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December 21, 2001

NEM Winter Meeting

All Executive Committee Members are encouraged to attend NEM's Winter Meeting to be held in Houston, Texas on January 17 and 18, 2001. Chris Bernard of Entergy-Koch and Tami Pallas of CMS MS&T have generously offered to sponsor the winter meeting that will be held at Entergy's headquarters at 20 Greenway Plaza Room 1. A firm headcount is needed ASAP.

The Executive Committee will be prioritizing NEM advocacy goals, issues, states, utilities and resource allocations for 2002. Wholesale policy issues to be discussed will include all of the FERC's recent rulemakings on RTO's, affiliate rules, market power, economic witholding, the latest proposals for federal legislation and the NISB/NERC/Duke Energy Proposals for wholesale standards. Retail Issues will include the proper rate structure for POLR services and the complete unbundling of utility rates based on fully allocated embedded costs for all competitive products, services information and technology. Technology Issues will include the latest standards for EDI/XML,standby rates for distributed generation services and the barriers currently being proposed by utilities that could hamper competition for energy services, information and technology.

The agenda is hotlinked here for your convenience. A quick registration form is hotlinked here for your convenience. A block of rooms has been reserved at the Renaissance Hotel located at 6 Greenway Plaza East in Houston. Be sure to request the special NEM rate of $119 per night. Contact Jennifer Webster at 281-230-1563 with any problems.

NEM Annual Membership Meeting and National Restructuring Conference Has Been Rescheduled for June 20 and 21, 2001

A number of very prominent Senators including the Speaker have called to express regrets with our dates as the Congress will recess for Easter both the week of and week after Easter which will include our meeting date of April 2 and 3, 2001. After much consultation, NEM has reserved June 20 and 21, 2002 at the Marriott Metro Center for our Spring event. Chairs of several important state PUC's and a number of Senators and Congressmen has penciled in the date.

Please make sure you reserve a room at the Marriott Metro Center in Washington, DC, for NEM's June 20 and 21, 2002 (please note the change in dates), Annual Membership Meeting and National Restructuring Conference. A quick registration form is hotlinked here for your convenience. Please contact NEM headquarters if you are interested in speaking, sponsorship or table-top space at the conference, as space will be limited.

NAESB Retail Quadrants Open Industry Meeting

Meetings will be held on January 17 and January 29, 2002, to address the structure and governance of the Retail Gas Quadrant and Retail Electric Quadrant of NAESB. The meetings will be held in AGA's offices in Washington, D.C. The full text of the Meeting Announcement is available on the NEM Website.

Commission Orders on a Single RTO for the Midwest

FERC issued a series of Orders related to establishing a single RTO for the Midwest. FERC approved MISO as an RTO finding that its proposal satisfied the criteria required under Order 2000 for RTO status. FERC approved the request of International Transmission Company (ITC) to transfer operational control of its transmission facilities to MISO and accepted the agreement between ITC and MISO that allows ITC to be an independent transmission company that will share certain functions with MISO. FERC approved DTE Energy's application for divestiture of ITC transmission facilities to an as yet unnamed unaffiliated entity with no ownership interest in a market participant to facilitate a stand-alone transmission company under MISO. FERC found that the Alliance Company lacks sufficient scope to exist as a stand-alone RTO and directed Alliance to explore how their business plan can be accommodated within MISO. FERC deferred ruling on whether National Grid is not a market participant and can therefore serve as a managing member of Alliance. The full texts of the Order Granting MISO RTO Status, Order Approving Transfer of ITC Transmission Facilities to MISO, Order Approving Divestiture of ITC Transmission Facilities, Order Rejecting Alliance Proposal, and the Order on National Grid are available on the NEM Website.

Order on Wholesale Electric Industry Standards Board

FERC has ordered that the various participants in the wholesale electric industry agree on a single standards organization to develop wholesale electric standards by March 15, 2002. Alternatively, FERC will institute its own procedures to choose an organization to develop such standards or to develop the standards at FERC. FERC clarified that the organization must be open to all industry members. FERC also stated that the standards development process, including the drafting stage, must be open to all, ensure due process, include an appeal process, and ensure that standards are developed by the industry through a consensus process with a balance of interests. FERC cited GISB's Executive Committee as an example of such an organization. FERC also noted the process should allow coordination of business processes and reliability standards as well as coordination between other energy standards development groups in the wholesale and retail natural gas and retail electric industries. The full text of the Order is available on the NEM Website.

NOPR on Financial Instruments, Comprehensive Income, Derivatives and Hedging Activities

The Commission issued a NOPR applicable to public utilities, natural gas companies, and oil pipeline companies establishing uniform accounting requirements for the recognition of changes in the fair value of certain security investments, items of other comprehensive income, derivative instruments, and hedging activities. The Commission proposes to add new balance sheet accounts to the Uniform Systems of Accounts to record items of other comprehensive income and changes in the fair value of derivative instruments. The Commission also proposes to add new general instructions for the accounting of derivative instruments and hedging activities along with new instructions for the accounting of items of other comprehensive income.

The Commission requested comment on the extent to which independent and affiliated power marketers and power producers should be required to follow the Uniform System of Accounts, what financial information, if any, should be reported by these entities, how frequently it should be reported, and whether these previously exempted entities should be subject to reporting the information required in the proposed regulations. The Commission also sought comment on whether they should rescind the Part 34 blanket authorizations granted to these entities and require them to comply with the Part 34 filing requirements for all future issuances of securities and assumptions of liabilities. Comments will be due sixty days after publication of the NOPR in the Federal Register. The full text of the NOPR is available on the NEM Website.

Order Clarifying Western Market Initiatives

FERC issued an Order clarifying previous directives for pricing and price mitigation in the Western energy markets. The Order provides that: 1) governmental sellers are excluded from price mitigation as applicable to bilateral transactions outside the ISO spot markets and the must-offer requirement outside California; 2) the underscheduling penalty is eliminated; 3) marketers, LSEs, and hydroelectric units selling in the CAISO and PX spot markets may submit evidence that the refund methodology results in a total revenue shortfall for their transactions; 4) generators subject to the must-offer requirement should be able to recover their costs for complying with CAISO's instructions to keep their units at minimum load status, and CAISO is directed to pay these costs regardless of whether it buys the power; 5) units operating outside California may set the mitigated market clearing price; and 6) the mitigated market clearing price is to be set by the proxy price of the last unit dispatched rather than the lower of the proxy price or the actual bid of the marginal unit. The full text of the Order is available on the NEM Website.

Initial Briefs Filed in Illinois Power Delivery Services Proceeding

Staff filed a brief in the Illinois Power (IP) delivery services proceeding arguing that: 1) IP should only require smaller use customers returning to bundled service from delivery service to stay on the utility's bundled service for 12 months, rather than 24 months as IP proposed; 2) the Commission should not direct IP to split gas accounts and electric accounts at this time; 3) electronic signatures should be permitted for customer enrollment and a workshop should be used to work out the details; and 4) IP's proposed tariff language on standby customers and standby charges provides uneconomic and distortionary price signals to standby customers. IP should provide incentives for self-generation through special contracts and other measures. The full text of Staff's Brief is available on the NEM Website.

CUB and the Attorney General (GCI) argued in their brief that internet enrollment is consistent with state and federal law and the issue should be pursued in a workshop setting. The full text of GCI's Brief is available on the NEM Website.

IP argues in its brief that: 1) self-generation customers that want to use delivery services as a backup or for standby supply services should be subject to a standby capacity requirement (consisting of a customer's demand charge, distribution capacity charge, and transformation charge); 2) the proposed SBO credits ($0.439 and $1.133 for residential and non-residential electric only customers if the supplier assumes payment responsibility, $0.213 for residential and non-residential electric only customers if the supplier does not assume payment responsibility, and $0.226 and $0.920 for residential and non-residential combination customers if the supplier assumes payment responsibility) should be approved; 3) small commercial customers that return to bundled service should be required to remain for 24 months before returning to delivery service; and 4) IP should be required to split bills for combination gas and electric customers. The full text of IP's Brief is available on the NEM Website.

NEM Reply Brief in ComEd Delivery Services Proceeding

NEM filed a Reply Brief in the ComEd delivery services proceeding reiterating its support for an embedded cost-based methodology for rate design as well as single bill option credits and metering service credits. NEM also urged that Internet enrollments be permitted and that returning customers not be subject to a 24-month minimum stay requirement. The full text of NEM's Reply Brief is available on the NEM Website.

Examination of Default Service Issues

The Commission will begin examination of default service issues at a meeting on January 17, 2002, at 9:30AM in the 16th floor hearing room of the Commission's offices. Staff is required to submit a report by February 4, 2002, on the status of discussions. Interventions in the proceeding are due by January 11, 2002.

Staff Testimony Filed in Consumers Gas Proceeding

Staff filed testimony in Consumers gas proceeding recommending that new unbundled services not be established. Staff maintains that Consumers cost of service study provides cost information related to metering, billing information services, transmission services, balancing services, storage services, backup and peaking services, and customer turn on/off services that is available to any party wishing to offer unbundled services to Consumers' customers. Staff further states that with a concrete proposal sponsored by an alternative service provider, it would be possible to determine avoidable utility costs and determine a backout charge. Staff also recommends that Consumers study the development of a pooling option and peak and off-peak rates for transportation service customers. The full text of Staff's Testimony is available on the NEM Website.

Initial Briefs Filed in Consumers Electric C&I Unbundling Case

Staff filed a brief in Consumers electric C&I unbundling case recommending that billing of unbundled rates should not commence during the rate freeze period to avoid customer confusion. Consumers argued that C&I customers should be able to select between three unbundled rate structures: 1) a 2-part structure with an energy charge and customer charge; 2) a 3-part structure with a billing demand charge, an energy charge, and a customer charge; and 3) a 4-part structure with a maximum demand charge, a billing demand charge, an energy charge, and a customer charge. The full texts of Staff's Brief and Consumers' Brief are available on the NEM Website.