July 13, 2001


 NEM's Fall and Spring Meetings

NEM's Executive Committee met on June 28-29, 2001, in Boulder, Colorado. The Executive Committee addressed a number of important substantive issues and approved NEM's "National Guidelines to Implement Distributed Generation and Related Services" and "National Guidelines to Implement Competitive Advanced Energy Metering and Related Information Technologies." Copies are on the website.

All NEM members and prospective members are invited to join the Executive Committee for an open meeting on October 3-5, 2001, at the Palmer House Hilton in Chicago. It will be structured to bring everyone up to speed on the most important restructuring issues in the most important markets, hopefully in one day with a short wrap-up on day two. Many thanks to Exelon, Nicor, Peoples and Encorp for sponsoring the meeting. Please also mark your calendar for April 1 and 2, 2002, the Annual Membership Meeting and National Restructuring Conference, that will be held at the Marriot Metro Center in Washington, DC.


 FERC to Form Large Regional RTOs

FERC issued a series of Orders announcing its goals to form single Northeast, Southeast, West and Midwest RTOs. FERC ordered the institution of 45-day mediation sessions for the purpose of forming single RTOs for the Northeast and the Southeast. The full text of the Order Instituting Mediations for a Northeast RTO and the Order Instituting Mediations for a Southeast RTO are available on the NEM Website.

Northeast: FERC found that PJM's RTO filing satisfied many of the Order 2000 criteria (PJM has operational authority over all the facilities under its control, its existing operations meet the criteria for maintaining short-term reliability, PJM is the sole administrator and transmission provider, PJM provides ancillary services, and PJM is the sole OASIS site administrator) and granted PJM provisional RTO status. FERC found that PJM is a good step toward creation of a Northeast RTO and can serve as a platform for the formation of a single Northeast RTO. FERC provisionally approved Allegheny's request to join the PJM RTO (PJM West). FERC rejected the ISONE filing due to concerns about compliance with the independence, scope and regional configuration requirements of Order 2000. FERC also rejected the NYISO RTO filing. The full texts of the Orders on PJM, Allegheny, and ISONE are available on the NEM Website. The NYISO Order will be posted when made available electronically.

Southeast: FERC ordered the parties to the Southern, GridSouth, Southwest Power Pool, and Entergy filings to participate in the Southeast RTO mediations. FERC conditionally approved a number of GridSouth compliance filings including the interim congestion management proposal. Due to concerns about independence from market participants, FERC required the timely seating of an independent GridSouth board. FERC rejected the GridSouth Reliability Operating Agreements as premature because an independent Board has not yet been installed. GridSouth's Generator Interconnection Procedures filing was ordered to be revised so that interconnection processes are under the control of GridSouth and not transmission owners. FERC rejected Southern's RTO filing for failure to meet the scope requirements of Order 2000. FERC rejected the Southwest Power Pool and Entergy RTO filings for failure to satisfy scope and regional configuration requirements. The full texts of the Orders on GridSouth, Southern, and Southwest Power Pool/Entergy are available on the NEM Website.

Midwest: FERC conditionally approved the Alliance RTO filing finding that: 1) Alliance must file the proposed business plan they intend to implement, either ownership and control of transmission facilities by an outside investor or formation of the Publico corporation, within 45 days; 2) Alliance must establish an independent board to make all of its business decisions and until final RTO approval is granted, a stakeholder advisory committee should advise the independent board; 3) FERC will step in to develop an acceptable stakeholder process if the parties do not develop one; 4) A method for compensating small transmission owners use of the Alliance system must be developed; 5) Alliance's tests and checks system for ensuring unbiased calculation of ATC and TTC must be refiled; and 6) Alliance's market monitoring proposal must be refiled to address concerns about independence. The full text of the Alliance RTO Order is available on the NEM Website.

 PJM Filing on Alternate Value

PJM filed a revision to its Reliability Assurance Agreement to eliminate the limit on the Alternate Value calculations. The full texts of the Filing Letter, Revised Tariff, and Redlined Revised Tariff are available on the NEM Website.

State Issues

New Jersey

 Basic Gas Supply Service Proceeding

NEM filed comments supporting the competitive provision of Basic Gas Supply Service (BGSS). NEM argued that BGSS should be structured as true last resort service that encourages minimal stays and should reflect all of the political, social and reliability concerns of providing such service. The full text of NEM's Comments is available on the NEM Website.

NJNG filed a BGSS proposal in which it proposed to: 1) continue to provide BGSS as a bundled service option, 2) offer additional BGSS options such as a fixed commodity price option for a duration of one or more years, 3) retain responsibility for acquiring and managing capacity, 4) provide third party suppliers with the ability to take voluntary assignment of NJNG's capacity up to the proportion of firm load the supplier is serving, 5) extend market development fund incentive benefits; 6) provide customer care services such as billing, call center, and collection on behalf of suppliers who lack those resources, 7) provide a periodic customer mailing in which customers must affirmatively choose a BGSS option or a third party supplier offer, and 8) create performance-based mechanisms to promote reliability and price stability. The full text of NJNG's Proposal and NJNG's BGSS Comments are available on the NEM Website.

Elizabethtown Gas filed comments arguing that "complete" BGSS" cannot be opened to competition from third parties at this time. Elizabethtown argued it must be responsible for maintaining system reliability, balancing, acting as supplier of last resort in the event of default of a third party supplier, and supplying commodity to those denied service in a competitive environment. Elizabethtown maintains it should be allowed to modify its current BGSS service to allow: 1) competitive suppliers to offer supply packages to the utility in return for public recognition of having supplied the gas, 2) implementation of a flexible pricing mechanism to permit the utility to adjust BGSS price monthly or at least at pre-established times during the winter, and 3) continued use of the utility's gas procurement strategy. The full text of Elizabethtown's Comments is available from NEM headquarters.

 Rockland Electric Basic Generation Service Proposal

Rockland Electric (RECO) submitted a supplement to the utilities Basic Generation Service (BGS) proposal. RECO proposed to become a member of PJM to facilitate the BGS auction. RECO and the other utilities propose to net their "committed supplies" against BGS load and provide winning bidders with pro rata shares of the committed supply. In the case of an insufficient number of bids to serve BGS load, RECO will purchase the percentage of BGS load not subscribed at auction in PJM administered markets. If a winning bidder defaults prior to start of BGS service, the market segments will be offered to other winning bidders or bid out to others. If a winning bidder defaults during the period it is rendering service, the market segments may be offered to other suppliers, bid out, or procured in PJM administered markets. The full text of RECO's Supplemental Filing is available from NEM headquarters.

 Competitive Metering

Staff will host a meeting to begin discussions on competitive metering. The meeting will be held on July 24, 2001, at 10AM at the Board's offices.


 Dominion Proposes Fixed Rate and Hedging Proposals

Dominion East Ohio (DEO) has requested Commission approval of a nine-month levelized GCR rate, to be effective July 30, 2001 through April 29, 2002, instead of a three-month rate as previously implemented. Marketers are concerned that the proposal will inhibit their ability to compete in the territory. DEO also proposed to implement a hedging pilot program for the 2001-02 winter period using a combination of three methods. One-third of the pilot program volumes will be purchased under a NYMEX derivatives-based "costless collar" arrangement that establishes a floor and ceiling price for gas that will be delivered over the five winter months. One-third of the program volumes will be purchased using a risk management tool. The remaining one-third will be purchased using a dollar cost averaging approach that will lock in the five-month winter NYMEX strip prices for July through October 2001. The full text of the GCR Rate Proposal and the Hedging Proposal are available on the NEM Website.


 Order on Gas Unbundling Studies

The Commission ordered each gas utility to provide an unbundled gas cost of service allocation study for use by parties that want to advocate or oppose unbundling in the utilities' next rate cases. Consumers must file a study as part of its recent rate case filing and the other utility studies must be submitted by January 1, 2005. The utilities must provide detailed and comprehensive studies on their costs to provide the following services, by customer class, computed on a fully allocated cost basis: (1) metering services, (2) billing information services, (3) transmission services, (4) balancing services, (5) storage services, (6) backup and peaking services, and (7) customer turn-on and turn-off services. In addition to the direct plant costs and expenses of providing a particular service, indirect costs such as general plant costs, common plant costs, administrative and general expenses, and uncollectible accounts expense are also to be included. The filings are to include all of the workpapers necessary to explain and support rate base, revenue, and expense amounts included in the studies, and the workpapers to support the calculation of all allocation factors utilized. The utilities must also include in the filings copies of functional general ledgers for each month of the calendar year. The full text of the Order is available on the NEM Website.

 Mid-Sized LDC Permanent Gas Customer Choice Programs

PSC Staff has requested additional comments on MGU and SEMCO's proposed permanent gas customer choice programs. Staff prepared a list of questions for additional discussion pertaining to: which entity should render supplier of last resort service and how; enrollment period restrictions; customer switching restrictions; proposed balancing charges; daily delivery obligations, and pooling requirements; provision of a back-out/shopping credit to marketers that render bills to customers; and imposition of residential customer billing practice requirements on marketers. Comments are due July 20, 2001, and a collaborative meeting will be held August 2, 2001. The full text of the Notice Requesting Comments and MGU's Comments are available on the NEM Website.


 Order in Nicor Proceeding

The Commission issued an Order in the Nicor Customer Select proceeding providing as follows: 1) the program should be expanded to all customers in Nicor's service area; 2) supplier single billing through account agents should be implemented; 3) payments under single billing should be applied first to any overdue regulated charges, then to overdue supplier charges, next, to current regulated charges, and finally, to any current supplier charges; 4) uniform price disclosure for suppliers should not be implemented; 5) Nicor should send a notification letter to customers that have switched into the program; 6) the proposed monthly group charge, monthly account charge and group additions charge should be eliminated because of gas storage inventory savings Nicor realizes when customers switch; 7) the proposed $0.50 bill charge for billing for supplier charges to customers under the program should be eliminated because it was not justified by Nicor; 8) the $2000 supplier application charge is cost-justified and should be implemented; 9) Nicor Gas should modify its tariff to state that it will not impose a Customer Select OFO unless it imposes similar conditions on all other classes of non-Customer Select transportation customers, as well as on itself; 10) corporate name and logo issues should be addressed in the generic affiliate issues proceeding; 11) customers should be able to sign up for the program with suppliers via Internet; and 12) residential customers should have a three day right of rescission. The full text of the Order is available on the NEM Website.


 Staff Report on Proposed Minimum Stay Requirements

Staff has issued a Report on proposed rules governing customer minimum stay periods. Staff sought to strike a balance between fostering the development of competitive markets and prevention of gaming. Staff proposes that LDCs may require a 12-month minimum stay period for electricity customers with an annual peak demand of 300 kW or greater. However, customers that return to capped rate service provided by the LDC as a result of a competitive service provider's abandonment of service in the state can choose another competitive service provider at any time without the requirement to remain for the minimum stay period of 12 months. Comments on Staff's proposal are due July 23, 2001. The full text of Staff's Report is available on the NEM Website.

 Staff Testimony on Virginia Power and AEP RTO Filings

Staff filed testimony on the applications of Virginia Power and AEP to transfer control of their transmission facilities to the Alliance RTO. Staff expressed a number of concerns with the Alliance RTO including the lack of a fully functioning power exchange, the possibility that the proposed market monitor will not be truly independent, absence of draft interconnection agreements for existing generating facilities, potential ability of transmission owners to delay construction of new facilities that would mitigate market power opportunities for affiliated generating interests, and delays in instituting an appropriate governance structure. The full text of the Staff's Testimony is available from NEM headquarters.


 Competitive Market Initiatives Proceeding

DTE instituted a multi-phase competitive market proceeding. DTE ordered the electric utilities to immediately provide the names, addresses, and rate classes of default service customers upon request of licensed competitive suppliers and to establish a list of Active Competitive Suppliers in their service territories. DTE proposed that each utility be required to provide to requesting competitive suppliers the historic load information and credit information for default service customers that have affirmatively agreed to such disclosure. This proposal and the proceeding in general will be discussed at a technical session on July 24, 2001, at 11AM. DTE also set forth a list of other issues it intends to investigate in separate phases of the proceeding including: use of electronic signatures, participation of utilities in Internet-based auctions to assist in the movement of default service customers to other suppliers, the manner in which municipal aggregators may aggregate default service customers, and providing utilities with the authority to obtain customer authorization to switch default service customers to competitive suppliers. Finally, the Commission indicated it would pursue the establishment of rules for interconnection standards and back-up distribution rates for the installation of distributed generation in a separate proceeding. The full text of the Order Instituting Proceeding is available from NEM headquarters.

Other Issues

 UBP Meeting

The UBP/Retail Standards Board is planning a meeting for July 23, 2001, from 9:00AM to 5:00PM at the Hyatt Regency Baltimore Hotel. The purpose of this meeting is to discuss and review the work of the Retail Standards Governance Subcommittee.