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February 1, 2002
Intecom Elected to Executive Committee

NEM is pleased to announce that Intecom Inc. has been elected to NEMís Executive Committee. Intecom, an EADS Telecom company, has been providing energy organizations around the world with enterprise and call center communications solutions for more than 20 years. Its voice and data platform has the flexibility to add new communications tools as they come to market ó maximizing the life and value of prior telecommunications investments. Philippe Lecat, President & Chief Executive Officer, David Chambers, Chief Technology Officer, Kyle Priest, Vice President, Marketing, Keith Martino, Director, Vertical Market Solutions, Kevin Marshall, Energy Business Development Consultant, will represent Intecom Inc. within NEM.

NEM Annual Membership Meeting and National Restructuring

A number of very prominent speakers and PUC Commissioners have agreed to speak at NEM's Annual Membership Meeting and National Restructuring Conference to be held June 20 and 21, 2002 at the Marriott Metro Center in Washington, DC. 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.

NEM Member Opportunity

Due to the current upheaval in the energy industry, Power & Gas Marketing magazine is planning a special Marketers 2002 Report for their March-April issue. This will be an opportunity for energy marketing and trading companies to promote and differentiate themselves in terms of the products and services they can and do provide to the marketplace and consumers. Companies interested in participating should contact Jeff Share at 281-558-6930.

NAESB Retail and Wholesale Meetings

A final meeting will be held February 20, 2002, to finalize procedures for the NAESB Retail Electric and the Retail Gas Quadrants. The meeting will be held at the Florida Power and Light offices in West Palm Beach. Additional details will be forthcoming.

The NAESB Wholesale Gas Quadrant Executive Committee meeting will be held at the same location the following day. Those interested in attending this meeting should contact the NAESB Office at

PUHCA Requirements Proposed to Apply to Power Marketers

Consumer groups have contacted Senator Bingaman arguing that Enron's collapse justifies imposition of PUHCA requirements onto power marketers. They contend that Enron's energy marketing and brokering activities should be considered a "public utility" and therefore Enron should have been a registered holding company subject to PUHCA restrictions. NEM is preparing a response to Senator Bingaman to clarify that PUHCA did not cause Enron's failure and should not be imposed on power marketers. Copies of the letter will be available shortly.

Wood Testimony on Senate Committee on Enron and Energy Markets

Chairman Wood testified before the U.S. Senate Committee on Energy and Natural Resources on January 29, 2002. Chairman Wood stated that Enron's failure was not related to competitive energy markets but rather to questionable business investments and its method of reporting financial positions to investors and the business community. He refuted the idea that Enron's collapse justified a return to cost-based regulation of electricity and discussed the resiliency of the markets. Chairman Wood also mentioned that requiring power marketers to comply with FERC's accounting requirements (as is suggested in the recent NOPR) would not have prevented Enron's failure because FERC accounting requirements are meant to collect information for setting cost-based rates. He also urged reform of PUHCA in conjunction with increased access to books and records by FERC and state regulators. The full texts of Chairman Wood's Testimony, Figure 1-Selected Spot Power Prices, Figure 2-Selected Natural Gas Spot Prices, and Figure 3-Enron Affiliated and FERC Regulated Companies are available on the NEM Website.

Commission Allows Formation of PJM West

The Commission issued an Order allowing Allegheny and PJM to form PJM West effective March 1, 2002. However, the Commission stressed that approval of the PJM and PJM West RTOs is still pending. The full text of the Order is available on the NEM Website.

Draft Decision on Retroactive Abrogation of Direct Access Contracts

ALJ Barnett issued a draft decision retroactively abrogating direct access contracts signed from July 1, 2001, through September 20, 2001. The decision also prohibits the extension and assignment of direct access contracts entered into prior to July 1st. NEM has prepared draft comments arguing that the retroactive abrogation violates the Contract Clause and Due Process Clause of the U.S. Constitution, that the PUC was not granted the statutory authority to engage in retroactive ratemaking, that suppliers and consumers lawfully entered into direct access agreements in reliance on then-existing law, and that assignment should be permitted. The due date for comments has been extended to February 14, 2002. The full texts of the Draft Decision and NEM's Draft Comments are available on the NEM Website. NEM members should forward their comments and suggestions on the Comments to headquarters ASAP.

NEM Submission on Small Volume Gas Transportation Programs

NEM sent a submission to the IUB recommending principles for development and implementation of small volume gas transportation programs. These principles include: 1) not imposing enrollment restrictions; 2) not imposing minimum stay requirements; 3) permitting supplier consolidated billing; 4) prohibiting administrative charges, access fees, switching fees, aggregation and pooling charges that act as barriers to competition; 5) requiring reasonable delivery rules, conditions and tolerances; and 6)implementing consumer education programs. The full text of NEM's Submission is available on the NEM Website.

Load Response Technical Session

The DTE will convene a technical session on February 15, 2002, at 10AM to discuss ways to improve load response capabilities of consumers. Actions for consideration include initiatives aimed at increasing participation in the ISONE Load Response Program and increased use of advanced metering technology by customers and competitive suppliers. Parties interested in attending should reply to by February 11, 2002.

New Jersey
Order Issued on Basic Gas Supply Service

Contrary to the comments filed by NEM, the BPU issued an Order on BGSS declining to make competitive BGSS available on a competitive basis at this time. The BPU directed Staff to form a Gas Policy Group to examine issues such as pricing and reliability that will effect the long-term structure of BGSS. The BPU also decided that interested competitive suppliers and utilities could pursue implementation of BGSS pilot programs subject to certain guidelines. These guidelines include use of a two year minimum term, inclusion of at least 25% of residential and small commercial customers in the pilot, supplier access to interstate capacity and storage, and uniform pricing for all customers within the same rate class categories and no subsidization. The full text of the Order and Guidelines is available on the NEM Website.

New York
Comments Submitted in Unbundling Proceeding

NEM filed comments on Issues 2, 3 and 4 in the Unbundling proceeding arguing that: 1) streamlined and then fully allocated embedded cost-based unbundled rates should be implemented as soon as possible; 2) consumers deserve just and reasonable unbundled rates based on the same embedded costs they currently pay in bundled rates for competitive services; 3) resources that would be used to develop long run incremental cost studies are better spent on developing embedded cost-based unbundled rates; 4)utility recovery of stranded costs should be premised on a showing that the costs are material, were productively managed and reasonably mitigated, the utility was not earning in excess of its earning cap, and identification of losses specifically attributable to the utility's obligation to provide POLR and bundled services. Lost revenues not associated with utility provision of POLR or bundled service should be added to distribution rates in a competitively neutral fashion and be computed on an after-the-fact basis. The full text of NEM's Comments is available on the NEM Website.

Staff filed comments arguing that competitive rates based on embedded cost studies should be implemented before LRIC studies are attempted (although still supporting its proposed total service long run incremental cost methodology). Staff argued that per unit net lost revenues should be computed by calculating the difference between short run avoided costs and the unbundled or backout rate. Staff said the calculation of net lost revenues should be made on an after the fact basis and be collected as a competitive surcharge applicable to all customers. Staff argued that initial recovery in a competitive service charge would provide ESCOs a larger margin for competition but eventually, as migration increases, a different method may be required. The full text of Staff's Comments is available on the NEM Website.

The Attorney General argued that utilities should not be allowed recovery of net revenue losses attributable to retail migration, but if it is permitted it should be on an after-the-fact basis.

Echoing NEM's arguments, Multiple Intervenors (MI) argued that only embedded cost studies should be used to establish unbundled rates and for calculating stranded costs. MI also argued that utilities are not guaranteed total recovery of stranded costs and that any recovery should be subject to utility promotion of competition and consistent with cost causation principles. The full text of MI's Comments is available on the NEM Website.

ConEd Phase 5 Meeting

The first meeting in the ConEd Phase 5 proceeding will be held on February 13, 2002, at 10AM at the Commission's Penn Plaza offices. ConEd is expected to file a proposed plan by February 1, 2002, for discussion and questions at the meeting.

NEM Submission on NYSEG Price Protection Plan

NEM submitted its continued concern that: 1)the long term fixed price option will not be reflective of market conditions and should be subject to Commission reopening and review; 2) NYSEG has reserved the right to discount the fixed commodity price for the second enrollment period; 3)NYSEG will be able to pass the commodity risk of serving variable rate option customers through the floating wires charge; and 4) NYSEG will be able to recover portions of the adders and incremental costs and net revenue shortfalls resulting from the unbundling proceeding as uncontrollable costs contrary to Commission precedent. The full text of NEM's Submission is available on the NEM Website.

NEM Submission on NYSEG Market-Based Backout Credit

NEM filed in support of NEM member, Advantage Energy, who requested Commission reconsideration of its prior Order on NYSEG's market-based backout credit. NEM and Advantage Energy requested that the Commission retroactively implement market-based backout charges from April 2001 to February 2001. This is meant to redress the fact that NYSEG did not properly load weight day ahead market prices and did not properly calculate the off-peak credit. The full text of NEM's submission is available on the NEM Website.

Many thanks to Kyle Storie of Advantage Energy for bringing this matter to the attention of NEM.

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