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July 11, 2003
Upcoming NEM Meetings and Conferences

Our Fall meeting will be held October 7-8, 2003. Centrica has generously offered to host the meeting at the fabulous Queen’s Landing Inn and Conference Resort at Niagara-on-the-Lake in Ontario.

The easiest way to arrive is to fly into Buffalo and drive across the border. It is about a half hour car drive, but it should be quite worthwhile. There will be break out sessions for (1) Wholesale, Trading, Credit, Clearing, price reporting/manipulation and related technology issues, (2) Retail and national consumer education and PR campaign issues, (3) Technology Standards and Implementation issues. All members and selected prospective members are encouraged to attend.

A block of rooms will be reserved for October 6-7, 2003, at the rate of $265/night (Canadian).

Please also mark your calendars for March 31 and April 1, 2004, for NEM's Annual Membership Meeting and National Restructuring Conference. It will be held in Washington, DC at the Capitol Hyatt. Chairman Wood, NARUC President-elect Wise and a number of other important speakers have already confirmed. If you wish to be listed as a sponsor of this event, please contact headquarters ASAP as advertisements will be coming out shortly.

The Winter Executive Committee meeting is tentatively scheduled for January 20th, 2004, in Houston.

NEM Retail Issues Conference Call

NEM will convene a retail issues conference call on July 15, 2003, at 11AM EST. Subjects for discussion will include the Ohio Commission's proceeding to review the gas cost recovery mechanism rules (for further details see the update item below), Columbia's gas pilot program in Kentucky, NJ Staff's meeting on retail electric rules, New York's HEFPA rules, and California direct access legislation. The call-in number is 703-788-0600, and the passcode is 209353. An Agenda for the call is available on the NEM Website.

NEM Conference Call on FERC Price Indices Safe Harbor

NEM will convene a conference call on July 15, 2003, at 12:30 PM EST to further discuss FERC's price indices and the safe harbor concept to finalize NEM's comments on the subject. The call-in number is 703-788-0600, and the passcode is 209353.

The Outlook for the Texas Commercial & Industrial Energy Markets Audio Conference

The Outlook for the Texas Commercial & Industrial Energy Markets Audio Conference will be held on July 18, 2003 from 10:00 AM - 11:30 AM Central. Restructuring Today will present a 90-minute panel of experts including PUC Chairman Rebecca Klein, President of Reliant Energy Solutions Jim Ajello, Ray Cunningham of Exxon Mobil who is president of the Texas Industrial Energy Consumers and Jackson Mueller, a consultant who guides large energy buyers. The conference will discuss the mix of risks and opportunities that large Texas commercial and industrial buyers face that energy buyers in other states don’t share. The conference will cover: (1) the potential for $4 billion more in costs if the PUC allows the unregulated Reliant Solutions to buy Reliant assets and pass on the cost to the public as a transition cost; (2) the real costs of switching from zonal congestion pricing to locational marginal pricing; (3) the outlook for competition in East Texas; (4) whether market gaming is a real threat in Texas or has the ERCOT market oversight division got the situation under control? (5) are there things power buyers can do to ease the burden as gas prices rise ? (6) is the market competitive within ERCOT today? Does the over-building of generation assure competitive prices for C&I buyers? (7) the prospects for green power from wind mills in West Texas. The conference is $170/line when you register before July 17. Late registration is $200. For more information go to Restructuring Today.

OMOI Summer Energy Market Assessment Report

Staff from the Office of Market Oversight and Investigation (OMOI) presented its summer energy market assessment report at FERC's Agenda Meeting. Staff concluded that: (1) Market participants have taken steps toward transparent market designs and trading platforms, as open and competitive energy markets evolve; (2) New power plant investments now provide higher reserve margins across much of the country; (3) Market participants are addressing concerns about the quality of natural gas price reporting; and (4) Energy markets are rebounding from a period characterized by adverse financial conditions. Staff identified the challenges that lay ahead for this summer. The challenges include: (1) A tight supply-demand balance in natural gas markets that is raising natural gas and electricity prices; (2) Lack of demand response in the electricity markets; and (3) Financial conditions that have reduced the number of companies active in energy markets, consequently limiting market liquidity and effectiveness. The full text of OMOI's Presentationon its Report is available on the NEM Website.

FERC Draft Order on ISONE Mitigation Plan

FERC issued a draft order accepting the general market mitigation plan ISONE proposed this May. The measures will apply during periods of peak demand. Under the proposal, ISONE will calculate the NEPOOL Supply margin prior to the Day-Ahead clearing prices or the Real-Time hourly dispatch. ISONE will then designate "Pivotal Suppliers" (suppliers that are required to have at least part of their portfolio reliably dispatch the power system) and related generating resources for each hour in each of the markets. Those suppliers that are deemed pivotal suppliers will be evaluated by ISONE for possible mitigation measures. The full text of the FERC Draft Order will be posted on NEM's Website as soon as it is available in electronic form.

SB 888 Does Not Pass Out Of Committee

SB 888, Dunn's bill to repeal direct access, did not pass out of the Assembly's Committee on Utilities and Commerce. The bill, which needed eight votes to pass the Committee, received none. Three members of the Committee voted against the measure while the other members abstained. Sarah Reyes, Chair of the Committee, said that the policies behind SB 888 could be taken up in another bill.

PUC Approves Exit Fee

The PUC voted to retain a Cost Responsibility Surcharge (CRS) of 2.7 cents/kWh for Direct Access customers. The PUC originally adopted this surcharge amount in December 2002, but said it would consider the surcharge level again based on a more refined analysis of actual Department of Water Resources (DWR) costs. The Commission determined that a 2.7 cents/kWh CRS minimizes the possibility of cost shifting to IOU customers and is a low enough CRS so as to maintain the economic viability of Direct Access. The PUC also determined that current investor-owned utility (IOU) customers who leave IOU service to become municipal utility customers must pay a CRS for their fair share of energy costs incurred by the DWR during the energy crisis. All continuing IOU customers are now paying for DWR's long-term contracts in their current electric rates. The PUC determined that customers who depart IOU service to obtain electricity through other options, such as Direct Access and municipal service, should still be responsible for paying their fair share of costs, otherwise rates for remaining IOU customers would be higher. The Commission approved a surcharge for existing Municipal Departing Load customers because these customers were formerly customers of IOUs when DWR entered into its long-term contracts and, therefore, are held to the same surcharges as established in prior Commission decisions for Direct Access customers who were IOU customers during the energy crisis. However, the PUC determined that new customers of municipalities do not have to pay the CRS as long as the municipal utility was established and serving retail customers before February 1, 2001, the date established by the Legislature. Continuous customers of municipal utilities do not pay the surcharge. The surcharge will be 2.7 cents/kWh on an interim basis. The full text of the CAPUC Order will be available on NEM's Website as soon as it is available in electronic form.

MPSC Adopts Revised Rules for Interconnection Standards

The MPSC issued an Order adopting revised administrative rules governing electric interconnection standards. The rules cover definitions, electric utility interconnection procedures, technical criteria, project applications, project filing fees, interconnection deadlines, additional services provided by electric utilities, pre-certified equipment, and waivers. Under the rules, the new project capacity classifications are: (1) under 30 kW, (2) 30 kW to 150 kW, (3) 150 kW to 750 kW, (4) 750 kW to 2 MW, and (5) 2 MW or more. The interconnection deadlines for processing an application filed by a project developer for each classification under the rules are: (1) under 30 kW, 2 weeks, (2) 30 kW to 150 kW, 4 weeks, (3) 150 kW to 750 kW, 6 weeks, (4) 750 kW to 2 MW, 12 weeks, and (5) 2 MW or more, 18 weeks. Additionally, the rules established a fee structure whereby a project developer will pay the utility a filing fee calculated at $0.50 per kW of project capacity, but, in any event, no less than $100 and no more than $500. The full text of the MPSC Order is available on the NEM Website.

Commission Approved Consumers GCR Rate

The Commission approved Consumers GCR rate of $4.8500 per thousand cubic feet for the billing month of April 2003 and $5.1830 per thousand cubic feet for the billing months of May 2003 through March 2004. These rates are subject to a quarterly ceiling price adjustment mechanism. By the terms of this mechanism, the GCR may be increased on a quarterly basis contingent upon NYMEX futures prices increasing to a level above that which was incorporated in the calculation of the approved GCR rates. The full text of the Order is available on the NEM Website.

New York
HEFPA Follow-Up Meeting Scheduled

Commissioner Staff scheduled a follow-up HEFPA meeting to be held on July 17, 2003, at 10 AM. The meeting's purpose is to further discuss the proposed draft rules and the notes Staff prepared from the meeting held on June 30, 2003. There will be a billing subgroup meeting following the general meeting. Those wishing to participate should RSVP by email by noon on July 16, 2003. The full text of the June 30th Meeting Notes are available on the NEM Website.

NYS Electric Retail Access Migration Report

According to the May 2003 Electric Retail Access Migration Report, New York commercial and industrial shopping is up, but residential shopping has slowed. More than a third of New York C&I load was served in May by competitive suppliers. O&R has the most shoppers (26% of residential customers and nearly 23% of C&I customers). For O&R this is a 25% increase from a year ago. The full text of the May 2003 Summary Report is available on the NEM Website.

NYPSC Issues NOPR on Meter Testing and Reporting

The NYPSC issued a NOPR to amend the regulations applicable to Meter Testing and Reporting. The proposed revisions will make the regulations applicable to competitive entities providing metering services. The proposed rules cover the following topics: (1) Definitions; (2) Meter Test Facilities; (3) Calibration; (4) Meter Records; (5) Test Loads and Conditions; (6) Tests for New Meters; (7) Determination of Meter Performance; (8) Complaint and Referee Tests; (9) In-service Tests; and (10) Meter Registers & Add-ons, Auxiliary Devices, and Data Processing. Comments on the NOPR are due 45 days after it is published in the State Register. The full text of the Metering NOPR is available on the NEM Website.

Staff and Marketers Submit Briefs on DP&L Stipulation

Several marketers submitted a brief urging PUCO to reject the Stipulation. The Marketers do not oppose an extension of the MDP through 2005 - the statutory limit. They also submit that the defects in the Stipulation can be cured with three amendments. First, the shopping credits should be increased by the transition cost riders and reset at the embedded cost of DP&L's legacy rate generaiion cost ("Big G"). Second, commercial and industrial customers who shop and then return to tariff service during the extended MDP should be placed on a market based rate which fairly captures the cost of providing their power. Residential customers that shop and then return to tariff service during the extended MDP should be charged the tariff rate, but DP&L may apply to the Commission for regulatory transition charge revenues. Third, the portion of the Stipulation dealing with the rate stabilization program (RSP) program, and the RSS Rider should be rejected. In the alternative, the part of the Stipulation which addresses the post market development period should be deferred until the Commission promulgates rules as to Standard Service Offer (SSO) and the competitive bidding process.

WPS also submitted a Brief opposing the Stipulation. It stated that the RSP is not market based and that DP&L's Stipulation attempts to improperly supplant PUCO's upcoming Orders on SSO and the competitive bidding process. WPS agrees that the shopping credits should be reset to the Big G level. The full texts of the Marketers' Brief and WPS' Brief are available on the NEM Website.

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