December 14, 2001

The Commission has discussed a reexamination of electric restructuring. NEM has filed in opposition arguing that such an inquiry will impose large risks on unregulated entities, have a chilling effect on competitive entry, and unfairly changes the rules subsequent to market participants investing time and resources into the Arizona market. The inquiry was announced subsequent to the filing of Arizona Public Service (APS) in which it requested a modification to the rule requiring it to acquire all of its customers' standard offer generation requirements from the competitive market, with at least 50% coming from a competitive bidding process. APS proposes instead that the Commission approve a long-term purchase power agreement with its affiliate to supply the power and that its affiliate act as the wholesale provider of last resort. The full texts of NEM's letter and APS' Filing is available on the NEM Website.

Many thanks to David Crabtree of TECO Power Services for his assistance with this matter.

The DPUC has requested written testimony on the issues of capacity disposition and the cost responsibility of that capacity. Specific issues to be addressed include mandatory capacity assignments, slice-of-system assignments, exit fees, transition surcharges, and shifted and stranded costs. Testimony is due January 15, 2002. The full text of the Request for Testimony is available on the NEM Website.

NEM, Staff and ComEd filed Briefs in the delivery services proceeding. NEM argued in its Brief that: 1) the proper price to beat for competitive services is the utilities' embedded costs, and institution of rates based on marginal costs will significantly understate the true prices that consumers actually pay for competitive services provided by utilities; 2) ComEd's proposed special demand ratchet for standby customers should be rejected; 3) consumers should be given shopping credits on their utility bills equal to ComEd's fully embedded costs of metering and information-related services, billing and customer care services and related technologies and should be permitted to use the credits to shop for a full panoply of energy services, products and technologies; and 4) customers should be able to enroll telephonically and through the Internet.

Staff argued in its Brief that: 1) ComEd's proposals to use marginal costs for design of delivery service rates and to set unbundled service credits are inappropriate and should be rejected in favor of embedded costs; 2) ComEd's proposal to set the Single Bill Option (SBO) credit on the basis of avoided costs unfairly benefits the company at the expense of competitors and consumers and the avoided cost approach for unbundled metering suffers from the same deficiencies; 4) a proper SBO credit should be based on ComEd's calculated $0.60 embedded cost based credit less a $0.27 offset for transactions between ComEd and suppliers over VANs or a $0.03 offset for transactions over the Internet; and 5) customers should be able to switch via Internet.

ComEd argued in its Brief that: 1) the Commission should use a marginal cost based approach to ratemaking; 2) the proposed special demand ratchet for standby customers should be adopted so that these customers cannot evade delivery services facilities charges; 3) the proposed single bill option credit of $0.03 is properly calculated based on the net costs ComEd will avoid when RESs elect the option and not based on an embedded cost approach; and 4) the proposed standard metering charges are properly calculated based on net costs ComEd will avoid when customers elect unbundled metering service.

The full texts of NEM's Brief, Staff's Brief and ComEd's Brief are available on the NEM Website.

The Board announced that customer choice would soon be made available to small volume gas customers. NEM has submitted a filing with the Board in support and has urged it to implement the recommendations in NEM's "National Guidelines to Competitively Restructure the Market for Natural Gas and Related Products and Services," and "National Energy Technology Policy." The full text of NEM's Letter is available on the NEM Website.

Many thanks to George Phillips of MidAmerican Energy and Wendy Ito of Nicor Energy for their assistance with this matter.

The DTE has requested comments on the following issues raised in Phase II of the Competitive Markets proceeding: 1) whether electric distribution companies (EDCs) should act as electricity brokers for their default service customers; 2) inclusion of customer account numbers on Customer Information Lists; 3) requiring the first four characters of a customer's account name for enrollment of a customer; 4) expansion of Customer Information Lists to include information about customer service delivery points and/or about customers who receive generation service from competitive suppliers; and 5) the EDCs use of the Internet for the transmission of customer data between themselves and competitive suppliers. Initial comments are due January 4, 2002, and reply comments are due January 14, 2002. The issue of internet-based customer authorizations will be discussed on January 16, 2002, at 10AM at DTE offices. The full text of the Notice Requesting Comments is available on the NEM Website.

The Board approved the Utilities proposal for the provision of Basic Generation Service (BGS) in year 4 of the transition period to run from August 1, 2002, through July 31, 2003. The proposal entails use of a simultaneous, multi-round descending clock auction for the procurement of supply to meet the full electricity requirements (energy, capacity, ancillary services, transmission, etc.) of retail customers that have not chosen a Third Party Supplier. The BGS loads of all the electric distribution utilities, perhaps as large as 18,000 MW, are to be bid in the same auction. The full texts of the BGS Order, Attachment A (Tentative Approvals and Decision Process), Attachment B (Post Auction Assessment for the NJ BGS Auction), and Attachment C (Modifications to the Auction Rules) are available on the NEM Website.

A revised set of Draft EDI Implementation Guides for Pennsylvania, New Jersey, Delaware and Maryland has been circulated. Comments are due on the revised documents by December 19, 2001, in order to have finalized documents issued by the year's end. The full texts of the Draft EDI Implementation Guides are available on the NEM Website.

In addition to NEM's Motion for Clarification of the Commission's recent Order requiring the utilities to file streamlined embedded cost of service studies and embedded cost-based rates, the Utilities and Multiple Intervenors (MI) have also filed Motions challenging the Order. The Utilities have requested a stay of the requirement that they file tariff amendments containing unbundled rates based on streamlined embedded cost of service studies. In the alternative, the Utilities argue they should have been provided with a mechanism to recover transition costs simultaneous with the filing of embedded cost based rates. MI challenges the Order because it only required the electric utilities to file "streamlined" embedded cost of service studies that do not classify or allocate costs related to the provision of transmission and distribution service.

NEM filed a response to the filings urging the Commission to implement embedded cost-based rates as soon as possible, quantify the levels of migration and monitor utility mitigation efforts prior to developing just and reasonable methods to ensure utilities receive appropriate revenue requirements based on the embedded costs associated with the actual services provided to migrating customers versus full sales customers versus POLR customers. NEM also urged the Commission to Order fully allocated embedded cost-based rates be issued no later than June 2002.

The full texts of NEM's Response, the Utilities' Motion and MI's Petition are available on the NEM Website.

The PSC is considering changes to the New York UBP to reflect recommendations arising from the national UBP effort. The PSC is considering replacement of the provisions identified in the Definitions, Customer Information, New Delivery Customer Requirements, Switching Requirements, Slamming Prevention Process, Discontinuance of Service, and Dispute Resolution Process sections of the current New York UBP with provisions entitled Glossary, Customer Information, Customer Agreement and Switching, Customer Inquiries, Disputes Between Distribution Utilities, ESCO, Direct Customers, Default Providers, and Registration Agents, and ESCO Eligibility. Comments are due February 4, 2002. The full text of the Notice Requesting Comments with Proposed Provisions is available on the NEM Website.

Staff has circulated a settlement agreement in the Keyspan proceeding. Due to confidentiality concerns, NEM members interested in reviewing the document should contact headquarters.