August 17, 2001


 NEM's Fall and Spring Meetings

All NEM members and prospective members are invited to join the Executive Committee for an open meeting on October 3-5, 2001, at the Palmer House Hilton in Chicago. NEM members interested in speaking at the meeting should contact headquarters. A draft agenda for the meeting is hotlinked here for your convenience. Many thanks to Exelon, Nicor, Peoples and Encorp for sponsoring the meeting. Please also mark your calendar for April 1 and 2, 2002, the Annual Membership Meeting and National Restructuring Conference, that will be held at the Marriot Metro Center in Washington, DC.

 DOE-GISB Meeting to Consider Energy Industry Standards Board

Craig Goodman, President of NEM, and Chris Bernard, Executive Vice President and General Counsel for Entergy-Koch, participated in the DOE-GISB meeting on August 14-15, 2001, to consider an energy industry standards board (EISB). The concept of an EISB received support from various industry groups in attendance. However, it was clear that many details remain to be worked out. It is likely that the RTO process and pipeline standardization will occur more rapidly than any EISB. Additionally, a number of participants voiced concern about the coordination of standards developed by NERC and an EISB.

 Restructuring Today Article on NEM

Restructuring Today featured NEM as its quote of the week on its urging that Congress resolve jurisdictional issues, require FERC to promulgate uniform, non-discriminatory, open access transmission tariffs, accelerate cost recoveries for qualified investments, mandate a date certain for state to transition to a competitive energy market, and repeal the state action defense to antitrust laws. The full text of the Restructuring Today Article is available on the NEM Website.

 NEM Member Opportunities

NEM members that wish to contribute articles for NEM magazines or to post their technology-related white papers on the NEM site should contact headquarters ASAP.

Federal Issues

 Reliability Legislation

PJM has developed proposed reliability legislation in response to NERC-developed language on the subject as included in H.R.312. PJM's language is meant to ensure that FERC be entrusted with balancing the markets and maintaining reliability rather than two separate entities. PJM's language includes an explicit definition of "reliability" and "reliability standards." PJM's version is also meant to limit preemption of state action with respect to reliability standards. The full text of PJM's Proposed Legislation and H.R.312 are available on the NEM Website.

State Issues

New York

 NEM Brief in POLR Proceeding

NEM filed a brief on the Recommended Decision in the POLR proceeding arguing that: 1) the suggestion to defer removing utilities from the merchant function should be rejected; 2) utilities should be removed from the business of providing commodity as well as competitive products, services, information and technologies and it should occur expeditiously and by a date certain; 3) the proposal to wait until multiple suppliers are offering multiple products for a customer class in a service territory before requiring utility removal from that market, will impose a "chicken and egg" type constraint on the market; 4) hedged products are competitive products that should be rendered by the competitive marketplace, and if utilities are to be permitted to offer hedged products, the utilities must be fully at risk and should not be entitled to any deferrals; 5) Commission oversight of ESCO provision of consumer protections should be consistent with all existing consumer protection rules; and 6) promulgation of new consumer protection rules targeting the energy industry will impose added costs on energy consumers without any appreciable increase in consumer protections. The full text of NEM's Brief is available on the NEM Website.

Staff argued in its Brief: 1) the subject of POLR should be explored further rather than adopting the proposed "all ESCOs as POLR" approach; 2) utility hedging strategies for commodity services should be pursued in the near-term, but primarily for small volume, mass market, customers for whom competitive retail alternatives are limited at this time; 3) hedging is a competitive pricing mechanism, and therefore, pre-approval of utility hedging strategies is inappropriate; and 4) continued development of competitive markets would be enhanced by subjecting all energy suppliers to a common set of consumer protections that are a subset of HEFPA. The full text of Staff's Brief is available on the NEM Website.

The Attorney General filed a brief opposing a Commission determination that incumbent utilities must at some point stop serving retail customers and that the Commission possesses the authority to decide that utilities do not have an obligation to serve. The Attorney General also argues that the Commission possesses the authority to impose HEFPA requirements on ESCOs. The full text of the Attorney General's Brief is available on the NEM Website.

The Consumer Protection Board argued in its Brief that the Commission has the authority to require all ESCOs to ensure that consumers receive all consumer protections currently provided by utilities and that all customers are served without undue discrimination. The full text of the Consumer Protection Board's Brief is available on the NEM Website.

 Unbundling Proceeding Reply Comments

NEM filed reply comments in the unbundling proceeding to express concern with Staff's proposal to group distribution and transmission into a single functional delivery bucket that would not be further classified or allocated. NEM argued this would obscure the results of the studies and prevent the parties from receiving necessary information to identify argue for the proper classification products, services, information and technologies as competitive. NEM argued that allowing the utilities discretion to perform the studies pursuant to their own assumptions and methods subject to subsequent debate will unfairly tilt the playing field in favor of the utilities. NEM also argued that the Utilities proposed list of functions into which utility costs will be allocated will fall far short of ensuring sufficient detail to transparently illustrate information about each function, product, service, information or technology currently being provided by the utility such that the costs are capable of being traced and verified as contestable by the parties. The full text of NEM's Reply Comments is available on the NEM Website.

Staff reiterated in its brief the importance of being able to trace the dollars in the cost studies to argue for alternative treatment of costs. Staff also urged that the utilities should be held to the deadlines originally set by the Commission for performance of cost studies and submission of new rates. The full text of Staff's Reply Comments is available on the NEM Website.

The Attorney General supported Staff's proposals that the utilities file their cost studies by December 31, 2001 and that the cost studies combine transmission and distribution costs into a single category without further allocation. The full text of the Attorney General's Reply Comments is available on the NEM Website.

 NYSEG Price Protection Plan

NYSEG filed modifications to its proposed price protection plan to provide for three rate options: 1) a Bundled Rate Option in which customers will pay NYSEG a fixed price for power supply and delivery service; 2) an ESCO Rate Option in which customers will pay NYSEG a fixed rate for delivery service and a floating non-bypassable wires charge and will receive commodity service from an ESCO; and 3) a Default Service Offer for customers that do not choose either of the other options. NYSEG's Plan is proposed to last for a six-year term for which NYSEG can seek a one-year extension. NYSEG also proposes that the 2 and 4 mill adders that were ordered to be implemented in the back-out rate proceeding should expire December 31, 2002, and the market price back-out should not be permitted to produce a bill that is less than zero. NYSEG proposed to retain POLR responsibilities for the term of the Plan for all customers. The full text of NYSEG's Modified Plan is available from NEM headquarters.

Staff filed an alternative proposal that would allow customers to choose to receive service from an ESCO, from NYSEG under a variable price option or from NYSEG under a fixed price option to be in effect from 2003-05. Residential and small customers will be placed on the fixed price option unless they choose otherwise during an enrollment period. Customers in other classes that do not make an affirmative selection will be placed on the NYSEG variable rate option. Staff proposes to unbundle NYSEG's rates such that the delivery rate is separated from the commodity rate, including charges for production plant, purchased power, fuel, congestion and transmission revenues. All transmission and distribution costs are to be fixed for all customers at a reduced rate. All customers will also pay a Commodity Adjustment Charge to account for fixed price contracts that NYSEG has already entered into for 2003-05. Staff proposes that retail customers receive 2 and 4 mill adders as a credit from the delivery charge. The full text of Staff's Proposal is available on the NEM Website.

 NIMO Power Choice Compliance Filing

NIMO submitted a supplement to its Power Choice compliance filing to revise competitive transition charge prices. The filing also proposes the following modifications: 1) revise the delivery charge adjustment to exclude ancillary services and NYPA transmission adjustment charge (NTAC) costs and revenues, 2) allocate the transmission revenue adjustment to service classifications based on the percent allocation of the transmission revenue in NIMO's most current embedded cost of service study; and 3) modify electricity supply cost to include a true-up mechanism for ancillary services and NTAC and a true-up mechanism for ICAP purchases and sales in the monthly and deficiency auctions. The full text of NIMO's Compliance Filing is available from NEM headquarters.

New Jersey

 RECO Third Party Supplier Fee Proceeding

RECO submitted a Third Party Supplier (TPS) fee filing in which it proposes to continue its general administrative fee of $25 per MW of capacity obligation per month for another year. RECO proposes to file an updated fee structure on August 1, 2002. The full text of RECO's Filing is available from NEM headquarters.

 Affiliate Relations Standards Meeting

Staff will host a meeting to discuss final affiliate relations standards and government aggregation standards on August 27, 2001, at 10AM at PSE&G in conference rooms 206, 207, and 208. The interim standards are set to expire on March 11, 2002.


  DEO Gas Hedging Pilot

The Commission denied DEO's application for pre-approval of its proposed gas hedging pilot program. The Commission found it was inappropriate to pre-approve the program and that it should be evaluated within the context of the utility's overall gas purchasing strategy. The full text of the Order is available from NEM headquarters.



PECO filed a petition with the Commission to enter into a new contract for firm transportation capacity in the amount of 30,000 Dth/day beginning November 1, 2003 and extending through October 31, 2013. The full text of PECO's Petition is available on the NEM Website.


 Consumers Gas Cost of Service Study

Consumers filed a gas cost of service study as required by the Commission's unbundling order. However, Consumers did not include workpapers, claiming they were already furnished in previous filings, or copies of functional ledgers as was ordered. The Commission also issued an Order declining to institute a separate proceeding, in addition to the rate case, to consider Consumers' study as was requested by the utility. The full text of Consumers' Gas Cost of Service Study and the Order are available on the NEM Website.

 Comments Sought on Mid-Sized LDC Gas Choice Programs

Staff circulated a summary of the August 2, 2001, meeting on mid-sized LDC programs and requested additional comments on the following issues:

  1. customer switching, enrollment provisions and returning to a market-based rate a) How much choice should a Choice customer have? b) When should they be able to exercise that choice? c) Who should enforce the Supplier agreement with the customer? and d) How much price protection should GCR Sales customers have from the effects of returning Choice customers? (i.e. to what extent should there be a market based rate for returning choice customers.)

2) supplier of last resort a) In the context of being the SOLR, should the LDC plan for 100% of all choice customers returning to a GCR sales or should appropriate levels be reserved as determined in the LDC's GCR plan cases? b) Should a reasonable level of cost be permitted to be included in the GCR cases to serve the returning choice customers (i.e. capacity and commodity)? and c) If any costs from item b above becomes unreasonable for the GCR sales customer to absorb, should the LDC be permitted to recover (at least in the short term) reasonably incurred costs through a transition cost mechanism that would be paid by both sales and choice customers?

3) daily delivery obligation, failure fees and balancing fees a) reasonableness of SEMCO/MGU proposals

4) capacity assignment a) Should there be any pipeline capacity assignment? b) Should a Supplier be required to demonstrate it holds primary peak day capacity for the winter time period? and c) What should any assigned pipeline capacity be price at?

5) buy/sell agreements a) SEMCO proposed to pay a Supplier based on gas delivered times the Supplier's price. MGU proposed to pay the Supplier based on revenues billed rather than gas delivered.

Comments are due August 28, 2001. NEM members should submit comments to headquarters ASAP. The full text of the Meeting Summary is available on the NEM Website.


  Commission Seeks Comments on Metering Issues

The Commission is seeking comments on Staff's Report on metering as well as various utilities' requests for delays in implementation of competitive metering services. Staff recommends that the first stage of a phased-in approach should provide meter functionality choices and data access choices, including access to meter data information on a near real-time, on command basis by January 1, 2003. Staff recommends submission of a draft of the proposed rules for this stage of the phased-in approach to competitive metering by February 14, 2002. Staff recommends that the competitive metering work group should continue its examination of the market and formulate recommendations for subsequent phases of the implementation of competitive metering. Comments are due August 21, 2001. The full texts of the Commission's Order and Staff's Report are available on the NEM Website.


  Competitive Market Proceeding Comments

NEM and other marketers filed comments arguing that current Federal law requires Massachusetts to recognize electronic signatures, and that DTE action affirming the applicability of the Federal E-SIGN law to electricity transactions in Massachusetts will encourage a robust electricity market in the State. The marketers also argued that lists of customer names, addresses, and rate classes should be provided to licensed suppliers not only for default service customers but also standard offer customers, and customer usage data should be provided on an opt-out basis. The full text of NEM's Comments is available on the NEM Website.

The Attorney General recommends that the Department require written verification or third-party verification for electronic signatures. The Attorney General also recommends that customers be given the right to choose not to participate in the requirement that the distribution company make available default service customers names, addresses and rate classes to suppliers and brokers. The full text of the Attorney General's Comments is available on the NEM Website.