July 19, 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 CROs and others have done on the issues, an open discussion among industry, DOE, the Federal Reserve, SEC, CFTC, Rating Agencies, banks and Wall Street Firms, and plan for 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 firstname.lastname@example.org to indicate your attendance.
|NEM Meeting on FERC GIGA NOPR on Standard Market Design, Credit, Risk, Finacial Governance, State Retail Programs and Consumer Aggregation Rights will be Held September 26 and 27, 2002, in Chicago|
NEM's Executive Committee will hold an important meeting to review, identify and prioritize issues and vote on NEM's position on the FERC Giga-NOPR, RTOs and Standard Market Design, Next Steps to Develop and Implement Industry Standards for Risk Valuation, Management and Financial Governance as well as review and prioritize NEM's positions on State Retail and Technology-related issues on September 26 & 27, 2002, in Chicago. The meeting will be opened for all NEM members and prospective members.
NEM has reserved Union Train Station in downtown Chicago for this meeting. Depending on the number of people coming, we may break out into Wholesale and Retail/technology sessions for issue identification and prioritization and then recombine at the end of the day for the Executive Committee to vote on the recommnedations.
NEM Policy Chairs will lead the discussion on all issues. Your attendenace and input on these important issues is encouraged and will be appreciated.
|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 and visible from the general session.
Members who wish to be speakers, sponsors or exhibitors should contact headquarters immediately as we will be starting our worldwide advertising shortly. The exposure and attendance should be even better than this year.
|NEM Winter Executive Committee Meeting to Be Held in San Diego on January 16 and 17, 2003|
NEM's Winter Executive Committee Meeting will be held in San Diego at Sempra's headquarters on January 16 and 17, 2003. This meeting will be for NEM Executive Committee Members only. As in the past, the Executive Committee will establish the policy position and priorities for NEM for the coming year.
All Executive Committeee Members are requested to attend. An agenda will be sent out prior to the meeting.
|Caminus Energy Analytics Showcase|
Caminus will host an Energy Analytics Technology Showcase on July 24, 2002, at 4PM at the Conference Center at Minute Maid Park in Houston, Texas. The Showcase is a private technology exhibition where attendees can view a variety of advanced assessment and decision-support tools for the full range of energy risk. You may register online at www.caminus.com. For additional information go to: http://www.caminus.com/Blast/CaminusEvents/EnergyAnalytics2.htm.
|NEM-EEI Master Netting Agreement|
Revised drafts of the NEM-EEI Master Netting, Setoff, Security, and Collateral Agreement, Collateral Annex, Cover Sheet, and Credit Elections Cover Sheet are now available. These documents are close to final, subject to comments from outside counsel preparing the legal landscape, corrections of typographical errors, and clarification of any existing ambiguities. Any typos or similar corrections should be forwarded to email@example.com. The final drafts of the documents will be distributed in connection with the completed legal landscape. The full texts of the Revised Draft (Clean) and Revised Draft (Redlined) are available on the NEM Website.
Many thanks to Dede Russo, Marty-Jo Rogers, Chris Bernard, Vince Duane and others for their leadership and hard work on this important project.
|Food Marketing Institute Conference|
The Food Marketing Institute (FMI) will be hosting its 23rd annual Energy and Technical Services conference on September 15-16, 2002, in Bal Harbour, Florida. FMI conducts programs in research, education, industry relations and public affairs on behalf of its 2,300 member companies — food retailers and wholesalers — in the U.S. and around the world. Conference topics include use of distributed generation, HVAC technologies, and incorporation of energy management technologies.
This conference provides an opportunity for NEM members to meet and network with potential customers. The full texts of the Table Registration Form and Promotional Brochure are available on the NEM Website.
|Consumer Groups' Conference Supporting Reregulation|
A number of consumer groups are sponsoring a conference on September 28-29, 2002, in Washington, DC entitled, "Electricity: Too Important to Leave to the Market - A Conference on Restoring Just and Reasonable Electricity Service." Topics for discussion include, "the mistake of deregulation: it cannot work," "deregulation failures across the world," and, "restore just and reasonable rates." Additional information on the conference is available at: http://www.restorejustrates.org/main.html.
|NEM Member Publication Opportunity|
NEM members interested in submission of articles for publication in industry publications (Harts and Power and Gas Marketing) should submit their articles to NEM headquarters by COB, Wednesday, July 24, 2002.
|D.C. Circuit Opinion on FERC's RTO Authority|
The D.C. Circuit issued an opinion on FERC's RTO authority in response to a series of Orders FERC issued on the formation of the PJM ISO. As part of PJM's filings to implement an ISO, FERC had ordered that: 1) pursuant to FPA Sections 205 and 206, the utilities could not unilaterally propose rate changes, and the ISO must be a participant in the development of such changes; 2) pursuant to FPA Section 203, utilities could not withdraw from the ISO without pre-clearance from FERC; and 3) existing bundled wholesale power sales agreements that were inconsistent with PJM transmission rate arrangements must modified.
The D.C. Circuit found that FERC did not have the statutory authority under FPA Section 205 to require the utilities to give up their right, vested in FPA Section 205, to make unilateral changes to rate design. The Court stated that, "the power to initiate rate changes rests with the utility and cannot be appropriated by FERC in the absence of a finding that the existing rate was unlawful."
The Court also found that FERC did not have the authority under FPA Section 203 to require Commission approval prior to a utility withdrawal from the ISO. The Court rejected FERC's argument that ISO formation constitutes a "disposition" of facilities under Section 203. The Court reasoned that there is no transfer of ownership or physical operation of the utilities' facilities, only a change in certain operational responsibilities given to the PJM ISO. The decision did not address FERC's authority to review a specific utility's withdrawal from the ISO under FPA Section 205.
The Court rejected the provision of FERC's order that required, "generic reformation of pre-existing wholesale power contracts to reflect transmission pricing under the new ISO regime." The Court said that FERC failed to make the particularized findings that the contract modifications were in the public interest as is required by the Mobile-Sierra doctrine. The full text of the Opinion is available on the NEM Website.
|Senate and House Legislation on Corporate and Auditing Accountability|
The Senate and the House have both passed legislation on corporate and auditing responsibility. The Senate has requested a conference to resolve differences in the bills.
S.2673, the "Public Company Accounting Reform and Investor Protection Act of 2002," provides for the establishment of a Public Company Accounting Oversight Board to oversee audit activities. It also prohibits public accounting firms from contemporaneously rendering non-audit services and mandatory services. The bill requires SEC to issue rulemakings requiring: 1) each annual and quarterly financial report to disclose material off-balance sheet transactions and relationships that may have a material effect upon an issuer's financial status; 2) presentation of pro forma financial information in a non-misleading manner and reconciled with generally accepted accounting principles; 3) disclosure of loan guarantees to senior management officials by an issuer; 4) inclusion of an internal control report and assessment within annual reports; 5) issuers to disclose whether or not they have instituted a code of ethics for senior corporate financial officers; and 6) issuers to disclose whether their audit committees are comprised of at least one member that is a financial expert. The bill also provides that: 1) an issuer's audit committee has oversight responsibility for accounting firms performing audit services; 2) CFOs and CEOs must certify the content of financial statements filed with the SEC and will be required to reimburse an issuer for certain bonuses and compensation received subsequent to the issuance of an accounting restatement due to material noncompliance with securities laws; and 3) insider trades are prohibited during pension fund blackout periods. The full text of S.2673 is available on the NEM Website.
H.R.3763, the "Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002," provides for SEC creation of criteria for formation of Public Regulatory Organizations that would provide oversight to accountants' financial statements. The bill also requires SEC to issue rulemakings to: 1) prohibit exertion of improper influence by issuer officers and directors on the conduct of audits; 2) require rapid disclosure of an issuer's "financial condition or operations as is necessary in the public interest;" 3) revise rules on corporate disclosures to require adequate disclosure of off-balance sheet transactions; 4) improve transparency of financial reporting information; and 5) revise current rules to require immediate disclosure of a change or waiver of an issuer's code of ethics. The bill also requires SEC to engage in more frequent review of issuer disclosures, subject to an SEC-created risk rating system, at least once every three years. The full text of H.R.3763 is available on the NEM Website.
|Greenspan Senate Testimony|
Federal Reserve Chairman Greenspan testified before the Senate Committee on Banking, Housing and Urban Affairs this week and offered extensive comments on the crisis of confidence in the markets. Greenspan placed a great deal of importance on the role of the CEO in an organization. He said, "a CEO must be afforded full authority to implement corporate strategies, but also must bear the responsibility to accurately report the resulting condition of the corporation to shareholders and potential investors. Unless such responsibilities are enforced with very stiff penalties for non-compliance, as many now recommend, our accounting systems and other elements of corporate governance will function in a less than optimum manner." Greenspan further stated that, "even a small increase in the likelihood of large, possibly criminal penalties for egregious behavior of CEOs can have profoundly important effects on all aspects of corporate governance because the fulcrum of governance is the chief executive officer." The full text of Greenspan's Testimony is available on the NEM Website.
|Standard Market Design Technical Conference on Data and Software Standards|
FERC held a standard market design (SMD) technical conference on data and software standards this week. The conference began with a panel of software vendors. The vendors differed with respect to how much standardization is necessary. All of the vendors agreed that an open interface was desirable but only some thought that standardization of smaller functional blocks of the market system were desirable. Those in favor argued it would reduce costs, and those opposed said it could stifle innovation.
A second panel addressed critical infrastructure security issues. FERC Staff said that cybersecurity standards will be included as part of the SMD NOPR. FERC requested NERC's assistance in drafting security standards. The draft NERC security standards are proposed to be effective January 1, 2004, and would require market participants to develop and implement a security program for the physical resources they control. Compliance with the standards would be self-certified, and the applicability of some requirements would be lessened for smaller market participants. There is to be a formal on-going NERC process to develop security standards that FERC will incorporate by reference. The full text of the Draft NERC Security Standards for Electric Market Participants is available on the NEM Website.
Representatives from ERCOT, ISONE, PJM, MISO, NYISO, and the western RTOs discussed their experience to date in implementing software solutions and problems they foresee in the future. Mr. LaPlante of ISONE noted that their implementation of the pre-existing PJM software and market design has allowed them to meet their objectives of reducing implementation time, reducing risks and reducing costs. He also noted that they added features to the original design to accommodate features unique to ISONE, such as the treatment of market monitoring. Mr. Ott of PJM stressed the need for data format standards and standard terminology. Mr. Watkins of the western RTO group advocated a vendor-driven process of developing open standards. Mr. Thompson of NYISO argued that a lot of seams issues lie in whether or not control area operators communicate and cooperate with each other and said that once they do, many seams problems are easily solved rather than needing a lot of software changes.
FERC Staff said the SMD NOPR would be issued in two weeks, and the current draft is approximately 600 pages. Educational technical sessions will held after the NOPR is issued. FERC Staff scheduled a session for September to address additional issues pertaining to data and software standards. Topics identified for the session are to include: 1) the process for standardization of data; 2) whether benchmarks, data sets and test problems should be required; and 3) whether the Ontario system is an appropriate standard.
|NOI on Gas Pipeline Negotiated Rate Policies|
FERC issued a NOI to review its negotiated rates program that was developed to help pipelines market turned-back capacity to new shippers. FERC is reviewing whether the recourse rate is adequate to protect against the exercise of market power by interstate gas pipelines. FERC is also accepting comments on other issues associated with its negotiated rate program. Initial comments are due 30 days after publication of the NOI in the Federal Register, and reply comments are due 30 days subsequent. The full text of the NOI is available on the NEM Website. Please forward all comments to NEM headquarters as soon as possible.
|Orders on CAISO|
FERC issued an Order requiring that a new CAISO board be instituted. FERC found that, "the CAISO is not sufficiently independent to operate its interstate transmission facilities on a non-discriminatory basis," and, "that the Board, as currently constituted, poses a barrier to the implementation of market redesigns that are necessary to rehabilitate the CAISO and Western markets." FERC was concerned with the extent to which the Board and the CAISO are controlled by the state of California. FERC required the CAISO to implement a two-tier form of governance by January 1, 2003. The top tier, with sole decision-making authority, is to be an independent, non-stakeholder Board. The lower tier is to be an advisory committee(s) of stakeholders and an advisory committee of the California Electricity Oversight Board. The full text of the Order on Governance of the CAISO is available on the NEM Website.
The Commission also issued an Order addressing CAISO's comprehensive market redesign proposal. FERC decided to temporarily extend the existing west-wide must-offer requirement. FERC also decided to impose a $250/MWh bid cap on the real-time, ancillary services and day-ahead (when implemented) markets. The CAISO will be permitted to implement automatic mitigation procedures. FERC ordered technical conferences on an available capacity requirement, congestion revenue rights, implementation of LMP, and use of a 10-minute market. FERC also required CAISO to submit a schedule and process for a demand response program. The full text of the Order on the Market Redesign Proposal is available on the NEM Website.
|NEM Opposes Utilities' Proposals on Implementation of AB 661|
NEM filed comments on Nevada Power and Sierra Pacific's petition on the implementation of AB 661. NEM urged the Commission to reject the Utilities' proposed pro rata transmission right policy. NEM also recommended that the Commission evaluate the propriety of assessing an impact charge, permit modifications to applications, including those pertaining to 10% contracts, permit receipt of timely information and separately evaluate the applicability of AB 661 to cogeneration projects. The full text of NEM's Comments are available on the NEM Website.
Many thanks to Aldyn Hoekstra of Sempra Energy Solutions and Vicky Sandler of APS Energy Services for their assistance with this proceeding.
|Rockland Electric (RECO) Basic Generation Service Proposal for Load in NYISO Control Area|
RECO submitted a proposed RFP process to cover the unforced capacity and energy requirements its Central and Western Division Basic Generation Service (BGS). The Western and Central Divisions are part of Zone G of the NYISO control area, rather than PJM, and would not be included in the statewide auction. The full text of RECO's Proposed RFP Process is available on the NEM Website.
|NEM Urges Changes in Dominion East Ohio (DEO) and Columbia Gas Proposed GCR Rate Modifications|
NEM submitted comments opposing the proposed modifications to the GCR rate proposed by Dominion East Ohio (DEO) and Columbia Gas. The changes would result in a reduction by $1.867 and $2.6246 for DEO and Columbia Gas respectively. NEM argued that implementation of the modifications will deter competitive entry because of the lack of consistently applied pricing rules and signals. NEM also argued that the changes will result in consumers receiving inconsistent and inaccurate price signals. The full text of NEM's Comments are available on the NEM Website.
|Gas Operations and Logistics Support Working Group Meeting Scheduled|
Another meeting of the Gas Operations and Logistics Support (GOALS) working group has been scheduled for August 6, 2002, at 10AM in Room 11D of the Commission's offices. A conference call bridge will also be used, and the phone in number is (614)644-1099. An agenda for the meeting is forthcoming.
|NOPR on Disclosure of Electricity Transactions|
The Commission issued a NOPR in which it proposed the reporting of information for each bilateral transaction for energy or capacity in the state. Each party to a transaction would report, on a monthly basis, the following: 1) seller company and customer company name; 2) whether the buyer is an affiliate of the seller; 3) the tariff under which the transaction was conducted; 4) contract execution, commencement, and termination date; 5) actual termination date; 6) product classification, type and name; 7) contract extension provisions; 8) whether the contract is long or short term; 9) quantity; 10) rate; and 11) actual total compensation. Thirty days after the information is reported to the Commission it would be made publicly available on the Commission's electronic retrieval system. Comments are due July 29, 2002, and reply comments are due August 8, 2002. The full text of the NOPR is available on the NEM Website. Please send your comments to NEM headquarters ASAP.
|NEM Urges Changes to Wires Charge Calculation|
NEM submitted comments to Staff on methodologies for calculation of projected market prices and resulting wires charges. NEM urged that imposition of wires charges be suspended until the Commission determines that the electric utilities do in fact have net stranded costs. NEM also argued that if a wires charge is implemented it should be on a competitively neutral basis. NEM recommended that the market price for generation utilized in setting the wires charge must be priced at retail rates for each customer class, and it should include the fully allocated embedded costs associated with providing energy supply including the commercial costs of serving retail load. The full text of NEM's Comments are available on the NEM Website.
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