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June 21, 2003
OM Elected to Executive Committee

NEM is pleased to announce that OM has been elected to the Executive Committee. OM is a world leading provider of transaction technology to the energy and financial services industries. OM will be represented within NEM by Chris Crosby, Senior Vice President for Energy Markets, Gerry Vurciaga, Vice President for Business Development, and Dariush Shirmohammadi, Vice President of Business Development and Solution Consulting. Gerry has also volunteered to help Co-chair NEM's Wholesale Technology Policy Development Team.

Alstom EAI Corporation Nominated to NEM's Executive Committee

NEM is pleased to announce that Alstom Energy Automation & Information Corporation (Alstom EAI) has been nominated to the Executive Committee. Around the world, Alstom's EAI Business provides leading solutions for the energy industry, developing and integrating technologies for substation and distribution automation, real-time power control, information management and energy market systems. With world class informations software, reliable automation systems, and value-added application and support services, Alstom EAI Business delivers solutions to ensure the reliable, efficient and secure operation of energy infrastructure and energy markets. Alstom EAI will be represented within NEM by Renee Guild, who is responsible for emerging markets and development of new businesses and Ali Ipakchi, Director of Market Participants.

NEM Summer Executive Committee and Policy Meeting

NEM Summer Executive Committee Meeting to be held in Chicago at Constellation NewEnergy's Headquarters (Click here for map), on June 30, 2003. The meeting will start at 9AM on June 30 and all attempts will be made to finish business in one day. This meeting will be for NEM Executive Committee Members only. A block of rooms has been reserved at the rate of $159 per night at the W Chicago City Center. Place your reservations at (312) 917-5640.

Also, Please Register on the NEM website so we may have your meeting materials sent and ready for you in Chicago.

There are significant wholesale, retail, legislative, trading and technology issues currently facing NEM, and the industry. All Executive Committee Members are requested to attend. A Revised Agenda is available on the NEM Website.

Conference Call on NEM Position on Price Reporting

NEM has been requested by FERC and CFTC to advise, or possibly endorse a solution to the current issues surrounding the accuracy, transparency, auditability and availability of actual transactional and counterparty data to ensure the regulatory and financial credibility of the industry. Price indexes were identified by the Executive Committee as the number one regulatory issue of 2003. FERC and CFTC will hold another technical conference on June 24 (next Tuesday). Given the recent inquiries from FERC and the upcoming technical conference NEM needs your input and recommendations for a "preliminary" NEM position (subject to EC approval) as soon as possible. There will be a conference call Friday, June 20 at 2PM Eastern Time. The dial-in number is 1-703-788-0600 and the pass code is 209353.

Conference Call On Collared Swap Approach to Michigan Stranded Costs Issue

NEM will convene a conference call on Wednesday, June 25, 2003, at 2PM EST to discuss strategy in the Michigan stranded cost collaborative proceeding. The dial-in number is 1-703-788-0600 and the pass code is 209353.

SEC Rule To Prohibit Improper Influence on Conduct of Audits

As directed by the Sarbanes-Oxley Act of 2002, the SEC is adopting rules to prohibit officers and directors of an issuer, and persons acting under the direction of an officer or director, from taking any action to coerce, manipulate, mislead, or fraudulently influence the auditor of the issuer's financial statements if that person knew or should have known that such action, if successful, could result in rendering the financial statements materially misleading. The rules are designed to ensure that management makes open and full disclosures to, and has honest discussions with, the auditor of the issuer's financial statements. These rules prohibit officers or directors of an issuer, or persons acting under their direction, from subverting the auditor's responsibilities to investors to conduct a diligent audit of the financial statements and to provide a true report of the auditor's findings. The SEC Final Rule is effective on June 27, 2003. The full text of the SEC Final Rule on Improper Influence on Conduct of Audits is available on the NEM Website.

SEC Final Rule on Management's Reports on Internal Control Over Financial Reporting and Certification of Disclosure

As directed by the Sarbanes-Oxley Act of 2002, the SEC is adopting rules requiring companies subject to the reporting requirements of the Securities Exchange Act of 1934, other than registered investment companies, to include in their annual reports a report of management on the company's internal control over financial reporting. The internal control report must include: (1) a statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting for the company; (2) management's assessment of the effectiveness of the company's internal control over financial reporting as of the end of the company's most recent fiscal year; (3) a statement identifying the framework used by management to evaluate the effectiveness of the company's internal control over financial reporting; (4) and a statement that the registered public accounting firm that audited the company's financial statements included in the annual report has issued an attestation report on management's assessment of the company's internal control over financial reporting. Under the new rules, a company is required to file the registered public accounting firm's attestation report as part of the annual report. Additionally, the SEC is adding a requirement that management evaluate any change in the company's internal control over financial reporting that occurred during a fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting. The SEC Final Rule is effective as of August 14, 2003. The full text of the SEC Final Rule is available on the NEM Website.

FERC Releases White Paper on Price Formation Issues

FERC Staff has released a White Paper on price formation issues for consideration at the June 24, 2003, technical conference on energy price discovery and indices. The White Paper discusses implementation criteria for price indices and criteria for developing good price reporting systems for which it seeks industry consensus.

The implementation criteria for consideration are as follows: 1) near-term steps to improve price reporting; 2) increased costs of a new price reporting approach and a mechanism to fund the change from the current system; 3) application of the same solutions to both gas and electricity markets; 4) extent of Commission authority to implement changes such as conditioning market-based rate authority on agreements to provide price reporting; and 5) adoption of reporting standards to provide regulatory certainty.

The criteria of good price indices for consideration are as follows: 1) providing confidentiality to protect commercially sensitive individual transaction data subject to the need for verification and regulatory oversight; 2) price reporting systems would collect actual transaction variables such as, "price, volume, delivery point, duration, date and time, whether the transaction is a purchase or sale, and the counterparties to the transaction." Information to disseminate would include, "price, volume, location, type of contract, time and liquidity;" 3) the process of developing price reporting information should be transparent such that customers know about index calculation methodologies; 4) price reporting information should be subject to a thorough and independent audit process; and 5) all customers should have reasonable access to price reports on a timely basis.

The White Paper also raises the following questions for comment: 1) should FERC have access to data to permit regulatory review of alleged instances of manipulation; 2) should FERC make trade reporting to index developers mandatory and does it have the requisite authority to do so; 3) can sufficient verification of data be achieved without disclosing counterparty information; 4) should there be an external process and data audit of indices provided to the Commission for review; 5) should FERC authorize and adopt minimum standards applicable to price reporting entities; 6) what is the extent of FERC's authority to sponsor an SRO entity for price formation in the energy industry.

Comments on the White Paper are requested by July 10, 2003. The full texts of the White Paper and Notice of Technical Conference are available on the NEM Website.

FERC Releases Agenda For Price Indices Conference

FERC will hold a technical conference on Tuesday, June 24, 2003, at 9 A.M. to consider the role of price indices in the formation of prices for electricity as well as natural gas. The discussion will focus on comparing the merits of various options. Under consideration are industry solutions as well as solutions involving regulatory or self-regulatory oversight, and what would be required to implement each option. The conference will include panelists to explore proposed short- and long-term options. The due date for Comments has been extended to July 10, 2003. The full text of the Agenda is available on the NEM Website.

Illinois
ICC Report on Transition to Electric Competition

The Illinois Commerce Commission prepared a report to the General Assembly based on the information the electric utilities provided regarding the transition to a competitive electric industry. The Report includes the following eleven topics: (1) Number of Customers Switching and Transition Charge Recovery; (2) Utility Cost Mitigation Activities; (3) Depreciation Rate Changes, Mergers, UFAC Elimination and Rate Reductions; (4) Use of Transitional Funding Instruments (Securitization); (5) Revenue and Consumption Statistics; (6) Adjusted Revenue and Consumption Statistics; (7) Utility Revenue and Income; (8) Generating Plant Sales to Non-Affiliates; (9) Plant Sales or Transfers to Affiliates; (10) Plant Sales or Transfers by Affiliates to Non-Affiliates; (11) Reporting of Transmission and Distribution Expenditures.

The report stated that the total number of customers in 2002 that have requested delivery service is 23,459. The report also stated that the amount of usage that switched to delivery service over the period from October 1, 1999 through December 31, 2002 was 67,301 million KWh. The full text of the Report is available on the NEM Website.


Kentucky
Columbia Gas Seeks to Terminate Pilot Program

Columbia Gas has filed a request for early termination of its gas choice program on March 31, 2004. The program was scheduled to conclude on October 31, 2004. Columbia argues that the pilot program should be terminated because: 1) "in the aggregate customers are not saving money;" 2) Columbia would likely incur "substantial" stranded costs if the program were to run beyond March 31, 2004; 3) due to the workings of storage contracts, March 31, 2004, is the logical time to conclude the program. Columbia further requests: 1) to limit marketer participation in the program to the existing participants; 2) to no longer make customer lists available to marketers; and 3) to educate customers about the termination of the program.

NEM Member Interstate Gas Supply (IGS) has filed a petition to institute the program on a permanent basis. IGS argues the program should be continued because it has provided consumers with an opportunity for savings as well as the opportunity to choose from a variety of rate options. Customers also should not be penalized because Columbia's business decision to utilize an incentive-based stranded cost mitigation scheme has not been as lucrative as expected. The success of the program is evident in the 33% switching rate achieved. NEM will intervene and actively participate in this proceeding. Members interested in participating should contact headquarters. The full texts of Columbia's Motion and IGS' Petition are available on the NEM Website.

Massachusetts
DTE Proposal To Direct Competitive Suppliers to Use NE-GIS

The Department opened an inquiry into the use of the New England Generation Information System (NE-GIS) for the purposes of complying with the Departmentís Information Disclosure Requirements. The Departmentís regulations require that each competitive supplier provide its customers an information disclosure label containing the price, fuel source, emissions, and labor characteristics of the supplierís generation resource portfolio. Competitive suppliers are required to update the information presented on their disclosure labels on a quarterly basis, using market settlement data or equivalent data provided by the Independent System Operator for the most recent one-year period. The Department is requesting comments on whether it should direct licensed competitive suppliers in Massachusetts to use NE-GIS as the sole basis for the fuel source, emissions, and labor information included on disclosure labels. NE-GIS establishes a two-month trading period for each quarter, and produces a report for each supplier at the end of the trading period. The Department proposes that each supplier be required to update its information disclosure label during October 2003 to include information from its GIS report for the first quarter of 2003. Afterwards, each supplier would update its label quarterly. Comments on the proposal to require competitive suppliers to use NE-GIS are due July 9, 2003.

The Department will hold a Technical Conference to discuss issues associated with the Information Disclosure Requirements on July 2, 2003. The technical session will be divided into two portions. The topic of discussion for the first portion will be the Departmentís proposal to direct competitive suppliers to use NE-GIS as the sole basis for the fuel source, emissions, and labor information included on their disclosure labels. The topic of discussion for the second portion of the technical session will be revisions the Department could make to our Information Disclosure Requirements to increase the usefulness of the disclosure labels to retail customers, in anticipation of a rulemaking the Department may open to revise our regulations on these issues. The full text of the Department Order Opening Inquiry is available on the NEM Website. Please send your comments to Headquarters as soon as possible.

New Jersey
Board Adopts Schedule for BGS Procurement for Year 2

The Board adopted a procedure and rate design for procuring of the remaining supplies necessary to serve BGS customers for Year Two of the post-Transition Period (June 1, 2004 though May 31, 2005) and beyond. The process and schedule adopted is similar to that adopted for Year Four of the Transition Period (August 1, 2002 - July 31, 2003) and Year One of the post-Transition Period (August 1, 2003 - May 31, 2004). The schedule will result in a Board decision in late September 2003 on the process to be followed for procurement of Year Two BGS and will result in the award of supply contracts in February 2004. The beginning of the supply year has been changed to June 1 rather than August 1. The Board directed the electric distribution companies to file proposals addressing how to procure BGS for Year Two and beyond by July 1, 2003.

Additionally, the Board adopted the following preliminary procedural schedule: July 1, 2003: Filing of Electric Distribution Companyís (EDCs) Proposal; August 8, 2003: Deadline for alternate proposals/initial comments on EDC proposals; September 9, 2003: Deadline for Final Comments; September 24, 2003: Expected Board decision on BGS proposals; October 1, 2003: EDC Compliance Filing; October 8, 2003: Expected Board decision on Compliance Filing. The full text of the Board Order is available on the NEM Website.

New York
New York PSC Implements HEFPA Legislation

The Commission voted to implement new HEFPA provisions requiring ESCOs to provide consumer protections to customers and granting ESCOs the right of termination. The Commission approved measures to: 1) require pro-ration of payments on consolidated bills between ESCO and utility charges, first to past due charges and then to current charges; 2) grant ESCOs the right to terminate service for nonpayment; 3) recognize that ESCOs are eligible to receive social service payments for eligible customers; 4) require ESCOs to offer a budget billing option and deferred payment agreements; 5) prohibit ESCOs from requiring security deposits; and 6) limit late payment charges on unpaid balances to no more than 18% per year, or 1.5% monthly. The Commission will next issue draft rules for comment, conduct collaborative meetings, and convene a technical conference for receipt of input on the draft rules. The full text of the Commission's Order and details of future steps will be posted on the NEM Website when made available electronically. Many thanks to NEM members for their leadership and support on these important issues and a special thanks to Bill Kinneary for his leadership on the pro ration issue.

ALJ Sets Schedule & Scope of Rate Disincentives Proceeding

The NYPSC set the scope and schedule of the proceeding to investigate potential electric delivery rate disincentives against the promotion of energy efficiency, renewable technologies and distributed generation. The NYPSC ordered the utilities to provide a detailed "typical bill" analysis by September 8, 2003. The analyses must be in a format that will permit comparison with the results presented in Niagara Mohawk's November 15, 2002, "Report on Environmental Collaborative". Comments are due October 10, 2003, and may focus on the significance of typical bill analysis in view of competing assumptions about such factors as avoided costs, time-of-day rates, transmission revenues, or other pertinent considerations. Comments should also address incentives or disincentives utilities may have to promote distributed generation (DG) or energy efficiency (EE) as well as the utilities role in the market place for DG and EE. The full text of the ALJ's letter on the Schedule and Scope of this proceeding is available on the NEM Website.

Virginia
DVP Revises Pilots

DVP has revised parts of its proposed Pilot Programs. A summary of the changes is as follows: (1) DVP has agreed to an extension of the wires charges reduction term. The end of the Pilot Programs will now be upon the expiration or termination of capped rates with an opportunity, two years into the Pilot Programs, to make modifications to address unsuccessful aspects of the Programs; (2) The Default Supply Service Pilot name has been changed to the Competitive Bid Supply Service Pilot; (3) The Competitive Bid Supply Service Pilot blocks will now be based on three geographic areas; (4) The bidding process for the Competitive Bid Supply Service Pilot has changed. In the filing, DVP specified that once the winning CSP for each block had been determined, the higher of the class specific price of the four winning bids for the blocks would be used to establish the market price for that class for all four blocks. This has been deleted from the Terms and Conditions; the winning bid will now be that CSP offer that wins the bid for a geographic block, which will be the lowest weighted average bid; (5) DVP has committed to complete an initial screening for savings for those customers eligible to participate in the Competitive Bid Supply Service Pilot. The Company will not randomly assign any customer if their individual Pilot Price-to-Compare is less than the class-average price offered by the CSP.

Additionally, DVP has offered to consider an increase in the wires charge reduction with a corresponding decrease in the size of the Pilots in the event that the 50% wires charge reduction appears to be insufficient to stimulate activity in the Pilot Programs. The full text of the revised Terms and Conditions for the three Pilot Programs is available on the NEM Website. DVP will file the revised Terms and Conditions by June 25, 2003.


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