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March 5, 2004
NEM's Annual Membership Meeting and National Restructuring Conference

NEM's Annual Membership Meeting and National Restructuring Conference will be held on March 31 and April 1, 2004, at the Capitol Hill Hyatt in Washington, DC. The Senate VIP reception will be held on March 31 at 6PM in the Senate Russell Caucus Room 325. If you would like to invite a spouse or a VIP to the reception please contact NEM Headquarters.

House Energy and Air Quality Subcommittee Chairman Barton, FERC Chairman Wood, CFTC Chairman Newsome, FERC Commissioner Brownell, CFTC Commissioner Brown-Hruska, NARUC President Wise, NJBPU President Fox, NARUC BPL Committee Chair and MIPSC Commissioner Chappelle have all confirmed that they will be presenting public policy addresses at the NEM event.

If you wish to exhibit at this event please contact headquarters ASAP. You may view the agenda and register for the event by using this hotlink. Registration Information is also available on the NEM Website.

NEM's Summer and Fall Executive Committee Meetings Scheduled

NEM's Summer Executive Committee Meeting will be held during the last week of June in Colorado. NEM is exploring the possibility of holding a Marketer/Utility Leadership Summit during the second week of October. Please mark your calendars. Many thanks to HomePort and ESG for hosting the upcoming meetings.

NEM Article Entitled, "The Public Interest in a 21st Century Global Economy"

NEM's March article for Harts magazine is entitled, "The Public Interest in a 21st Century Global Economy." The article reflects on the evolution of the energy industry and the public interest that utilities have an obligation to serve. The article posits that, "a late 19th Century, early 20th Century utility business model may not be well-suited for the high technology needs of a globally competitive digital economy of the 21st Century." The article recommends that, "the 'public interest' may be far better served if public utilities focus available capital and credit on the reliability of energy delivery networks and let the competitive marketplace underwrite the high costs, high risks and potential losses associated with buying and selling volatile commodities." The full text of the Article is available on the NEM Website.

EIA Releases Report on Status of Natural Gas Residential Choice Programs

EIA released a report on the, "Status of Natural Gas Residential Choice Programs by State as of December 2003." EIA reports that almost seven percent (4.2 million) of U.S. gas customers purchase gas from a marketers. The largest migration has been achieved in Georgia (1.4 million customers), Ohio (1.3 million customers) and New York (295,000 customers). These migration statistics are consistent with the findings and recommendations of NEM's Executive Committee.

The transitional rate design of the Georgia market highlights the importance of a utility's exit from the merchant function, identified as a priority by the Executive Committee. This supports NEM's decision to pursue a strategy of engaging with utilities to develop mutually beneficial competitive market transition designs.

The success of the Ohio market also highlights a number of transitional market structure recommendations of NEM's Executive Committee. These include the Ohio gas utilities purchase of marketer receivables, the movement to a monthly GCR to better reflect market conditions, and permitting cost-effective customer acquisition via phone, internet and wet signature.

The migration numbers in New York are reflective of the success of O&R's Switch and Save Program, from which a number of NEM's Executive Committee transitional market structure recommendations were derived. These include utility purchase of marketer receivables, marketer access to storage and capacity, and provision of performance-based migration incentives to utilities to promote customer switching. The full text of the EIA Report is available on the NEM Website.

FERC Clarifies Generation Interconnection Rule

FERC issued an Order on its Generation Interconnection rule. The Commission clarified that the transmission provider has the option of charging the interconnected customer a transmission rate that is the higher of the incremental cost rate for the network upgrades required to interconnect its generating facility or an average embedded cost rate for the entire transmission system, including the cost of network upgrades.

The Commission revised two aspects of the rule pertaining to the method of reimbursing generators for the cost of financing network upgrades needed for interconnection as follows: 1) the transmission provider will not be required to provide credits to interconnection customers for all of the transmission delivery services the customers take, rather only for the transmission delivery service taken by the interconnecting generation facility; and 2) the transmission provider can choose, five years prior to the generation facility operations date, whether to reimburse the interconnection customer at that time for any remaining balance of the cost of financing network upgrades and accrued interest, or to continue to provide credits beyond five years until there is no remaining balance. The Commission decided that it will provide additional flexibility to interconnection pricing proposals filed by an independent transmission provider. The full text of the Order will be posted on the NEM Website when made available electronically.

NEM Comments on Allocation of Upstream Capacity

DTE initiated an inquiry to examine whether the upstream capacity market is sufficiently competitive to warrant changing its policy requiring mandatory allocation of capacity. NEM submitted comments urging that DTE institute a market-based framework for the availability of capacity and recommended that marketers should have an option to purchase capacity up to the proportion needed to serve migrating customers with the ability to purchase more capacity if necessary to serve additional customers acquired in the future or for other commercial reasons. The full text of NEM's Comments is available on the NEM Website.

Order on Distributed Generation Interconnection Standards and Procedures

DTE issued an Order adopting Model Distributed Generation Interconnection Standards and Procedures. The Order resolves the following issues: 1) review and interconnection study costs to be assessed against interconnecting customers are limited to the costs solely associated with interconnection, not unrelated distribution system upgrades; 2) a ten percent cap for cost increases will be imposed to incent utilities to make good faith estimates of interconnection costs; 3) in the event of a conflict between the interconnection agreement and tariff, the interconnection tariff shall control; 4) simplified, expedited and standard review processes shall be conducted within 60 days, 125 days and 180 days, respectively; 5) the application fee shall be set at a maximum of $2500 in the interconnection tariff; 6) the DG collaborative should examine the issue of meter ownership by distributed generators; 7) all facilities greater than or equal to ten KW must maintain general liability insurance for the term of the interconnection agreement; 8) distribution companies may require the use of an external disconnect switch for qualified inverters; 9) distributed generation interconnection tariffs will not replace DTE's Qualified Facilities regulations; 10) the DG collaborative should continue to meet over the next two years to assess the interconnection tariff and report to DTE; and 11) standby rate issues will be addressed in NSTAR's filing to establish standby rates for large and medium-sized commercial and industrial customers with on-site, self-generation facilities. The full text of the Order and Model Interconnection Tariff is available from NEM headquarters.

Court of Appeals Decision on Electric Code of Conduct

The Michigan Court of Appeals has rejected the utilities arguments against the Commission's electric code of conduct. The Court found the PSC did not exceed its statutory authority by enacting a code of conduct that applies to unregulated services that are not directly related to retail open access (i.e., appliance repair), whether those services are provided by the utility or its affiliates. The Court also found that the PSC did not intrude on the management decisions of the electric utilities by implementing the code of conduct. The Court stated that the code of conduct was adopted as part of a contested case, not a rulemaking, and therefore was not subject to administrative rulemaking procedures. The Court also held that the code of conduct is not preempted by federal law and is not unconstitutionally vague. The full text of the Opinion is available on the NEM Website.

New York
Staff Meeting on Proposed HEFPA Rules

Staff scheduled a meeting for March 10, 2004, from 10AM to 4PM to discuss the proposed HEFPA rules and related questions. The meeting will be held at One Penn Plaza in the 8th floor boardroom.

3333 K Street, N.W., Suite 425
Washington, D.C. 20007
Tel: (202) 333-3288     Fax: (202) 333-3266

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