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July 26, 2002
Intercontinental Exchange Nominated to NEM Executive Committee

NEM is pleased to announce that IntercontinentalExchange has been nominated to NEM's Executive Committee. IntercontinentalExchange is an Internet-based marketplace for the trading of over-the-counter energy, metal, and other commodity products. It represents a partnership of world leading financial instituations with some of the world's largest diversified energy and natural resource firms. Jeffrey C. Sprecher, Chief Executive Officer, Richard V. Spencer, Chief Financial Officer, Charles A. Vice, Chief Operating Officer, Rafael Pirutinsky, Senior Vice President, David Goone, Senior Vice President, and James M. Falvey, Vice-President, General Counsel and Corporate Secretary, will represent IntercontinentalExchange within NEM.

NEM-NAESB Jointly Sponsor Meeting on Industry Standards for Credit, Risk Management and Financial Disclosure

NEM and NAESB sponsored an industry/government meeting this week in Washington, DC. Craig Goodman, NEM President, and Bob Young, of Deloitte and Touche and NEM's Executive Committee, presented the Energy Market Stability Framework issued by the NEM Taskforce. The meeting included an overview of what the CROs and EEI have done on the issues as well. The meeting also included open discussion among industry, DOE, CFTC, PSC Commissioners, and NARUC officials. Topics for discussion included: 1) the challenge to commissioners of maintaining the viability of the market and implementing regulations that keep step with changes in the industry; 2) the need to educate consumers, regulators, legislators, and the press about the merchant power business and its benefits; and 3) the need for inter-industry and inter-agency coordination in dealing with these issues. It was decided that an informal coordinating group follow-up on the various efforts discussed. The full text of Craig Goodman's Presentation, Bob Young's Presentation and the Agenda and Meeting Materials are available on the NEM Website. A Powerdaily article on the meeting entitled, "NEM-NAESB eye risk management," is also available on the NEM Website.

NEM Conference Call on Risk Management and Financial Disclosure

NEM will hold a conference call of its Risk Management and Financial Disclosure Taskforce on August 14, 2002, at 1PM EST. The purpose of the call is to review where we are and where we need to go on this group of issues including coordination with other groups and development of the "Energy Market Stability Framework" into a national policy paper. The dial in number is 703-788-0600, and the passcode is 209353.

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 recommendations.

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 Conference Call on FERC Standard Market Design Giga-NOPR

NEM will host a conference call on August 20, 2002, at 2PM EST, on the forthcoming FERC standard market design giga-NOPR. The purpose of the call is to begin the formation of a comment group to address the NOPR. The dial in number is 703-788-0600, and the pass code is 209353.

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. A hotlink for signup is provided here.

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.

Washington Post Article on Energy Trading

The Washington Post published an article today entitled, "Caution: Energy Trading - Today the Power Industry Fears the Risk." The article discussed the scaleback in power trading operations of many companies in response to Wall Street pressure. The full text of the article is available at

Sarbanes-Oxley Act of 2002

The House and Senate have passed the Sarbanes-Oxley Act of 2002, and it is cleared for the White House. The bill provides for the establishment of a Public Company Accounting Oversight Board and prohibits public accounting firms from contemporaneously rendering audit and non-audit services. The corporate responsibility title of the bill requires that: 1) the audit committee of an issuer is responsible for the work of public accounting firms it employees; 2) principal executive and financial officers must certify that annual or quarterly reports do not contain untrue statements or omissions of material fact; 3) CEOs and CFOs are liable to reimburse bonuses and certain profits to an issuer if an accounting restatement is required because of material noncompliance; and 4) directors or executive officers are prohibited from engaging in insider trades during blackout periods.

With respect to enhanced financial disclosures the bill provides that the SEC must issue rules on: 1) disclosure of off-balance sheet transactions; 2) pro forma financial information filed in periodic reports; 3) issuer disclosure of whether or not it has a code of ethics for senior financial offiers; and 4) issuer disclosure of whether at least one member of its audit committee is a financial expert. SEC is also required to review issuers at least once every three years.

The bill provides that a fine and/or twenty years in prison shall be the penalty for destruction, alteration or falsification of documents in federal investigations and bankruptcy. The bill imposes a fine and/or thirty-five years in prison for defrauding shareholders of publicly-traded companies. Corporate officers that certify financial reports that do not comport with requirements are to be fined one million dollars, up to ten years in prison, or both. If corporate officers willfully make such certifications when the reports are not in compliance, they are to be fined five million dollars, up to twenty years in prison, or both. The full text of House Report 107-610 (including the full text of the bill) is available on the NEM Website.

GAO Report on California Market

GAO issued a report entitled, "Restructured Electricity Markets: California Market Design Enabled Exercise of Market Power." The report found that, "wholesale electricity suppliers exercised market power by raising prices above competitive levels during the summer of 2000 and at other times after restructuring." But GAO did not make findings as to whether the exercise of market power was in violation of federal or other laws. The report also stated that, "[t]he design of California’s electricity market enabled individual wholesale suppliers of electricity to exercise market power. In addition, once prices rose, in part as a result of market power, the design lacked effective mitigation strategies to return prices to competitive levels." This was chiefly attributed to the retail price freeze and the prohibition against utilities entering into long-term contracts. The full text of the GAO Report is available on the NEM Website.

FTC Workshop on Anticompetitive Restrictions on the Use of the Internet

FTC will host a workshop on "Possible Anticompetitive Efforts to Restrict Competition on the Internet." The focus of the workshop is on the anticompetitive effects of state regulation of e-commerce and business practices with antitrust implications. The workshop will be held October 8-10, 2002, and written comments will also be accepted until that time. The full text of the Notice of Workshop is available on the NEM Website.

PSC Issues NOI on Gas Market Prices

The Commission issued a NOI on standards for determining whether gas prices are constrained by market forces. The Commission has the statutory authority to intervene in the marketplace on behalf of consumers if the market does not constrain prices. Prior to Commission intervention, either 90% of the consumers in a specific pool group must be served by three or few marketers or Commission-adopted standards must be met and it must find that prices are significantly higher than they would be if market forces were constraining price. The Commission has issued a NOI to begin formulating these standards. The Commission is seeking comments on how to determine: 1) whether or not prices paid by consumers are constrained by market forces, and 2) where it is found that prices are not constrained, whether or not those prices are significantly higher than they would be if they were constrained. Comments are due August 19, 2002. The full text of the NOI is available on the NEM Website.

ComEd Competitive Service Proposal

ComEd has petitioned the Commission to declare that the provision of electric power and energy through Rate 6L to customers 3Mws or greater is a competitive service. ComEd argues that reasonably equivalent substitute service is available at a comparable price from unaffiliated providers to these customers. Customers that are on Rate 6L as of June 2003 may continue to take the service for up to three years. Customers that do not select a competitive supplier will then receive service under ComEd’s real-time pricing tariff, Rate HEP. The full text of ComEd's Petition is available on the NEM Website.

Peoples and North Shore Gas Collaborative on Required Daily Delivery Quantity

Peoples and North Shore Gas will host a collaborative on the rules pertaining to the calculation of the Required Daily Delivery Quantity. The approach that Nicor Gas uses for its heating degree-day adjustment will be examined. The collaborative will be held August 8, 2002, at 9AM at the utilities' corporate headquarters in Chicago. Those interested in attending should RSVP to Deb Egelhoff at 312-240-4542.

NEM Comments on Default Service and Distributed Generation

NEM submitted comments on the proper pricing and structure of default service as well as distributed generation interconnection standards and practices and rates.

NEM strongly supported the competitive provision of default service and argued that default service pricing must include the full energy and commercial costs of serving retail load, including administrative and marketing costs. NEM also urged that default service pricing be differentiated by customer class.

With respect to distributed generation, NEM urged the adoption of standardized application processes, contractual terms, interface requirements, and safety and reliability requirements. NEM also argued that rates applicable to distributed generation must reflect its value to the distribution system and that standby rates should only require distributed generation investors to pay for actual energy used and only when it is used. The full texts of NEM Comments on Default Service and Distributed Generation are available on the NEM Website.

Order Rejecting Bay State's Proposed Supplier Fees

Bay State had proposed the following supplier fees: 1) a monthly fee of $0.60 per customer bill for standard passthrough billing service; 2) a monthly fee of $1.50 per customer bill for standard complete billing service; 3) a monthly fee of $0.10 per customer account for general pool administration service; and 4) a customer switching fee of $10 per switch for taking a customer from another supplier’s customer pool or moving a customer from one of its customer pools to another pool. Bay State also proposed fees to be charged directly to customers including a one-time telemetering fee for daily metered service customers of $1,400 for instrumented meters and $475 for non-instrumented meters and a maintenance fee of $6.50 per month for daily metered service customers. DTE rejected the proposed supplier fees because Bay State failed to demonstrate they were justified by net incremental costs. DTE rejected the switching fee because it was not solely based on the actual costs incurred by Bay State for providing these services, but also included a deterrent element. DTE rejected the proposal to charge suppliers or customers a fee of $1,400 for instrumented meters and $475 for non instrumented meters because the fees were not cost-based and included a corporate markup element. DTE rejected the telemetering maintenance fee because Bay State was not authorized in its tariff to collect such a fee from consumers or suppliers. The full text of the Order is available on the NEM Website.

Michigan Appeals Court Opinion on Affiliate Transaction Guidelines

The Michigan Appeals Court issued an opinion finding that the "Guidelines for Transactions Between Affiliates" adopted by the MIPSC were invalid. The Court reasoned that the guidelines were rules that should have been promulgated in a rulemaking proceeding, rather than a contested case proceeding as had been utilized. The Court did not evaluate the issue of whether the MIPSC had the authority to issue the rules. The full text of the Opinion is available on the NEM Website.

Consumers' Application to Unbundle Residential Electric Rates

Consumers filed an application to unbundle its' residential electric rates. Consumers proposes to include percentage information on customers bills, rather than detailed unbundled charges. Consumers' argues that displaying percentage information on customer bills will prevent customer confusion. The full text of Consumers' Application is available on the NEM Website.

NEM Member Opportunity in DTE Load Profiling Proceeding

NEM has intervened in the DTE load profiling proceeding. DTE was ordered by the Commission to address: 1) the most appropriate level for any demand meter installation threshold; 2) the number of separate customer profiles that should be developed; 3) the number of sample meters that should be used to compute the proxy demand per kilowatt-hour for each customer profile; and 4) the price, if any, to be charged by Detroit Edison for providing customer profiling service. DTE filed a load profiling proposal in which it argued that the existing single-phase/three-phase threshold incorporated in its Retail Access Service Tariff is the appropriate threshold for determining which customers shall be required to have interval metering and which customers should be energy metered. DTE also argued that the existing residential and commercial profiles are accurate and adequate to provide service for single-phase customers. DTE stated that, with respect to the number of sample meters that should be used to compute the proxy demand per kilowatt-hour for each customer profile, that its current class profiles for the Optional Load Profile Management Service are based on sample sizes of 310 meters for residential and 250 meters for commercial single-phase. DTE proposed a charge for its Optional Load Profile Management Service, in which marketers would be provided with a forecast of the hourly energy requirements for all of their energy-metered customers, of .34 ¢ per kWh.

Testimony in the proceeding is due September 4, 2002. NEM members interested in acting as a witness for this proceeding should contact headquarters.

Commission Approves Modifications to Dominion East Ohio and Columbia Gas GCR Rates

Contrary to the urgings of NEM, the Commission approved the requests of Dominion East Ohio (DEO) and Columbia Gas (CGO) to modify the calculation of their GCR rates. DEO requested 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 Commission concluded that the modifications will be more reflective of market rates and will send a better price signal to GCR customers considering competitive options. The full texts of the DEO Order and CGO Order are available on the NEM Website.

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