally, purchase of receivables will advance the Commission's goals set forth in its Gas Policy Statement. The full text of NEM's Comments are available on the NEM Website.

NEM Submits Comments on Billing Format

NEM submitted comments on the format and content of gas and electric bills. NEM submitted that it is important that consumers understand the full costs associated with the various elements of their bill so that a price competitive market for these services, information and technologies can emerge. NEM submitted various clarifications and suggested language to make the bill easier for consumers to understand. Specifically, NEM suggested that the sample bill should be designed to provide unbundled rates for gas metering so that when the Commission renders a decision and permits competitive gas metering, consumers will be provided with a bill that permits them to compare and shop. NEM also suggested that the NYPSC should highlight the "price to beat" on the bill so customers can see the price differentials if they were to switch to a competitive supplier. Additionally, NEM said that it is important that consumers understand that the utility commodity "price to beat" is not necessarily reflective of current market conditions. The full text of NEM's Comments are available on the NEM Website.

Commission Rejects Proposal to Delay Pro-ration of Customer Payments

The Commission held that the utilities should file revised tariffs incorporating the Uniform Business Practices (UBP) to take effect on February 19, 2004. The Commission denied the utilities' request to postpone the implementation of pro-ration. The NYPSC ordered the utilities to provide for the pro-ration of payments on consolidated bills to take effect on February 3, 2004. The NYPSC also denied the utilities' request to extend the deadline for completing Phase II testing for electronic data intercahnge (EDI) of information. Utilities must complete testing by January 5, 2004. The full text of the Order is available on the NEM Website.

Staff Testimony on FirstEnergy's Rate Stabilization Plan

Staff presented testimony on FirstEnergy's Rate Stabilization Plan (RSP) and Competitive Bidding Proposal in FirstEnergy's Post-Market Development Period case. Staff found deficiencies in the following components of FirstEnergy's RSP: (1) the provision for early termination of the RSP by FirstEnergy; (2) the provision for 35% of the Rate Stabilization Charge (RSC) to be paid by those who arrange for alternative service by the end of 2004; (3) the accrual of deferrals for expenses which exceed 15% of "little g"; (4) the distribution rate freeze; and (5) the accrual of deferrals for the difference between "little g" and the market support price.

Specifically, Staff stated that for commercial and industrial customers, as well as aggregators, the RSP provides the option to arrange for contractual power for 2006-2008 and these customers will not pay the full rate stabilization charge (RSC). These opt-out customers can return to FirstEnergy's guaranteed rate after 6 months of paying FirstEnergy's incremental purchased power rate. Staff believes that there should be a further option that would allow customers to avoid all RSC charges if they agree to pay the incremental purchased power costs for the entire period, rather than for only six months, if they return to the companies supply service.

In terms of the Competitive Bidding Process (CMP), Staff found the following discrepancies between FirstEnergy's proposal and the recently issued Commission Order on CBP: (1) FirstEnergy's CBP would vary on a quarterly basis and the Order calls for the result of the competitive bidding process to be a fixed rate; (2) FirstEnergy's competitive bid prices do not include potential supplier default costs; and (3) FirstEnergy's proposal does not conduct a separate competitive bidding process for two separate customer groups. The full text of Staff's Testimony is available on the NEM website.

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