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August 12, 2002
IntercontinentalExchange Elected to NEM Executive Committee

NEM is pleased to announce that IntercontinentalExchange has been elected to NEM's Executive Committee. IntercontinentalExchange is an Internet-based marketplace for the trading of over-the-counter energy, metal, and other commodity products. It represents a partnership of world leading financial instituations with some of the world's largest diversified energy and natural resource firms. Jeffrey C. Sprecher, Chief Executive Officer, Richard V. Spencer, Chief Financial Officer, Charles A. Vice, Chief Operating Officer, Rafael Pirutinsky, Senior Vice President, David Goone, Senior Vice President, and James M. Falvey, Vice-President, General Counsel and Corporate Secretary, will represent IntercontinentalExchange within NEM.

APS Energy Services and Pinnacle West Capital Corporation Nominated to NEM Executive Committee

NEM is pleased to announce that APS Energy Services and Pinnacle West Capital Corporation have been nominated to NEM's Executive Committee. APS Energy Services is the unregulated Energy Service Provider subsidiary of Pinnacle West Capital Corporation, an Arizona-based Fortune 500 company with consolidated assets of $8.0 billion and annual revenues of $4.6 billion. Vicki Sandler, President of APS Energy Services, and Martin Shultz, Vice President of Government, Pinnacle West Capital Corporation, will represent the companies within NEM.

NEM Meeting on FERC GIGA NOPR on Standard Market Design, Credit, Risk, Financial Governance, State Retail Programs and Consumer Aggregation Rights will be Held September 26 and 27, 2002, in Chicago

NEM's Executive Committee will hold an important meeting to review, identify and prioritize issues and vote on NEM's position on the FERC Giga-NOPR, RTOs and Standard Market Design, Next Steps to Develop and Implement Industry Standards for Risk Valuation, Management and Financial Governance as well as review and prioritize NEM's positions on State Retail and Technology-related issues on September 26 & 27, 2002, in Chicago. The meeting will be open to all NEM members and prospective members.

NEM has reserved Union Train Station in downtown Chicago for this meeting. Depending on the number of people coming, we may break out into Wholesale and Retail/technology sessions for issue identification and prioritization and then recombine at the end of the day for the Executive Committee to vote on the recommendations.

NEM Policy Chairs will lead the discussion on all issues. Your attendance and input on these important issues is encouraged and will be appreciated.

NEM's Annual Membership Meeting and National Restructuring Conference for 2003 - Invitation for Speakers, Sponsors and Exhibitors

Next yearís Annual Membership Meeting and National Restructuring Conference will be held April 3 and 4, 2003, at the Hyatt Regency on Capitol Hill. We have arranged for additional space to accommodate more attendees with a special room for exhibits and added sponorship opportunities. Breakfast and all breaks will be in the exhibition room that is adjacent to and visible from the general session. A hotlink for signup is provided here.

Members who wish to be speakers, sponsors or exhibitors should contact headquarters immediately as we will be starting our worldwide advertising shortly. The exposure and attendance should be even better than this year.

NEM Winter Executive Committee Meeting to Be Held in San Diego on January 16 and 17, 2003

NEM's Winter Executive Committee Meeting will be held in San Diego at Sempra's headquarters on January 16 and 17, 2003. This meeting will be for NEM Executive Committee Members only. As in the past, the Executive Committee will establish the policy position and priorities for NEM for the coming year.

All Executive Committeee Members are requested to attend. An agenda will be sent out prior to the meeting.

NEM Conference Call on Risk Management and Financial Disclosure

NEM will hold a conference call of its Risk Management and Financial Disclosure Taskforce on August 14, 2002, at 1PM EST. The purpose of the call is to review where we are and where we need to go on this group of issues including coordination with other groups and development of the "Energy Market Stability Framework" into a national policy paper. The dial in number is 703-788-0600, and the passcode is 209353.

FERC NOPR on Standard Market Design

FERC has issued its rulemaking on Standard Market Design. NEM will host a conference call on August 20, 2002, at 2PM EST, to begin the formation of a comment group to address the NOPR. The dial in number is 703-788-0600, and the passcode is 209353. Comments on the NOPR are due October 15, 2002.

The key components of the NOPR include: 1) a single transmission service called Network Access Service with a single open access transmission tariff applicable to all customers, including bundled retail customers; 2) use of locational marginal pricing; 3) market power mitigation measures for spot markets; 4) a bid cap in the day-ahead and real-time markets; 5) a resource adequacy requirement; 6) transmission is to be operated by an independent entity, called an Independent Transmission Provider. This entity is also to operate day-ahead and real-time energy markets; 7) an access charge is to be used for transmission owners to recover their revenue requirements and will mainly be assessed to load-serving entities based on shares of the system's peak load; 8) transmission providers will offer various types of congestion revenue rights to be phased in over time; 9) definition of governance procedures; 10) state regulators participation in RTOs via Regional State Advisory Committees; and 11) requiring compliance with NERC cybersecurity standards.

Further NEM analysis of the NOPR will be issued shortly. The full text of the Standard Market Design NOPR, Staff Presentation on SMD, Standard Market Design 101, SMD NOPR Key Dates, SMD: Questions and Answers, and SMD: Preventing Unfair Business Practices are available on the NEM Website.

FERC Proposed Policy on Standard of Review for Market-Based Rate Contracts

FERC issued a proposed policy statement on the standard of review to be applied in determining whether to permit changes to market-based rate contracts for wholesale sales of electric energy. The Commission proposes specific language that parties would include in their contracts if they wanted the Commission to apply the stricter "public interest" standard of review. The parties could choose language that only binds the parties to this standard of review or choose language that also binds the Commission by that standard. If the parties do not include the exact language in their contract, the Commission would interpret it to mean that the "just and reasonable" standard of review is to apply. In the their concurring statement, Commissioners Brownell and Breathitt request comment on whether the standard should be reversed, i.e., application of the public interest standard unless explicit language in a contract provides for a lower standard. Comments are due September 23, 2002. The full text of the NOPR is available on the NEM Website.

FERC NOPR on Cash Management Practices

FERC is proposing to amend the Uniform System of Accounts for public utilities, natural gas companies, and oil pipeline companies to establish documentation guidelines for cash management agreements between FERC-regulated subsidiaries and their non-FERC-regulated parents. FERC proposes that all such agreements be in writing, specify the duties and responsibilities of cash management participants and administrators, specify methods of interest calculation and allocation of interest income and expense, and specify restrictions on deposits or borrowings by money pool members. The Commission proposes the following documentation be provided on: 1) each deposit with a money pool, 2) each borrowing from a money pool, 3) the security provided by the money pool for repayment of deposits into the pool as well as the security required in support of borrowings from the pool, 4) daily balances of deposits with and borrowings from the money pool for every individual deposit or borrowing. Also, as a condition for participation in cash management arrangements, FERC-regulated entities must maintain a minimum proprietary capital balance of thirty percent and both the FERC-regulated entity and its parent must maintain investment grade credit ratings. Comments are due August 22, 2002. The full text of the NOPR is available on the NEM Website.

Massachusetts
Order on Competitive Market Initiatives

DTE issued an Order in the competitive market initiatives proceeding. The Order provides that utilities are not permitted to include customer account numbers on customer information lists. However, they are to include unique customer identifiers beginning with the updated versions of the customer information lists to be made available in September 2002. The customer information lists are also to include: 1) information regarding the customers of competitive suppliers but shall not include the name of the competitive supplier; 2) service delivery point information; and 3) information regarding each customerís nodal or zonal location. The Department also approved guidelines to govern the use of electronic authorizations. The enrollment requirement for C&I customers of the inclusion of the first four character account name is eliminated. The Department ordered the utilities to work with the EBT Working Group to investigate whether the Internet is a viable alternative to VANs and to submit a report on the subject in two months. The Department deferred consideration of whether the utilities should act as consumer aggregators for consideration in the default service proceeding. The full text of the Order is available on the NEM Website.

New York
Order on NYSEG Price Protection Plan Default Service

In its previous Order on NYSEG's Price Protection Plan the Commission left open the issue of whether the Bundled Rate Option or ESCO Rate Option delivery rates should apply to customers currently receiving electricity supply from an ESCO that do not affirmatively choose a delivery option during the enrollment period. The Commission decided that ESCOs currently serving customers in NYSEG's service territory are authorized to choose the delivery service option for their customers who do not choose a service option during the enrollment period under the Price Protection Plan. If neither an ESCO nor its commodity customer chooses a delivery rate option, the default service option for such customer is to be the ESCO Rate Option. The full text of the Order is available on the NEM Website.

Texas
Workshop on Competitive Metering

The Commission will hold a workshop on competitive metering on September 17, 2002, at 9AM. The meeting will be held in the 7th floor Commission Hearing Room. An agenda for the workshop will be forthcoming. The full text of the Workshop Announcement is available on the NEM Website.

Virginia
NEM Comments on Default Service

NEM filed comments supporting the competitive provision of default service. NEM urged that proper structuring and pricing of retail default service will be key to establishing a competitive electric market in the state. NEM stated that the default service price must include the fully allocated embedded costs of energy supply including the commercial costs of serving retail load. NEM also argued that the costs to provide default service vary by customer group and properly designed default service prices should reflect these real price differences to encourage competition for all customer classes. The full text of NEM's Comments is available on the NEM Website.

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