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January 24, 2003
WPS Energy Services Elected to NEM Executive Committee

NEM is pleased to announce that WPS Energy Services Inc. has been elected to the Executive Committee. WPS Energy Services Inc. offers nonregulated natural gas, electric, and alternate fuel supplies as well as energy management and consulting services. WPS Energy Services Inc. will be represented by Mark A. Radtke, President, Dan Verbanac, Senior Vice President, Boris A. Brevnov, Vice President - Asset Management, Betty Merlina, Vice President - FSG Energy Services Division, and Marc D. Hess, Power Marketer, within NEM.

NEM's Annual Membership Meeting and National Restructuring Conference for 2003 - Invitation for Speakers, Sponsors and Exhibitors

Next year’s Annual Membership Meeting and National Restructuring Conference will be held April 3 and 4, 2003, at the Hyatt Regency on Capitol Hill. We have arranged for additional space to accommodate more attendees with a special room for exhibits and added sponorship opportunities. Breakfast and all breaks will be in the exhibition room that is adjacent to the general session. The Agenda is hotlinked here for your convenience. A registration form is hotlinked is hotlinked here for your convenience.

Conference Call for NEM Taskforce on Credit, Risk Management and Financial Accountability

NEM will convene a conference call of the Taskforce on Credit, Risk Management and Financial Accountability on January 27, 2003, at 2PM EST. The purpose of the call is to finalize the work of the Taskforce entitled, "Solutions to Improve the Creditworthiness, Reliability, Transparency and Financial Credibility of the Energy Industry." The dial in number is 703-788-0600, and the passcode is 209353.

NEM Winter Executive Committee Meeting

NEM's Winter Executive Committee Meeting was held last week in San Diego. Many thanks to Sempra Energy Solutions for hosting the meeting. Executive committee members identified and prioritized key federal and wholesale, retail, and technology issues for NEM address in the coming year. The full text of the Executive Committee Meeting minutes are available from NEM headquarters.

NEM Member Opportunity

NEM members that wish to have an article published in Harts magazine should contact headquarters ASAP.

NEM Member Opportunity

NEM members have been extended a special offer to receive a 20% discount on a new book entitled, "Power Market Risk: How to Survive (& Prosper) in Crazy Times." The book is designed to help power market executives become knowlegeable about risk management principles and practices. The full text of the Special Offer is available on the NEM Website.

NEM Member Opportunity

NEM has been approached by the Power Trading Corporation (PTC) of India to meet and discuss power trading issues. PTC is a newly formed organization with the responsibilities of purchasing and selling power and interregional transmission in India. PTC would like to promote the exchange of power with neighbors and develop a power market in the future. PTC will be in the Washington, D.C. area on January 29-30, 2003. NEM members interested in meeting with PTC should contact headquarters ASAP.

CCROs Release Clearing, Novation and Release Agreement

The CCROs released a standardized "Clearing, Novation and Release Agreement," to clear energy transactions on the various clearinghouses and other multilateral trading platforms, including EnergyClear Corporation, IntercontinentalExchange, New York Mercantile Exchange and VMAC. The full text of the Novation Agreement is available at:

SEC Issues Proposed Rule on Standards Relating to Listed Company Audit Committees

SEC proposed a new rule to implement the Sarbanes-Oxley Act of 2002 that would require the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that is not in compliance with the audit committee requirements established by the Act. The requirements relate to: the independence of audit committee members; the audit committee's responsibility to select and oversee the issuer's independent accountant; procedures for handling complaints regarding the issuer's accounting practices; the authority of the audit committee to engage advisors; and funding for the independent auditor and any outside advisors engaged by the audit committee. The standards are meant to allow audit committees to be more effective in protecting shareholder interests and to address the risk that management self-interest may diverge from shareholder interest.

The SEC also proposes to exempt from the proposed rule the listing of a security futures product cleared by a clearing agency that is registered under Section 17A of the Exchange Act or exempt from registration under Section 17A(b)(7) of the Exchange Act. The SEC proposes a similar exemption for the listing of standardized options issued by a clearing agency registered under Section 17A of the Exchange Act.

The new rule is proposed to become effective by April 26, 2003, and the new requirements would be required to be operative by the national securities exchanges and national securities associations no later than the first anniversary of the publication of the final rule in the Federal Register. The SEC is seeking comments on the proposed rule by February 18, 2003. The full text of the Proposed Rule is available on the NEM Website.

FERC and the CFTC Will Hold a Joint Conference on “Credit Issues in the Energy Markets: Clearing & Other Solutions”

FERC and the CFTC have scheduled a joint technical conference for February 5, 2003, to explore the feasibility of utilizing clearing to address credit issues in today’s energy markets. The forum will focus on credit and liquidity issues affecting energy market participants and will examine possible solutions, including the utilization of CFTC-regulated clearing facilities. A panel including credit analysts, clearing organizations registered with the CFTC, and energy market participants will discuss the issues. The full text of the Agenda for the Joint Conference is available on the NEM Website.

FERC Conference on Capital Availability for Energy Markets

On January 16, 2003, FERC held a technical conference on Capital Availability for Energy Markets. Chairman Pat Wood moderated the conference’s four panels: (1) Capital Investors; (2) Market Analysts; (3) Market Participants; and (4) Regulatory and Private Agencies/Organizations. The panelists discussed the current state of the energy market, the existing barriers to needed investment and potential solutions. All panels agreed that increasing transparency and decreasing regulatory uncertainty would be a key ingredient in restoring investor confidence. A NEM Summary of the conference is available from NEM headquarters upon request.

FERC Schedules Conference on Cyber-Security Standards

FERC will hold a technical conference on February 4, 2003, to discuss issues relating to the SMD NOPR's proposed rules for cyber-security of entities interacting on the nation's electric grid. The proposal was developed by NERC, which has since proposed a set of revisions to the standard that have been approved by the NERC Board. The conference will build upon the concepts found in the original and revised cyber-security standards. The discussions will focus on the implementation and timing of, and compliance with, the standards. The full text of the Notice of Technical Conference is available on the NEM Website.

ICC Files Report With the General Assembly On Recommendations To Improve Competition in The Electric Industry

ICC filed a report with the state legislature finding that competition has not fully developed in either the wholesale or retail energy markets and that retail competition will not evolve until suppliers can rely on a competitive wholesale market. The ICC reported that the barriers to competition in the wholesale and retail market include: (1) the lack of diversity in generator ownership; (2) the inadequacy of the transmission system to enable RESs to access remotely located, cheaper energy sources; (3) the lack of transparency in the current wholesale market design; (4) the volatility of transition charges; and (5) competition from the PPO. ICC recommended that the legislature consider policies to increase the number of independent entities that own generation in a service area and also act to eliminate disincentives for needed expansion of the transmission grid. The Commission adopted a number of NEM recomendations as follows: (1) require utilities to join RTOs; (2) require competitive bidding for bundled supply; (3) permit the Commission to set non-discriminatory stand-by rates; (4) no longer allow the utilities to reject Commission market value decisions; (5) allow RESs to use telemarketing-based customer enrollment programs; (6) eliminate the 24-month minimum stay requirement; and (7) consider implementation of municipal aggregation. Additional recommendations included: (1) readdress the issue of function separation between regulated utilities and their unregulated affiliates; (2) revise the facility certification provisions to promote competition; and (3) provide greater oversight of utility asset transfers. The full text of the Report is available on the NEM Website.

PSC Order Approves MichCon GCR Factor for 2003

The PSC issued an Order revising the maximum 2003 gas cost recovery (GCR) factor for Michigan Consolidated Gas Company (MichCon). MichCon is authorized to charge a monthly GCR factor of up to $4.575 per thousand cubic feet for the billing months February through December 2003. The Order increased the previously approved 2003 GCR factor of $4.14 per Mcf. The full text of the Order is available on the NEM Website.

NEM Brief in Detroit Edison Stranded Cost Proceeding

NEM submitted a reply brief in the Detroit Edison stranded cost charge proceeding continuing to urge the Commission to implement a competitively neutral stranded cost recovery mechanism. NEM noted that the uncertainty created by the current year-to-year calculation of stranded costs, assessed solely against retail access customers, deters competitive marketers from entering the market. NEM explained in its Brief how implementation of a competitively neutral stranded cost charge will avoid a "retail access death spiral" whereby customer return to utility service causes a diminishing population of retail access customers to shoulder the burden of stranded costs. NEM also urged that net stranded benefits should be carried forward to offset net stranded costs. NEM also argued that, in the absence of a competitively neutral stranded cost charge mechanism, the securitization and tax charge credit as well as equalization credit should continue to be used to offset net stranded costs of retail access customers. The full text of NEM's Brief is available on the NEM Website.

Texas PUC Report on the Scope of Competition in Electric Markets

The Commission submitted a Report to the legislature on the Scope of Electric Market Competition. The Commission estimates in the report that retail customers have saved, at a minimum, over $1.5 billion in electricity costs during the first year of competition as compared to the regulated rates in effect during 2001. The report states that in all areas open to competition, their are multiple REPs offering service to all customer classes, and customers are continuing to switch to REPs in increasing numbers. The report also identified areas where the PUC believed that the Legislature should expand or clarify the PUC's authority, especially with respect to its oversight of the electric industry. Recommendations suggested in the report include: (1) exploring a gradual phase-in of competition for metering services for C&I customers (competitive metering for such customers is scheduled to begin January 1, 2004); (2) clarifying the Commission’s authority to order the construction of new transmission or distribution facilities; (3) considering amendments to clarify that the Commission has clear authority to: (a) remedy all abuses of market power; (b) define what conduct in the wholesale market is improper; and (c) to order refunds to the persons harmed by improper wholesale market behavior. The full text of the Report is available on the NEM Website.

PUC Proposal on Competitive Metering

The PUC proposed a new rule to estalish the parameters under which competitive metering service will be available to C&I customers begining on January 1, 2004. The proposed rule identifies the following components of metering services as potentially competitive: ownership, installation and removal, maintenance, testing and calibration, data collection, and date management. The PUC maintained that the operational systems required to support full implementation of competitive metering services cannot be designed, implemented, and adequately tested before January 1, 2004. Therefore, the proposed rule called for a transition period where the utility will: (1) serve as the default meter owner, and (2) continue providing metering services other than ownership until the PUC determines that the operational support systems in the market are adequate to allow full customer choice in metering services. ERCOT will file quarterly updates with the PUC on the operational readiness of support systems necesary for the commission to authorize an entity other than the utility to provide metering services. The PUC may establish a pilot project under which an entity other than the utility may provide metering services. The PUC is requesting comments on the proposed rule within 30 days after publication in the Texas Register. Staff will conduct a public hearing on this rulemaking on March 20, 2003. Within 90 days of the effective date of this rule, the utilities must file a tariff that provides a competitive metering service credit to a customer that selects a meter owner other than the utility. The full text of the Proposal is available on the NEM Website.

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