NEM's Fall 2003 Leadership Roundtable 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 NEM rate will only be available through August 18, 2003. Please reserve your room early at (905) 468-2195.

The easiest way to arrive is to fly into Buffalo and drive across the border. However, there is shuttle service available at the Toronto Airport. Given the size, diverse expertise and desire of the group to develop detailed advocacy positions there will be break out sessions for (1) Wholesale, Trading, Credit, Clearing, Price Reporting/Manipulation issues, (2) Retail, National Consumer Education, and PR issues, (3) Technology Standards and Implementation issues. Detailed agendas for each policy team will be available on the NEM Website shortly. 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). Registration Information is available on the NEM Website.

The Winter Executive Committee Policy and Planning Meeting is scheduled for January 20th and 21st, 2004, at the Woodlands Inn and Conference Center, in Houston, Texas. Registration Information is available on the NEM Website.

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. Registration Information is available on the NEM Website.

NEM will convene a conference call on July 29, 2003, at 12 PM EST to discuss NEM's comments on FERC's Gas and Electric NOPRs to devise and implement market manipulation rules. 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 will convene a retail issues conference call on July 30, 2003, at 12PM EST. Subjects for discussion will include 2 recent Ohio issues (CG&E's Proposal for a monthly GCR and FirstEnergy's application to decrease its shopping credits) and New York's HEFPA rules and Renewable Portfolio Standards. 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 will convene a conference call on July 31, 2003, at 12 PM EST to discuss policy goals, current issues, and next steps for the Technology Standards and Policy Development Team. The call-in number is 703-788-0600, and the passcode is 209353. An Agenda for this meeting is available on the NEM Website.

The June/July 2003 issue of Retail Energy Foresight contains an interview with NEM and two NEM National Policy Chairs, Phil O'Connor, Vice President of Constellation NewEnergy and Bill Kinneary, President of Total Gas & Electric. The interviews address the key features of a retailer-friendly restructured market: (1) market based utility pricing; (2) unbundled utility bills; (3) payment allocation from single bills; and (4) long-term certainty on stranded costs. The experts agreed that an important part of any strategy to achieve the above objectives should include a plan to get the utilities to realize that it is in their own best interests to make retail competition work. The issue also covered switching trends in different states. The full text of the June/July 2003 Issue of Retail Energy Foresight is available on the NEM Website. Many thanks to Retail Energy Foresight for generously allowing NEM to provide copies of this issue.

Restructuring Today featured articles on NEM's positions in Ohio and New York on key issues facing the industry.

The Article on Ohio discussed NEM's speech at a Gas Association meeting in Ohio. At the meeting, NEM stated that marketers cannot succeed in Ohio without being allowed to bring competitive prices down to the lowest income customers. NEM stated that Ohio should create incentives to reward utilities for helping to promote migration and educating customers about energy choices. The full text of the Ohio Article.

A Restructuring Today article discussed NEM's comments on the New York Commission's proposal to implement hourly energy pricing. The article discussed NEM's position that marketers should not be required to offer hourly pricing, but that requiring utilities to do so for certain customer classes would send better price signals, encourage demand response and encourage customer switching to marketer fixed price offerings. The full text of the Hourly Pricing Article is available on the NEM Website.

Restructuring Today also had an article about NEM's speech at the New York State Bar Associations Committee on Public Utility Law. Among other important topics, NEM spoke about its position on HEFPA. The article discussed NEM's positions that: (1) ESCOs should never be treated or defined as utilities and (2) utilities should be required to buy ESCO' receivables to avoid duplicating existing infrastructure investments already made by utilities to implement HEFPA protections. The full text of the NY Speech Article is available on the NEM Website.

Debate on the Energy Bill will resume July 28, 2003. Currently, there are 391 proposed amendments to the bill. Amendments include a climate change section, a renewable portfolio standard, and hydro licensing issues. Additionally, Energy Committee Chair, Pete Domenici is reportedly attempting to rewrite the Electricity Title.

Senate Minority Leader Tom Daschle and Minority Whip Harry Reid called on the GOP leadership to bring the energy bill to the floor late this week rather than early next. Senate Majority Leader Bill Frist is still attempting to get a unanimous consent (UC) agreement on energy amendments before going to the floor, fearing an open-ended debate would extend well into the recess and endanger the bill's success. Democrats yesterday continued to resist a UC deal, leaving the amendment picture unclear. In a floor statement, Frist again urged Democrats to accept a proposal to file all amendments with the Senate clerk by today in preparation for debate the week of July 28. Though Republicans will go back to the floor with the energy bill with or without the agreement, aides acknowledged the UC will greatly expedite the debate and help Frist manage floor time. The Bill, as introduced in the Senate, is available on line.

The House, by a vote of 251-153, passed the FY 2004 Energy and Water Appropriations bill. The Chairman's mark provides a total of $27.1 billion in new discretionary spending authority for the U.S. Army Corps of Engineers-Civil, the Department of Interior including the Bureau of Reclamation, the Department of Energy, and several Independent Agencies. The recommendation of $22 billion for the Department of Energy is $147 million under the President's request and $1.2 billion above fiscal year 2003. The chairman's mark includes: (1) $330 million for renewable energy programs; (2) $268 million for nuclear energy programs; (3) $3.48 billion for DOE science programs; (4) $765 million for nuclear waste disposal; (5) $207.3 million for the Power Marketing Administrations. Reimbursable purchase power and wheeling activities are maintained at the fiscal year 2003 levels; (6) $8.5 billion for the National Nuclear Security Administration (NNSA), which includes the nuclear weapons program, defense nuclear nonproliferation, naval reactors and the office of the administrator; and (7) $7.6 billion for DOE environmental management cleanup activities. The full text of the version of the Bill that was sent to the Senate is available on line.

FERC and the CFTC issued a Joint Statement to make it absolutely clear that neither Commission has or will bring false-reporting cases against energy market participants where the false report is inadvertent or based solely on human error. Separately, FERC also issued a policy statement on price formation which creates a rebuttable presumption (safe harbor) that market participants, by adhering to specified standards, are acting in good faith and will not be subject to investigation or administrative penalties for inadvertent errors.

FERC called on price index developers to adopt standards for the creation and publication of any energy price index. Among other criteria, index developers should: (1) adopt and make available a written code of conduct that discloses how the developer will obtain, treat and maintain price data; (2) ensure that price reporting systems maximize the amount of useful and appropriate information that they collect and disseminate; (3) verify price data through various methods, including matching buys and sells and immediately contacting data providers about any discrepancies. In addition, FERC requested that the index price developers undergo periodic independent audits or verification of processes and index production; and (4) provide reasonable access to the price reports in a timely basis to the FERC and the public.

The Commission also set guidelines for price data providers. Price data providers were urged to: (1) provide a clear code of conduct for employees to follow in buying and selling natural gas and electricity and in reporting data to index developers; (2) assign trade data reporting duties to a department that is independent of and not responsible for trading. This will be expected of all companies, regardless of size; and (3) report bilateral, arms-length transactions between non-affiliated companies in the physical cash markets by the data providers to index developers in accordance with confidentiality agreements.

FERC, noting the voluntary nature of its guidelines, said, "if voluntary reporting does not increase to the point that indices are sufficiently robust to support a healthy market, or if the standards recommended by the Commission herein are not widely adopted, the Commission will consider further action." The full text of the FERC Policy Statement is available on the NEM Website.

FERC and the CFTC announced jointly that they had completed their respective investigations of trading behavior during the price spike observed in natural gas prices across the U.S. in late February 2003. Neither investigation identified evidence of market manipulation.

FERC’s Report found that the sharp price rise across the U.S. during the week of February 24, 2003, reflected relatively high short-term demand in the eastern and the mid-continental U.S. along with reduced ability to deliver natural gas from storage characteristic of the then-prevailing low storage inventories. Additional increases in price for specific eastern and mid-continent markets reflected even tighter supply demand balances due to the exhaustion of market-area storage. FERC examined records of transactions for that week subpoenaed from brokers and found no evidence of market manipulation. The Report stated that markets appeared to work effectively throughout the spike, but also stated that there are concerns about the “thinness” of some of these markets and the need to improve liquidity by attracting more traders into these markets. The full text of FERC's Report is available on the NEM Website.

The CFTC’s investigation focused on exchange-traded futures and options trading in natural gas during the week of February 24. The CFTC monitored the activities of large traders while comparing the prices of the expiring March natural gas futures contract to a host of other related prices. The CFTC found nothing in its analysis of large trader positions, prices, floor broker and trader activity, and trading tapes to suggest any manipulative activity in the natural gas futures and options market during the week of February 24, 2003.

FERC issued an Order setting new interconnection standards for large generators and issued a NOPR on expedited procedures for small generators.

FERC issued standard procedures and a standard agreement for the interconnection of generators larger than 20 megawatts. The rule covering the larger generators requires public utilities that offer transmission services also to offer nondiscriminatory, standardized interconnection service. The rule clarifies who pays for interconnection costs when the transmission provider is not independent. The generator pays for facilities on its side of the point of interconnection. The cost of upgrades to the transmission provider's transmission system to accommodate the new generator is initially funded by the generator. The transmission provider then refunds the amounts paid by the generator during the five years following commercial operation of the generator.

The rule sets out standard large generator interconnection procedures that the transmission provider and an interconnection customer must follow throughout the interconnection process. Included in the procedures are a standard application form and procedures for studies that would be conducted to assess the proposed interconnection's effect on the transmission system. The standard large generator interconnection agreement sets out the legal rights and obligations of the parties, including cost responsibility, milestones for the project's completion, and a process for resolving disputes. The rule would apply to any new generator larger than 20 megawatts in capacity that wants to interconnect to a public utility's transmission system. The rule does not require changes to individual interconnection agreements filed with FERC prior to the effective date of the rule. The rule would apply to Independent Transmission Providers, such as RTOs and ISOs, as well as non-independent Transmission Providers. Independent Transmission Providers would be allowed more flexibility in proposing alternative interconnection policies for both pricing and non-pricing matters.

In a companion order issued today, the Commission proposed a rule that would apply to the interconnection of small generators no larger than 20 megawatts. The proposed rule should expedite the interconnection of small generators, many of which use alternative fuels such as wind and solar, and innovative technologies. The proposed standards would apply to all public utilities that own, operate, or control transmission facilities in interstate commerce. The proposed rule includes small generator interconnection procedures that the public utility transmission provider and an interconnection customer must follow throughout the interconnection process. It includes: (1) super-expedited procedures for interconnecting pre-certified generators 2 MW or less to a low voltage electric system; (2) expedited procedures for interconnecting generators between 2 and 10 MW to a low voltage electric system; and, (3) expedited procedures for interconnecting small generators to a high voltage electric system – 69 kilovolts and above – and for generators larger than 10 MW to a low voltage electric system. The proposed small generator interconnection agreement establishes the legal rights and obligations of each party, addresses cost responsibility, lays out milestones for completing the project, and sets forth a process for dispute resolution.

NEM has been urging FERC to issue Interconnection standards for some time. Comments on the proposed rule are due within 45 days of the NOPR's publication in the Federal Register. The full text of the FERC Order and FERC NOPR is available on the NEM Website. Please send comments to NEM Headquarters before August 15, 2003.

In July 2002, FERC issued an order accepting the Alliance Companies’ decision to join MISO, subject to certain conditions, including an investigation into regional through-and-out rates (RTORs) for service between MISO and PJM. FERC concluded that the RTORs are unjust and unreasonable and directed PJM and MISO to eliminate the RTORs from their respective tariffs. The draft order concluded that the through-and-out rates contained in the tariffs of certain Alliance Companies may also be unjust and unreasonable. The Commissioners instituted an investigation to determine whether the Alliance Companies’ through-and-out rates are just and reasonable. The Commissioners also held that transmission owners (TOs) may submit filings to recover lost revenue resulting from the elimination of the RTORs. The full text of FERC's Draft Order will be available on the NEM Website when it is available in electronic form.