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February 8, 2002
Total Gas & Electric Elected to NEM's Executive Committee

NEM is pleased to announce that Total Gas & Electric (TG&E) has been elected to NEM's Executive Committee. TG&E is an energy marketer selling natural gas and electricity to approximately 50,000 customers in the Northeast and Mid Atlantic. Bill Kinneary, Chairman and CEO, and Michael D'Angelo, General Counsel, will represent TG&E within NEM. Mr. Kinneary joined TG&E in April of 2001 as its Chairman and CEO. Mr. Kinneary previously worked in the Brooklyn Union/KeySpan organization for 28 years; 25 in the utility where, as General Manager of Rates, he developed Brooklyn Unionís Natural Choice Program, and 3 years in KeySpanís deregulated business as COO of KeySpan Energy Services and President of KeySpan Energy Supply. Mr. D'Angelo joined TG&E in April of 2001 with over 10 years of regulatory experience. Mr. D'Angelo's previous experience includes work in the telecommunications industry as Director of Regulatory Affairs for Nextlink, currently XO Communications. He also worked at the New York Public Service Commission in the General Counselís Office and has over 5 years experience as an Administrative Law Judge for New York State and New York City.

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. A draft agenda is also hotlinked here.

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

NEM has publication opportunities in Harts Energy Markets and Power & Gas Marketing magazines. NEM members are encouraged to submit articles to headquarters for inclusion in these magazines ASAP.

Conference to Be Convened By The Wall Street Transcript

The Wall Street Transcript will be holding a conference on June 6, 2002, on "Business Strategies in an Era of Volatile Energy Prices." Topics to be addressed include projections of domestic and world energy consumption, risk assessment in development and security of energy-related projects, geopolitics of oil, and alternative energy solutions. The meeting will be held at the Princeton Club in New York City. The full text of the Agenda is available on the NEM Website. Members wishing to speak should contact headquarters ASAP.

NEM Letter to Bingaman Opposing Application of PUHCA to Power Marketers

NEM submitted a letter to Senator Bingaman opposing the application of PUHCA requirements to power marketers. NEM argued that power marketers do not fall within the definition of utility companies subject to PUHCA because they do not own utility assets or other facilities used in utility operations. NEM also argued that PUHCA is intended to curb abuses of complex corporate structures and financing whereas the Federal Power Act is intended eliminate unjust and unreasonable rates. Power marketers are therefore properly excluded from PUHCA regulation. NEM also asserted that subjecting power marketers to PUHCA requirements would cause substantial harm to the power industry. The full text of NEM's Letter is available on the NEM Website.

CFTC Plans Reorganization

CFTC plans to reorganize in order to better implement the Commodity Futures Modernization Act of 2000 that deregulated U.S. futures and derivatives markets. Pursuant to the plan, three new divisions assume the responsibilities currently held by the divisions of trading and markets and economic analysis. The three divisions will include: the division of market oversight, responsible for regulatory oversight of trade execution facilities, market surveillance, rule enforcement and amendment reviews; the division of clearing and intermediary oversight, responsible for oversight of the activities of clearinghouses and brokers; and the office of the chief economist, responsible for providing expert economic advice, policy analysis, economic research, education and training to the commission.

FERC-NARUC Meetings on Transmission Tariffs and Capacity Reserves

FERC will convene two sessions to coincide with the NARUC meetings next week. A session to address whether all wholesale and retail transmission services should be under the same rates, terms and conditions will be convened on February 10, 2002, at 10AM. FERC released a discussion paper on implementation of a single transmission tariff applicable to all wholesale and retail loads. The paper sets forth proposed terms for inclusion in the tariff such as interconnection and transmission rights, calculation of ATC and TTC by an independent entity, and explicit assignment of CBM costs to a load within the control area that is benefitted. State Commissioners are requested to consider whether the dual jurisdiction transmission model makes sense, how to transition to a single transmission tariff approach, and how to accomodate state commission obligations to protect retail customers and responsibility for bundled retail rates.

A session to address whether FERC should require RTOs to administer regional, long-term capacity obligations will be held February 11, 2002, at 4PM. FERC released a discussion paper on options to encourage new capacity construction. These options include: 1) requiring load serving entities (LSEs) to acquire specified amounts of generation capacity credits; 2) requiring LSEs to hold contracts with wholesale producers for generation and/or demand reduction in excess of the LSEs' projected demand; 3) requiring LSEs to secure control over generation and/or demand reduction in excess of projected demand; and 4) utilizing economic development incentives to attract new generation. The paper also sets forth considerations for a capacity reserve obligation that is only physical as well one that is contractual and physical.

The full texts of the Notice of FERC-NARUC Meetings, Discussion Document on Transmission Tariffs, and Discussion Document on Capacity Reserves are available on the NEM Website.

Standard Market Design Technical Conferences

FERC will convene another Standard Market Design Technical Conference on February 19, 2002. The purpose of the conference is to discuss the allocation of RTO functions and characteristics among separate organizations in an RTO region. The discussions will also involve allocation of the responsibility for performing other wholesale market functions such as administration of a balancing market and security coordination. The full text of the Notice of Technical Conference is available on the NEM Website.

The topics of discussion at this week's technical conference included energy markets and operating reserves, transmission rights and financial rights, and market power mitigation. A Summary of the Technical Conference Discussions is available on the NEM Website.

FERC released a straw paper for discussion by the Market Power Monitoring and Mitigation Panel at this week's conference. The straw provides as follows: 1) Market power is defined as, "the ability to raise market price above the competitive level," exercised by withholding capacity or output from the market or by raising the price or offer. A price is above the competitive level if it reflects an excess over true scarcity value; 2) The promotion of price-responsive demand via market rules, meter dissemination and retail tariff structures should be a priority; 3) In regions that do not support workable competition, there should be more stringent preventive mitigation including denial of market-based rate authority and increased merger scrutiny; 4) Competitive prices recover marginal costs of production, and marginal costs include variable costs as well as the marginal opportunity cost of all legitimate opportunities, costs and risks, such as the opportunity cost of selling to neighboring regions, forced outage risk costs, start-up and no load costs, technical inflexibilities, and the opportunity cost of selling at other time periods because of limited hydropower reservoirs or environmental constraints. Offers should not be required to be below the marginal opportunity cost of any unit, including the geographic opportunity cost of selling to other regions, and the temporal opportunity cost of selling energy-limited resources during other periods; 5) Withholding of output should be the focus of monitoring as opposed to pure financial contracts; and 6) After the fact analysis of market power should rely on actual evidence of withholding output. Ex post mitigation, such as refunds and price revisions, should be avoided.

The full text of theStraw Discussion Paper for Market Power Monitoring and Mitigation Panel is available on the NEM Website.

Commissioner Brown Alternative Draft Decision on Direct Access

Commissioner Brown has issued an alternative draft decision on the suspension of direct access. The draft provides that the direct access suspension date should remain September 20, 2001, and that contracts executed before September 20 should remain in effect subject to certain restrictions. The draft states that it cannot be inferred that the legislature intended for a retroactive application of the powers it conferred on the PUC from the language of AB 1X or its legislative history. The draft recommends that the imposition of exit fees on direct access customers to spread Department of Water Resources costs should be considered in a separate docket. The draft also recommends that the assignment or renewal of a direct access contract, if allowed by the contract, should be permitted. The full text of Commissioner Brown's Draft Decision is available on the NEM Website.

Report Issued by Natural Gas Task Force

The Governor's Natural Gas Task Force has released its Report recommending that: 1) there not be a return to a traditional regulated monopoly; 2) consumers should be allowed to choose an entity with regulated rates. This should entail use of an open selection process to choose the entity, fair pricing of the regulated option, and fair treatment of low income customers; 3) more marketers need to be recruited into the state to increase competition; and 4) AGLC should be provided with monetary rewards and penalties for furnishing service to marketers. The full text of the Natural Gas Task Force Report is available on the NEM Website.

Electric Supplier Disclosure Requirements

The Commission previously approved standards for disclosure of information by electric service providers (ESPs) to customers as well as standards for disclosure of fuel mix and environmental characteristics of electricity products by ESPs. ESPs were ordered by the Commission to make the information available via the PSC website. In an effort to ease this requirement, the PSC decided to allow ESPs to post the information on their own websites and provide the URLs to the PSC by February 15, 2002. The supplier webpages should be archived and dated as changes are made for compliance purposes. Staff has also developed a voluntary disclosure template for this purpose. The full texts of the Letter on ESP Website Disclosure Requirements, Regional Electric Power Fuel Sources, Emissions and Nuclear Waste - Template for Supplier Disclosures for the Year 2002, Order on Disclosure Requirements, Order-Exhibit A, and Order-Exhibit B are available on the NEM Website.

Detroit Edison Files Revised Unbundled Electric Rate Application

Pursuant to Commission Order, Detroit Edison has filed a revised application to unbundled its retail electric rates. The application unbundles existing metered tariffs into distribution, transmission and generation components. Detroit Edison is not proposing to include the unbundled rates in its schedule of rates or in customer bills other than a transmission service charge. Detroit Edison argues this is necessary to comply with the statutory rate freeze requirements. The full texts of Detroit Edison's Application, Testimony (Part 1), and Testimony (Part 2) are available on the NEM Website.

New York
ConEd Phase 5 Proposal

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. PSC Staff arranged a conference call for the meeting (Dial-in: 1-866-266-3697 Passcode: 937607 Name: Phase 5 Conference Call). ConEd filed a proposed plan for discussion and questions at the meeting. The proposal provides that: 1) the credit for working capital related to commodity supply, the supply procurement function, and uncollectibles will be reduced from 2 mills to 1 mill for small customers and from 1 mill to .5 mills for demand billed customers to reflect ConEd's "estimated avoided costs"; 2) ConEd will implement a trial consolidated billing service and will charge ESCOs $.65 per account per monthly billing cycle to provide utility consolidated bills; 3) ESCOs must provide for all customer contracts to be expressly assignable in the event of ESCO discontinuance of service; 4) ConEd will provide customer usage and billing information to authorized ESCOs for a 12 month period at no charge, and for information beyond that time span ConEd will charge $15 per account per year. ConEd did not propose an extension of the $65 per customer credit to ESCOs for enrollment of small customers that expires April 30, 2002. The full text of ConEd's Proposal is available on the NEM Website.

Competitive Metering Working Group Meeting

A competitive metering working group meeting has been scheduled for February 21, 2002 at 10AM at the Commission's third floor meeting room in Albany. The meeting agenda includes cost considerations, dispute resolution, compatibility, and data security issues in utility provision of MSP services. The meeting will also address the role of MDSPs, providers of billing determinants to utilities and ESCOs. Those interested in attending should contact LuAnn Scherer of PSC Staff by February 15, 2002, at (518)486-2476.

Central Hudson Benefit Fund Disposition Meeting

Staff will convene a meeting on February 13, 2002, at 10:30AM at the Commission's Albany offices to discuss the disposition of Central Hudson's accumulated benefit funds. Topics will include funding of an economic development program and a competitive metering initiative. Parties are also asked to submit proposals prior to the meeting.

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