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 naesb4@aol.com to indicate your attendance.

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.

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 http://www.washingtonpost.com/wp-dyn/articles/A36589-2002Jul7.html.

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.

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.

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.

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.