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July 29, 2005
NEM Fall Leadership Roundtable

NEM will hold its Fall Leadership Roundtable in Washington, DC, during the week of October 10th or 17th, 2005. Further details will be forthcoming. Please mark your calendar.

Energy Bill Conferees Approve Energy Policy Act of 2005

The House and Senate energy bill conferees approved the Energy Policy Act of 2005. Important provisions include: 1) prohibition of electric and gas market manipulation; 2) FERC must develop rules to enhance electric and gas market transparency through dissemination of pricing information; 3) FERC has jurisdiction over mandatory reliability standards; 4) FERC has jurisdiction to permit transmission facilities in a "national interest electric transmission corridor;" 5) FERC is to encourage the deployment of advanced transmission technologies; 6) FERC must institute a rulemaking on load serving entities entitlement to use firm transmission rights to meet their service obligations; 7) the Secretary of Energy is to study economic dispatch; 8) FERC must institute a rulemaking on incentive based rate treatments for transmision infrastructure investments; 9) electric utilities must offer customers time-based rates, and those customers requesting such rates must receive time-based meters; 10) PUHCA is repealed; 11) FTC must adopt rules a) protecting electric consumers from disclosure of information obtained in connection with the sale or delivery of electricity, and b) prohibiting cramming and slamming of electric consumers; and 12) a federal interagency (including the Departments of Justice, Energy and Agriculture as well as FERC and FTC) taskforce shall study competition within the wholesale and retail markets for electric energy. The full text of the Conference Report on the Energy Policy Act of 2005 is available on the NEM Website.

NYISO Filing on Netting Bilaterals Project

NYISO filed a report on its Netting Bilaterals Project. NYISO said it, "views the Netting Bilaterals Project as a potential improvement to its market structures, but has determined that it is not a project that merits the resources that would be required to implement it at this time," inasmuch as it "would benefit only a small number of Market Participants." It stated that efforts to complete the project likely will not begin before 2006 due to resource constraints. The full text of the NYISO Filing is available on the NEM Website.

New York
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NEM Comments on NYSEG/RG&E Retail Access Plans

NEM filed comments in opposition to NYSEG/RG&E's retail access plans. NEM argued that any utility competing as a utility should be declared "unworkably anticompetitive." In a competitive market, regulated utilities should be prohibited from offering and profiting from fixed-price or otherwise hedged commodity products, and defaulting customers into such products should be considered slamming. NEM further argued that the offering of a fixed price commodity service as a regulated utility rather than an affiliate under competitively neutral conditions undermines any semblance of objective competitive neutrality.

NEM noted the utilities failure to file proper embedded cost-based unbundled rates. NEM suggested that given a utility's failure to disclose or disgorge, the next best way to protect the public is to: 1) prohibit monopolies from performing competitive functions period; and 2) if additional utility functions become competitive and as consumers stop purchasing competitive products and services from utilities, use back-out credits that more fairly compensate consumers for each product, service, information or technology purchased from an alternative supplier. If utilities continue to obfuscate the true costs of serving retail load, the commission can either lower the utilities rates to equal the “embedded” (incremental) numbers proffered or benchmark the prevailing market prices and/or use the prices the customer actually pays for any particular product or service as a shopping credit until a bona fide accounting of the utilities embedded costs is certified by an independent third party.

NEM recommended that NYSEG should first refile its plan consistent with the Commission’s Policy Statement and best practices and rely on NYSEG Solutions and other ESCOs to provide customers with fixed price contracts. As a regulated utility, NYSEG should offer all ESCOs options for single power bills and purchase of accounts receivable by either party and file rates that remove all costs anticipated through a full exit from competitive functions. As a regulated utility, NYSEG should have a non-hedged commodity rate price as close to real time NYISO prices as practical and measurable.

The full text of NEM's Comments is available on the NEM Website.

NYPSC Staff Proposes Statewide Guidelines for ESCO Referral Programs

The NYPSC is requesting comments on statewide guidelines for ESCO Referral Programs (aka PowerSwitch-type programs). ESCO Referral Programs are proposed to have the following characteristics: 1) ESCOs can continue to sign up and enroll customers directly; 2) utilities would be required to enroll customers in the Referral Programs on behalf of ESCOs. As such they would be agents of ESCOs and therefore subject to applicable UBP requirements; 3) “all customers must affirmatively choose a specific ESCO”; 4) the customer-ESCO relationship would be governed by a proposed standard sales agreement. Relevant terms include: a) specification of commodity price for minimum two-month introductory period expressed relative to the utility’s commodity price; b) following the introductory period, the agreement becomes an “open price” contract, so ESCOs can change their price upon notice to the customer; c) month-to-month term; d) customer can withdraw (and the ESCO after the introductory period) at any time without penalty; e) other amendments to the agreements, besides price, would require affirmative consent of the customer; f)ESCO submission of an EDI price change to the utility is deemed as affirmation and representation that proper notice of the price change has been given to the customer; g) Referral Program information must conspicuously disclose that: i) “savings, if any, offered during the introductory period are not guaranteed beyond the introductory period;” ii) “the ESCO may change its price, upon notice to the customer, after the introductory period;” and iii) terms by which residential customers can rescind the agreement; and h) utilities and ESCOs can provide prospective customers with information about the Referral Program via internet, dedicated toll-free phone line, media advertising and direct mail.

Notices of intent to participate in this proceeding are due August 12, 2005, initial comments are due September 9, 2005, and reply comments are due September 30, 2005. The full text of the Notice Soliciting Comments is available on the NEM Website.

Commission Requires Central Hudson to End Fixed Price Offer

The Commission determined that a transition from Central Hudson's gas Fixed Price Offer (FPO) to competitive market offerings is needed. Importantly, the Commission concluded that, "a fixed price supply option is a service that could and should be developed and offered by the competitive marketplace." The Commission reasoned that, "because this FPO service is subsidized by other customers through GAC recovery of costs the utility incurs, ESCOs, who lack access to such a subsidy, cannot effectively compete against Central Hudson. The FPO therefore distorts the market, acts as a barrier against ESCO entry into the market, and is an obstacle to innovation in the market. Moreover, Central Hudson, like all other LDCs, has implemented strategies to limit price volatility of its gas supply, and also offers customers a budget billing option to levelize their gas supply costs. With these customer protections now in place, the argument that a utility-provided FPO is needed to protect consumers from price volatility is no longer compelling." The Commission also noted that seven ESCOs have indicated they are considering offering fixed price products in Central Hudson's service territory in the upcoming heating season. Central Hudson may offer the FPO for one additional heating season but the utility will not be allowed to subsidize the offering by recovering its costs through the GAC. Central Hudson must decide whether to continue the FPO within 15 days of the Order's issuance. The full text of the Order is available on the NEM Website.

Commission's Office of Retail Market Development Responds to RG&E Editorial

Ron Cerniglia, Director of the NYPSC's Office of Retail Market Development, issued a response letter to RG&E's opinion piece that ran in the Rochester Democrat and Chronicle. Cerniglia states that 77 ESCOs are eligible to do business in the state with 31 new ESCOs having entered after the Commission issued its Retail Policy Statement. Cerniglia notes that NEM's Executive Committee identified New York as its top-ranked priority.

In response to RG&E's citation to an EEI survey purportedly showing that customers believe utilities should be allowed to supply commodity, Cerniglia replies that, "[the survey] does not indicate that customers prefer the utility-provided fixed price supply option. In addition, respondents were not asked whether they would prefer a utility fixed price option that includes a premium (with a profit component) for the utility. Again, the Commission believes that ESCOs competing on a level playing field are well-equipped to offer these services and Energy East Corporation has the ability to offer the same service through Energetix, its unregulated energy services subsidiary."

The full text of Cerniglia's Letter is available on the NEM Website.

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