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April 18, 2003
MISO, PJM and TVA Will Integrate Their Power Markets

Midwest Independent Transmission System Operator Inc. (MISO), PJM Interconnection (PJM) and the Tennessee Valley Authority (TVA), three of the largest power grid operators in the eastern-half of the United States, agreed to work together to integrate their power markets. MISO, PJM PJM and the TVA said this was the first step in a process that would, when completed, create a wholesale power market covering a significant portion of the nation east of the Rockies. The announcement furthers the Federal Energy Regulatory Commission's (FERC) goal of creating a national standard market design (SMD) based, in part, on the PJM market model.

FERC Will Hold a Hearing on Nevada Long Term Electricity Contracts

FERC will hold an April 23 hearing to decide whether long-term electricity contracts signed by Nevada Power Co. and two other Western area municipal utilities should be canceled. In December, a FERC administrative law judge recommended that the commission throw out a complaint by Sierra Pacific Resources and its utility Nevada Power Co., and two municipal utilities in Washington state and California, that their long-term contracts were unfair and should be set aside. The power sellers included Enron Corp., El Paso Corp. , American Electric Power Co Inc. , Morgan Stanley's energy unit, BP Plc. , Mirant Corp. and Allegheny Energy . After hearing arguments FERC will decide whether to accept, reject or modify the judge's initial ruling. Two of the agency's commissioners have said they oppose canceling the contracts. The Nevada, Washington and California utilities failed to prove the California market "materially affected" long-term markets in the 14-state Western region, and failed to prove the contracts harmed their ratepayers, the judge said in December. The Nevada case is tied to a separate complaint brought by California alleging that some $20 billion in long-term contracts it signed should be canceled. FERC staff on March 26 recommended that the agency uphold both the Nevada and California long-term contracts.

FERC Technical Conference on Natural Gas Price Information

FERC Staff will convene a technical conference to discuss the adequacy of natural gas price information. Issues for consideration will include how data is collected, authenticity and reliability of quotes, coverage adequacy, whether and how information is checked, and what models will best promote price discovery. Conference participants are to include those who report, publish, and use natural gas price information. FERC requested that those with specific proposals for consideration make them available for posting prior to the conference. The conference will be held April 24, 2003, at 8:30AM. Additional details on the conference will be forthcoming. The full text of the Technical Conference Agenda is available on the NEM Website.

The Illinois Commerce Commission Issued an Order in ComEd's Delivery Service Rate Case

The Commission found that an embedded cost methodology should be used in this proceeding to allocate the jurisdictional revenue requirement between residential customers as a whole and nonresidential customers as a whole. The Commission concluded that, although the “top level” split of the jurisdictional revenue requirement between the residential and nonresidential classes as a whole should be based on ComEd’s embedded cost of service study the allocation of the revenue requirement among various classes within non-residential customer categories should be based on “across the board” methodology. Under this approach, the share of the revenue requirement assigned to non-residential customers will be allocated among classes of non-residential customers by increasing (or decreasing) on an “across the board” (equal percentage) basis the delivery services charges now in effect. The Commission rejected ComEd’s request for an annual demand ratchet for all delivery services customers and thus also rejects ComEd’s request for an annual ratchet for generation and standby customers. The Commission rejected the proposal of the ARES Coalition to modify the definition of billing demand for Rate RCDS. The Commission agreed with ComEd and found that the single highest demand is the best indicator of the delivery costs that a given customer imposes on ComEd and accurately reflects the amount of distribution equipment that is in place to serve the customer’s actual needs.

The Commission also found that ComEd's: (1) net jurisdictional delivery services rate base is $3, 616,659,000; (2) jurisdictional operating expenses (before income taxes) is $1,114,013,000; and (3) jurisdictional delivery services revenue requirement is $1,507,636,000 (not including ComEd's other revenues. The Commission also held that 8.99% is a just and reasonable rate of return for ComEd to earn on its jurisdictional delivery services rate base. Revisions to ComEd's Delivery Service Tariffs and Riders to conform to the above will be effective starting on the June 2003 billing period.
The full text of the Commission Order is available on the NEM Website.

NEM Submits Comments on Second Stranded Cost Strawman

NEM submitted that Staff's proposed fluctuating charge based on monthly switch rates will force consumers and retailers to continue to face even greater risks and uncertainties than the current process affords. NEM recommends that net stranded costs be computed and recovered only after a reasonable migration rate has been achieved. NEM questioned whether the proposed reconciliation process would determine whether stranded costs were actually incurred as well as whether over- or under- recoveries occured through the stranded cost charge. If not, NEM submitted that Staff's proposed procedure would simply assure that the charges were fully collected in accordance with its proposed table of charges without regard to the actual incidence of valid stranded costs. NEM submitted that net stranded cost charges should be recovered by a de minimus charge on all customers and not just retail open access (ROA) customers. NEM strongly advocates that effective competition cannot be achieved if stranded cost charges remain unpredictable and operate as an exit fee on ROA customers only.

New York
Staff Submits Brief on Exceptions to the Recommended Decision in the Unbundling Track

Staff's Brief on Exceptions in the Unbundling Track stated that it expects that the unbundled rates that would be filed if the Recommended Decision (RD) was adopted "would fall just within the low end of the range" identified by Staff's two methods. Staff recommended that the Commission adopt the RD for all the utilities, not just Con Ed and NYSEG. Staff's Brief on Exceptions, agreed with NEM, and supported the RD's rejection of Con Ed and NYSEG's allocation of 100% of credit and collection costs and customer care costs to delivery service. Staff also supported the RD's adjustments on allocations of uncollectables and working capital. Staff agreed with NEM that the utilities should reallocate their gas promotional costs. The full text of Staff's Brief on Exceptions is available on the NEM Website.

SCC Seeking Comments on Facilitating Effective Competition

The State Corporation Commission is preparing its third annual report to the Legislative Transition Task Force (LTTF) and the Governor. The report will cover the status of competition in the Commonwealth, the status of the development of regional competitive markets and recommendations to facilitate effective competition in the Commonwealth. Staff is asking interested parties to comment on the following to assist the Commission in developing a comprehensive review of methods that may be considered to facilitate effective competition: 1) What are the current obstacles to the development of a robust competitive retail electricity market for residential, commercial and industrial customers; 2) What is the outlook for future natural gas prices and the impact on wholesale electricity prices and a competitive retail market; 3) In light of recent legislation, how can the Commonwealth be assured of a continuing reliable electricity system when control of transmission is governed by an RTO; 4) Are the Commission’s Rules Governing Retail Access to Competitive Energy Services conducive to promoting effective competition in the Commonwealth; 5) What should be the level of consumer education when the program is resumed on July 1, 2004; 6) Are there any other actions that have been taken or are being considered in other states that may be used to advance competitive activity in Virginia? Comments are due by May 23, 2003. Staff will hold a discussion on the development of effective competition on June 6, 2003. Parties who plan to attend the meeting should notify Dave Eichenlaub by email at or phone by May 30, 2003. A full version of the SCC Request for Comments is available on the NEM Website. NEM members should forward comments to headquarters no later than May 1, 2003.

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