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February 14, 2003
Interstate Gas Supply Nominated to NEM's Executive Committee

NEM is pleased to announce that Interstate Gas Supply (IGS) has been nominated to the Executive Committee. IGS is one of the largest independent natural gas suppliers in the Midwestern United States. IGS is engaged in natural gas producing, marketing, and energy management. IGS now serves more than 450,000 residential and small commercial end-users through various Customer Choice programs in addition to more than 1500 industrial and large commercial end-users in Ohio. IGS will be represented within NEM by Scott White, President, Doug Austin, Vice President, and Dave Burig, Director of Customer Choice Programs.

NEM's Annual Membership Meeting and National Restructuring Conference for 2003

This year’s Annual Membership Meeting and National Restructuring Conference will be held April 3 and 4, 2003, at the Hyatt Regency on Capitol Hill. Congressman Joe Barton, Chairman of the House Energy & Air Quality Subcommittee, Chairman Patrick Wood of the FERC, Chairman James Newsome of the CFTC, SEC Commissioner Campos, NARUC President David Svanda, Chair Klein of the TX PUC, Chairman Vasington of the MA DTE, Chair Spitzer of the ACC, and Commissioner Jones of the PUCO are all confirmed to be speakers at the event.

Our VIP reception will be held in the Senate Russell Caucus Room on the evening of April 3, 2003. This is one of the nicest rooms in the Capitol. Many thanks to LODESTAR, Itron, and IMSERV for sponsoring the reception.

The Agenda is hotlinked here for your convenience. A registration form is also hotlinked here for your convenience.

NEM Conference Call with Ontario Ministry of Energy

NEM has been requested to participate in a conference call with Ontario's Assistant Deputy Minister of Energy, Judy Hubert next week. As soon as the date is set members will be advised.

The subject of the call is a paper with proposals to enhance competition in the market for commercial and industrial customers entitled "Action Plan to Lower Hydro Bills: Enhancing Supply and Competition in the Ontario Electricity Marketplace." The paper posits that large C&I customers can enhance competition by adjusting demand in response to price signals and by stimulating investment in generation capacity (either contracted from a non-utility generator or by building their own). Specific questions raised by the paper for consideration include: 1) changes to make to the Market Power Mitigation Agreement to increase its usefulenss to large customers; 2) whether large customers have incentives to moderate demand at critical times; 3) whether current pricing systems effectively link supply and demand; 4) what contractual terms, fixed or variable prices, are effective for large customers for future contracts; 5) how should the import offer guarantee/IMO uplift be handled; 6) what can be done to increase competition in Ontario and encourage greater supplier entry into the market; 7) what other measures should be taken to address long-term supply of electric generation; and 8) whether Ontario's efforts with respect to the wholesale market are the proper approach. The full text of the Action Plan to Lower Hydro Bills: Enhancing Supply and Competition in the Ontario Electricity Marketplace is available on the NEM Website. The dial-in number is 703-788-0600 and the passcode is 209353.

NEM Conference Call on Wholesale Marketing, Clearing, Risk Management and Related Technology Issues Scheduled

NEM will convene a conference call on Wholesale Marketing, Clearing, Risk Management and Related Technology Issues on February 21, 2003, at 2PM EST. The purpose of the call is to prioritize issues for NEM action. The frequency of future conference calls will also be determined. The phone in number for the conference call is 1-703-788-0600, and the passcode is 209353

NEM Conference Call on Retail Marketing and Related Technology Implementation Issues

NEM convened a conference call this afternoon to discuss retail marketing and related technology implementation issues. The call focused on developing an NEM public relations campaign on the benefits of competition. Members are asked to send bullet points on this topic and media distribution lists to headquarters ASAP. It was decided that biweekly calls would be held to discuss retail marketing and related technology implementation issues. The next call will be held Thursday, February 27, 2003, at 1PM EST. The dial-in number is 703-788-0600, and the pass code is 209353. An agenda for the conference call will be circulated prior thereto.

Joint Committee on Taxation Issues Report on Enron

The Joint Committee on Taxation reviewed Enron's use of tax shelter arrangements, off-shore entities, and special purpose entities, and the compensation arrangements of Enron employees. In a Report presented to the Senate Finance Committee this week, the Committee concluded that, "Enron’s aggressive interpretation of business purpose, the cooperation of accommodation parties, the protections provided by tax opinions, the complex design of transactions, advantages over the IRS -- all were factors that contributed to Enron’s ability to engage in tax-motivated transactions. Until the costs of participating in tax-motivated transactions are substantially increased, corporations such as Enron will continue to engage in transactions that violate the letter or the spirit of the law." The Committee recommends that: duplication of losses should be limited so that a single economic loss is not deducted more than once; rules to prevent corporate acquisitions for the purpose of evading or avoiding federal income tax should be strengthened; extraordinary dividend rules should be strengthened; there should be greater disclosure of partnership disguised sales; partnership allocation anti-abuse rules should be strengthened; rules are needed to address the appropriate interaction between the partnership basis rules and the corporate stock nonrecognition rules; rules for allocating subpart F income should include an anti-abuse provision; earnings stripping rules should be strengthened; annual information reporting should be required with respect to entities that are disregarded pursuant to a check-the-box election; financial asset securitization investment trust provisions should be repealed; rules relating to the characterization and treatment of debt and equity should be modified; and the 50-percent related party threshold under the interest expense disallowance rules for disqualified indebtedness should be eliminated.

With respect to Enron's compensation agreements, the Committee recommends that: clear rules should be adopted on the operation of cash balance plans and the conversion of traditional defined benefit plans into cash balance plans; legislative changes should be made to reduce the likelihood that defined contribution plan participants will have high concentrations of assets in a single investment; fiduciary rules should apply to statements made by company executives regarding investments under participant-directed defined contributions plans; changes should be made to the rules relating to nonqualified deferred compensation arrangements to limit the deferral of tax on compensation income while providing executives with inappropriate levels of security, control, and flexibility with respect to deferred compensation; guidance relating to split-dollar life insurance should be finalized; and the limitation on the deduction for compensation in excess of $1 million should be repealed. The full text of the Report of Joint Committee on Taxation is available at:

Draft Decision on Demand Response Pilot Programs Issued

The ALJ in the demand response proceeding has issued a Draft Decision approving a pilot program for a sample of residential and small commercial customers on an opt-out basis. The program will measure the impact of three specific time-varying rates on customer electric consumption and coincident peak demand: time-of-use rates, fixed critical peak pricing rates, and variable critical peak pricing rates. The program would tentatively begin June 1, 2003, and run throughout 2004.

The Draft Decision also requires the utilities to develop a plan to evaluate the impacts of home control systems. The utilities would have to procure home control system technology in the fall of 2003, integrate the system with the current billing systems in the winter of 2003, install the devices in the spring of 2004, and measure the impacts of the systems in the fall of 2004. The utilities would develop a draft plan by June 2003 for comment and file the final plan by July 1, 2003.

The full text of the ALJ's Draft Decision is available on the NEM Website.

Gas Roundtable Participants Near Completion of Report

The gas roundtable participants are near finalization of a report to be submitted for Commission consideration on February 21, 2003. Issues considered by the participants include payment processing and treatment of receivables, utility provision of customer lists, facilitation of service provision to low income customers through aggregation programs and supplier sharing of MEAP grants, supplier consolidated billing, enhancements to BGE's billing system, WGL's gas storage inventory policy, telephonic enrollment and standardized electronic data interchange. The roundtable is specifically considering NEM's position that the payment allocation order should be such that payments are applied first to the consumables portion of the bill, then to the non-consumables portion, and finally based on the age of the receivables. The full text of the finalized Gas Roundtable Report will be posted on the NEM Website when made available electronically.

New York
O&R Issues Distributed Generation Request for Information

O&R plans to issue an RFP in May 2003 to solicit bids for pilot DG projects commencing during the 2002-2003 planning year. Bidders must be pre-qualified in order to respond to O&R's RFP. O&R is requiring bidders to complete a Request for Information (RFI) questionnaire to assess responses and pre-qualify potential DG resource providers. Responses to the RFI are due May 16, 2003. The full text of O&R's RFI is available on the NEM Website.

Do Not Call Registry Legislation Introduced

Senator Spada introduced SB28 which would institute a Do Not Call (DNC) registry for the state of Ohio. The bill would require the Attorney General to either institute a state-specific registry or to adopt a national DNC registry established by a federal agency. An unspecified "reasonable distribution fee" would be required to access a copy of the registry.

NEM has submitted a letter to Senator Spada urging consideration of the implementation costs of such a registry and the resultant costs for energy supplies. NEM also urged that the Ohio legislation follow the rules established by the FTC's Telemarketing Sales Rule. The full texts of SB28 and NEM's Submission are available on the NEM Website.

Parties File Comments on Components of Default Service

NEM and other interested parties filed comments on the proper components of default service. Constellation NewEnergy, Strategic Energy, Appalachian Power and Allegheny Power are among the parties that agree with NEM that the price set for default service should reflect the true costs of providing retail generation service. Reliant Resources believes that default service prices should be linked to changes in the wholesale market price of electricity so that competitive retail providers will have confidence to enter the market. Most parties that filed comments agreed with NEM that default service should be delivered directly to the retail customer. Strategic Energy along with NEM urged that the utility exit the role of default service provider as quickly as possible in order for an efficient competitive market to develop. Dominion Virginia Power announced in its comments that by the end of the first quarter of 2003 it will file with the Commission a proposal for a competitive default service pilot program. The full texts of the Comments filed by NEM, Constellation NewEnergy, Strategic Energy, and Reliant Resources are available on the NEM Website.

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