Document Search
Site Search
Advanced Search
Updates & Alerts
News & Media
Upcoming Meetings
Deregulation Library
Member Services
July 12, 2002
NEM-NAESB Jointly Sponsor Meeting on Industry Standards for Credit, Risk Management and Financial Disclosure

NEM and NAESB will jointly sponsor an industry/government meeting in Washington DC on July 22, 2002, from 1:30PM to 5:00PM at the Watergate Hotel on all of the credit, risk management and financial disclosure issues contained in the Energy Market Stability Framework issued by the NEM Taskforce at NEM's conference.

The agenda will include an overview of what NEM, the CRO's and others have done on the issues, an open discussion among industry, DOE, the Federal Reserve, Big Oil, SEC, CFTC, Rating Agencies, the large banks and Wall Street Firms, and a plan to determine how to coordinate, vet and implement proposed solutions generated. A reception will follow. A room block has been reserved at the rate of $149.00 per day. For reservations call 202-298-2300. Contact JoAnn Garcia at 713-356-0060 or to indicate your attendance.

NEM Meeting and Conference Schedule

NEM's next membership meeting will be held September 26 & 27, 2002. The exact location is being arranged. NEM's Winter Executive Committee Meeting will be held in San Diego at Sempra's headquarters on January 16 and 17, 2003.

Next year’s Annual Membership Meeting and National Restructuring Conference will be held April 3 and 4, 2002, at the Renaissance Hotel. Members who wish to be speakers, sponsors or exhibitors should contact headquarters immediately as we are contracting for additional space and will be advertising worldwide. The exposure and attendance should be even better than this year.

Washington Post Article on Telecom Industry

The Washington Post ran an article this week entitled, "Telecom Sector May Find Past Is Its Future." The article reports on the telecom industry's current financial woes. The article noted the large increase of transmission capacity that was built which caused prices for service to bottom out. It also discussed the state of competition in the wireless industry and how the number of competitors, "has dropped prices to some of the lowest levels in the world." The wireless industry was called "destructively competitive." The article said that the only ones left in the business with money are the local telephone companies and that these companies have the competitive advantage of direct billing relationships and wires to their customers. The article states that, "the conventional view is that they will likely capture the bulk of customers as they move into the long-distance business state by state, and as their former competitors fail, and leverage their strength as they market the full range of communcations services." One interviewee predicted an industry consolidation and the emergence of oligopolies charging higher prices. The article is available at

Goldman Sachs Presentation on Energy Markets

Goldman Sachs made a presentation at the Energy Policy Forum at the Aspen Institute. The presentation details the exit of capital from the sector this year and the reduction of stock prices for many of the top power marketers of 2000-01. In response to the question of whether energy trading will survive, the conclusion was that marketing long MW positions would have high importance, hedging price exposure would be of medium importance, and managing third party exposure and proprietary trading would be of low importance. The presentation characterizes the merchant energy business model as one of no dividends and high growth. The full text of the Goldman Sachs Presentation is available on the NEM Website.

Senate Agriculture Committee Hearing on CFTC Authority

The Senate Agriculture Committee held a hearing this week to review the CFTC's authority in the over-the-counter derivatives market, whether the authority should be increased, and to review legislative proposals on the issue, including Feinstein's S.1951. CFTC Commissioner Erickson supported Feinstein's S.1951 stating that, "[i]t recognizes the benefits of market innovation by preserving the long-sought legal certainty for swaps – they remain for the most part 'exempt' from CFTC jurisdiction. At the same time, however, the bill ensures that all derivatives transactions are subject to the Commission’s fraud and manipulation authorities." Commissioner Newsome discussed the success of the commodity futures and options markets. Commissioner Newsome stated, "[f]rom the beginning of the discussions on these energy issues, my position has been that we need to find the 'facts' first, before proposing or supporting a 'solution.' My position has not changed." The full texts of Commissioner Newsome and Commissioner Erickson testimony are available on the NEM Website.

Feinstein Introduces Legislation on FERC Authority and Energy Derivatives

Senator Feinstein introduced S.2716 on July 10, 2002, and the bill was referred to the Senate Energy Committee. The bill provides FERC with increased criminal penalty authority for violations of the Natural Gas Act and Federal Power Act by increasing the prison term from 2 to 5 years and increasing the fine from $5,000 to $1,000,000. The bill increases the fine for violations of FERC rules and orders under the Acts from $500 per day to $50,000 per day. The bill increases civil penalties from $10,000 per day to $50,000 per day for each violation of the FPA. The bill also gives FERC authority to assesses monetary penalties against companies that do not comply with requests for information. The full text of S.2716 is available on the NEM Website.

Senator Feinstein introduced, S. 2724 on July 11, 2002, and the bill was referred to the Senate Agriculture Committee. The bill would give CFTC authority to investigate charges of fraud and manipulation in energy and metals derivatives markets. The bill would also subject electronic trading platforms to registration, transparency, disclosure and reporting requirements including: 1) requiring electronic trading facilities that are many-to-many exchanges or that have binding bids to maintain adequate capital for operations; 2) requiring all other exchanges to adopt a Value at Risk model; 3) requiring that energy transactions not regulated by CFTC or FERC to be referred to an appropriate regulatory agency; and 4) requiring FERC and CFTC to meet and discuss the functioning of energy derivative markets. The full text of S. 2724 will be posted on the NEM Website when made available electronically.

Standard Market Design Technical Conference

A technical conference on standard market design will be held July 18, 2002, from 9AM to 5PM to address data and software standards. The agenda for the meeting includes discussion of software developments, security issues, ISO software experience, and the planning process for software and data standards. The full text of the Notice of Conference and Agenda is available on the NEM Website.

Nevada Power and Sierra Pacific Filing on Implementation of AB 661

By the terms of AB 661, certain Nevada customers are permitted to purchase electric service from a "provider of new electric resources." A number of customers have filed applications to do so and requested that Nevada Power grant them transmission rights for importation of their loads from generation plants located outside of the congested grid inside the state and outside of the state. As result of these applications, Nevada Power and Sierra Pacific filed a petition requesting that the Commission establish a statewide transmission policy for the pro rata allocation of retail access transmission rights. The petition also discusses the assessment of an impact charge to departing customers. The Utilities asked for clarification of application requirements, including whether the submission of supplementary information causes the 180 day review process to be started again. The Utilities also request that the Commission clarify the applicability of AB 661 to cogeneration projects and the assessment of an impact charge on such customers. Petitions to intervene are due July 17, 2002, and comments are due July 19, 2002. NEM will be participating in this proceeding and member comments should be forwarded to headquarters ASAP. The full text of the Petition is available on the NEM Website.

New Jersey
Utilities Proposal for Basic Generation Service

The Utilities have filed a proposal on Basic Generation Service (BGS) to be rendered after the 4 year transition period ends and the mandatory price caps expire on July 31, 2003. The Utilities propose that a simultaneous descending clock auction be utilized for procuring BGS supply as was used in Year 4 and that the results of the bid process be used to set retail BGS customer rates. The Utilities do not agree on whether an adder should be included in BGS prices. JCP&L supports the inclusion of a 1.6 cent/kwh adder in the BGS price for retail costs such as marketing, risk and portfolio management, working capital, administrative and general expenses, and profit. The full texts of the Joint Utilities' Filing and Utility-Specific Addenda are available on the NEM Website.

New York
NEM Comments on Competitive Gas Metering

NEM submitted comments urging the institution of competitive gas metering and that all customers should be eligible. NEM recommended that metering manuals for gas and electric should be made uniform to the greatest extent possible in order to allow competitive meter service providers and meter data service providers to enter the market based on a unified, standard set of rules, processes and procedures for doing business in the state. NEM also recommended a consistent certification process for meter service providers and meter data service providers, permitting daily gas meter reads or on-demand reads, and permitting customers the ability to choose their meter read date and the date on which they get billed. The full text of NEM's Comments are available on the NEM Website.

Many thanks to Greg Lizak of IMServ for his assistance in this proceeding.

ConEd and O&R Technical Conference on Standby Rate Filing

A technical conference will be held on July 22, 2002, at 10AM at the Commission's Penn Plaza offices in which ConEd and O&R will present their standby rate filiings and respond to questions. Those that wish to attend should contact Michael Rieder at 518-474-6149 or by email at by July 17, 2002, to participate by telephone or in person.

Dominion East Ohio and Columbia Filings to Modify GCR Calculation

As part of their Gas Cost Recovery Reports, Dominion East Ohio (DEO) and Columbia Gas have proposed new methodologies for calculation of the Gas Cost Recovery (GCR) rate. DEO requests that it be permitted to extend the period for recovery of the Balance Adjustment component of the GCR from three months to five months and to recover interest expense on the delayed recovery. This new methodology would result in a $1.867 reduction in the GCR than under the present method. Columbia Gas proposed an alternate method for calculating the Balance Adjustment whereby the Actual Cost Adjustment imbalance would be recovered through the Refund and Reconciliation Adjustment component of the GCR. This revised method would result in a GCR that is $2.6246 less than it would be under the current methodology. The full text of the DEO and Columbia Gas filings are available from NEM headquarters.

3333 K Street, N.W., Suite 425
Washington, D.C. 20007
Tel: (202) 333-3288     Fax: (202) 333-3266

© Copyright 2001 National Energy Marketers Association