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May 13, 2004
NEM's Summer Executive Committee Meeting

NEM has reserved June 29th and 30th, 2004, at Constellation NewEnergy's offices for its Summer Executive Committee Meeting. The Summer Meeting is critical as it is the venue where the new Executive Committee leadership and regional and state policy chairs are elected and the Associations's primary national message and advocacy positions, venues and goals are prioritized and decided. The registration page is hotlinked here for your convenience.

NEM is interviewing candidates and actively seeking nominations for national, state and regional leadership positions for 2004-2005. NEM members are encouraged to submit nominations to headquarters ASAP. A full list of nominations will be circulated to the Executive Committee prior to the meeting.

To date, the issues that have been submitted for the Executive Committee agenda include: 1) NEM's National Recommendations for a "Transitional Retail Market Design;" (2) NEM's National Recommendations for (a) designing "POLR" (e.g. eligiblity, duration and scope of default service), (b) designing or constructing "Default Service Pricing," (c) the timing and means of privatizing POLR services; (3) What products and services should be bid out with the POLR franchise; (4) should POLR services be segregated, bid-out and/or assigned by class of customer; and (5) Are there any circumstances in which the utility must act as a backstop for commodity services, after its full exit from the merchant function. If so, (a) How important is a date certain, (b) What does the utility's obligation to connect and delivert include, (c) Should all transitional costs be recovered in POLR commodity prices until a complete exit occurs, and (d) If so, what what circumstances would justify a post exit recovery mechanism. Positions NEM has taken on these issues are hotlinked here for your review.

Members have also recommended consideration of: (1) a NEM standardized retail contract, (2) a NEM position on California's resource adequacy requirements, (3) NEM outreach to Wall Street on the impact of a utility's failure to exit the merchant function on both its cost of capital and its debt rating; and (4) in response to renewable portfolio standards, members have inquired about establishing a market in tradeable renewable credits.

NEM Advocates Open Access to Power Lines When Electricity and Content are Transmitted

FCC instituted an Inquiry pursuant to Section 706 of the Telecommunications Act to determine whether "advanced telecommunications capability" is being deployed to Americans on a timely basis. NEM submitted comments to FCC discussing the jurisdictional issues associated with Broadband over Power Lines and offering recommendations for regulatory action. NEM noted that Supreme Court precedent and federal statutes appear to give FERC primary and/or exclusive jurisdiction over access to as well as the just and reasonable pricing of power lines used to transmit “electricity” into or through interstate commerce, regardless of “whether or not it does other things as well." Conversely, FCC's federal jurisdiction over electric power lines appears limited to ensuring that radio frequency emissions from power lines do not disturb FCC-jurisdictional entities.

NEM pointed out that the inductive couplers deployed in BPL are used in an electrical generation process to generate micro-voltages of electrical information/content commingled with other electricity by power lines and transmitted to a customer’s premises.

Because FCC does not have open access jurisdiction over power lines, NEM urged FCC to work with FERC to ensure that power lines used to transport both electricity and content are opened to all competition. NEM urged FCC to work closely with FERC to open power lines for the wholesale and (unbundled) retail transmission of electrical energy “whether or not it does other things as well,” and suggested that a Memorandum of Understanding (MOU) between FCC and FERC should be used. The MOU should apportion jurisdiction over BPL such that FCC would enforce any relevant Part 15 emissions standards, and FERC would exercise its statutory authority over power line access and pricing.

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

EIA to Increase Natural Gas Marketer Reporting Burdens

EIA is requesting comments on its plans to increase the reporting burdens associated with its Form EIA-910, Monthly Natural Gas Marketer Survey. NEM has strongly opposed the Survey in the past. The Survey collects data from natural gas marketers on the number of customers, volume and revenue of natural gas sold to residential and commercial end-use customers. EIA now proposes, in addition to the five states for which reporting is currently required (Georgia, Maryland, New York, Ohio and Pennsylvania), to include reporting for Florida, Illinois, Michigan, New Jersey, Masachusetts, Virginia, West Virginia, and the District of Columbia. Comments on the revisions to Form EIA-910 are due July 9, 2004. The full text of the Comment Request is available on the NEM Website.

Order on Reliability Must Run Units

FERC issued an Order addressing PJM's proposal on mitigating market power of must-run units. In evaluating PJM's proposal, the Commission outlined a new procedure to address "Reliability Compensation Issues." The inquiry begins with the question of whether the organized market exhibits material short-term or long-term Reliability Compensation Issues. If the market does exhibit such issues, the next step is to evaluate whether market deisgn improvements can be implemented that will resolve the issues. If the market does not exhibit material Reliability Compensation issues and the issue is of a sufficiently narrow scope, the inquiry can focus on targeted approaches such as unit specific contracts or compensation schemes. FERC stated a preference for market design features to solve Reliability Compensation issues but recognzied that in some circumstances these measures will not be effective. In such case, FERC would be willing to consider a last resort process, such as an RTO-administered auction to create a long-term commitment that will support cost-effective financing.

With respect to PJM's proposal, FERC found that, "the PJM market exhibits few material short-term or long-term Reliability Compensation Issues," but that a few changes were needed to the market design to better reflect scarcity conditions in market prices and changes to mitigation rules. Specifically, the Commission found that PJM's current offer capping rules should be revised to make clear the rights of generators to have higher bid caps when they are subject to frequent mitigation and to clarify the dispute resolution process relating to compensation of must-run units. The Commission accepted PJM's proposal to suspend offer caps when competitive conditions exist in a load pocket (i.e. when there are four or more pivotal suppliers), subject to the requirement that PJM make a compliance filing further justifying its "jointly pivotal competitiveness standard" and clarifying the procedures for application of the standard.

The Commission agreed with NEM's concerns about PJM's proposal to eliminate the exemption from offer capping for post-1996 generating units. The Commission rejected the proposal because of "the equity and regulatory uncertainty concerns." With respect to PJM's proposal to implement a Local Market Auction to address long-term scarcity, the Commission rejected the proposal because of PJM's failure to provide sufficient detail to demonstrate that the proposal was just and reasonable. With respect to the PJM's proposal to require generation owners in the PJM control area to become members of PJM, the Commission also rejected the proposal because of PJM's failure to demonstrate the proposal was just and reasonable. Finally, the Commission directed PJM to consider the use of pricing or targeted revisions to its mitigation that recognizes operating reserve deficiencies in its market design. The full text of the Order is available on the NEM Website.

Many thanks to Steve Wemple of ConEd Solutions for his assistance and quantitative analysis supporting NEM's position in this proceeding.

DTE Recalculation of Energy Imbalance

FERC previously found that DTE should recalculate the rates and provide refunds, including interest, to all customers who took Energy Imbalance Service under its tariff. FERC ordered DTE to refund amounts due using the formula for decremental costs specifically identified in its tariff for the period running from January 2, 2000, to December 2, 2003, and to reimburse all customers who took Energy Imbalance Service under its tariff during that period, for any under compensation for over-deliveries outside the deviation bandwidth due to DTE’s misapplication of the decremental cost formula. DTE has only submitted a recalculation for the period running from January 1, 2003, through December 1, 2003, but states it will provide additional recalculations in the coming months. DTE performed the recalculation using two different approaches however under both approaches DTE is owed money. DTE claims it is owed $1.395 million in additional revenue under its "Option 1" and is owed $2.873 million in additional revenue under "Option 2." DTE stated that it, "does not seek to collect additional amounts due to the recalculation submitted through this compliance filing," however it is, "entitled to offset any payment obligation with amounts due to Detroit Edison under the recalculated rates." Comments on DTE's Filing are due May 21, 2004. The full text of DTE's Filing is available on the NEM Website.

Consumers Application to Recover 2003 Stranded Costs

Consumers Energy filed an application to recover net stranded costs incurred during 2003 and to recover those costs via a stranded cost recovery charge. Consumers prepared two calculations, with and without recovery of Clean Air Act costs, to be used depending on the outcome of another related proceeding. Not including Clean Air Act costs, Consumers calculates that it incurred $92,453,000 in net stranded costs in 2003 and because of the lag in recovery has added carrying costs to increase the amount to $105,850,000. The resultant net stranded cost recovery charge would be $0.015949 per kilowatthour. Including Clean Air Act costs, Consumers calculates that it incurred $143,893,000 in net stranded costs in 2003, plus carrying costs, to increase this amount to $164,743,000. The resultant net stranded cost recovery charge would be $0.024823 per kilowatthour. Consumers also proposes to terminate the securitization charge offset for retail access customers at the time their cumulative 50% share of the excess savings is consumed, which Consumers predicts will occur before the end of 2004. Motions to intervene in the case are due May 27, 2004, and a prehearing conference will be held June 3, 2004. The full text of Consumers' Stranded Cost Application is available on the NEM Website.

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