NEM Executive Committee members are reminded that the summer policy development meeting will be held June 28-29, 2001, at the Hotel Boulderado in Boulder, Colorado, 1-800-433-4344. Agenda items will include NEM's strategy for summer shortages, the development of, "National Guidelines for Implementing Distributed Generation and Related Services" and "National Guidelines to Implement Competitive Advanced Metering and Related Information Technology," strategies for utility offerings of long term fixed prices, and competitive services by tariff, and the next steps on National Energy Technology Policy development and implementation. A hotlink to register for the meeting is provided here and on the NEM Website for your convenience.

NEM is pleased to report that its draft, "National Guidelines for Implementing Distributed Generation and Related Services," has been approved by the Distributed Generation Policy Committee and will be debated and voted upon by the full Executive Committee on June 28. The final draft recommends that: 1) regulators should unbundle distribution rates, eliminate penalties, redundant charges, barriers to entry, and implement tariffs that encourage investments in distributed generation; 2) utilities must provide equal, non-discriminatory access to markets for power and auxiliary services; 3) federal and state governments must adopt uniform technical requirements and procedures for interconnection of distributed generation technology; 4) reasonable environmental regulations and wide-scale education are critical; and 5) utilities should only perform natural monopoly functions. NEM appreciates the input and cooperation of George Phillips, Jon Gipson, Scott Brown, Tony Prophet, Scott Castelaz, and Nat Treadway in the development of this document. The full text of NEM's National Guidelines for Implementing Distributed Generation and Related Services is available on the NEM Website.

NEM is pleased to report that the draft, "National Guidelines to Implement Competitive Advanced Metering and Related Information Technology," has been approved by the NEM Metering Policy Committee and will be debated and voted upon by the Executive Committee at the June 28 meeting. The document calls for immediate low-cost access to meters and information and (1) tax incentives for private investments to upgrade the metering and related technology infrastructure and (2) PBR for utilities for similar investments conditioned on competitive unbundling by that utility. NEM appreciates the input and cooperation of Emmett Kelly, Marguerite Bourgeois, Greg Lizak and Cody Graves in the development of this document. The full text of the Draft National Guidelines to Implement Competitive Advanced Metering and Related Information Technology is available on the NEM Website.

Barry Green, Co-Chair of NEM's Federal Policy Committee participated in this week's seams issue conference and advocated greater accountability of RTOs via a quarterly reporting requirement, subject to market participant comment, as a means of incenting action. Many participants complained that voluntary RTO compliance simply was not working, and FERC was requested to have its Staff present and participate in RTO activities. The Commissioners heard reports from the existing and developing RTOs on their status, in particular the efforts of the three Northeast ISOs to implement a standard market design and the efforts of Alliance/MISO to comply with the terms of their settlement agreement. The Reliability Model Report of NERC's Control Area Criteria Task Force, which presents a new paradigm for breaking down industry functions to separate those with a competitive advantage from the merchant function, was presented as an important tool for uncovering market power abuses.

The Commissioners made repeated reference to the use of GISB to solve similar "seams" issues for the gas market. Many supported the use of an industry standards board approach for the electric industry, and much discussion was had on the recent four quadrant (wholesale gas/wholesale electric/retail gas/retail electric) GISB Straw Proposal. The Commission repeatedly questioned whether it should make mandatory prescriptions about seams issues or if a "strong push" to the industry to develop solutions was more appropriate. The full text of NEM's Presentation is available on the NEM Website.

As part of its ongoing efforts to provide remedies for dysfunctional California wholesale markets, FERC ordered implementation of a west-wide mitigation plan as follows:

1) Use of a single market clearing price with "must offer" and marginal cost bidding requirements for sales in the CAISO's spot markets in reserve deficiency hours, i.e., Stage 1 when reserves are below 7 percent in California. Sellers in the CAISO's single price auctions will receive the hourly market clearing price. For bilateral sales in California and the rest of the WSCC, the hourly market clearing price is the maximum price, and sellers will receive the prices they negotiate up to the maximum price. Sellers other than marketers will be allowed the opportunity to justify bids or prices above the maximum prices.

2) Three changes to the previously ordered mitigation plan clearing price methodology are to be made: a) marketers must bid as price takers, i.e., they cannot bid higher than the market clearing price. However, the CAISO is required to add 10 percent to the market clearing price paid to generators for all prospective sales in its markets to reflect credit uncertainty; b) sellers that own generation must submit bids during reserve deficiencies that are no higher than the marginal cost to replace gas used for generation (i.e., what the seller would pay to procure gas at the last minute) plus variable O&M costs; and c) bidders should invoice the CAISO directly for the cost to comply with emissions requirements and for start-up fuel costs, and the CAISO shall file a rate mechanism to bill those costs over the entire load on the CAISO system.

3) For spot market sales in the WSCC and in California, in all non-reserve deficiency hours (when reserve levels in the CAISO exceed 7%) market clearing prices shall be set as follows: 85% of the highest CAISO hourly market clearing price established during the hours when the last Stage 1 (not Stage 2 or 3) was in effect will be the maximum price for the subsequent period. For bilateral sales in California and the rest of the WSCC, sellers will receive the prices they negotiate up to the maximum price. The maximum clearing price will remain in effect until the next Stage 1 is declared and a new price is set. When that Stage 1 is lifted, 85% of the highest hourly market clearing price from that period will carry forward as the new maximum price. Sellers other than marketers will be allowed the opportunity to justify bids or prices above the maximum prices.

5) Price mitigation is applicable to non-public utilities as a condition of selling into the spot markets and as a condition of using the interstate transmission grid under FERC's jurisdiction.

6) All public and non-public utilities who own or control generation in California must offer power in the CAISO's spot markets, and all public and non-public utilities in the remainder of the WSCC must offer power in the spot market of their choosing. This requirement is applicable to any non-hydroelectric resource whether owned or under contract to the extent its output is not scheduled (or committed for minimum operating reserves) for delivery in the hour.

The Order provides that the price mitigation plan will end on September 30, 2002. The Commission is also seeking comments on: (1) developments, either beneficial or adverse, which have occurred in the Western region spot markets as a result of the Order; (2) difficulties with implementation of the mitigation plan detailed in the Order and relevant solutions thereto; and (3) alternative market mitigation approaches. Comments are due August 20, 2001. The full text of the Order is available on the NEM Website.

NEPOOL and ISONE submitted a "Standard Market Design Document" incorporating previous submissions from ISONE and NEPOOL. The full text of the NEPOOL-ISONE Filing is available on the NEM Website.

NYISO submitted a compliance filing to revise its OATT to reflect the cost allocation methodology for the Commission-approved Economic Load Curtailment Program as well as its zonal allocation method. The full text of NYISO's Filing Letter, Revised OATT, Redlined OATT, and Proposed New Attachment R are available on the NEM Website.

NEM filed comments in the electronic tariff filing proceeding supporting the use of the Internet to transmit all energy-related information and data to the maximum extent currently practicable and recommending immediate consideration of XML. NEM also supported the establishment of fair, efficient, and uniform business rules, procedures, processes and practices. The full text of NEM's Comments is available on the NEM Website.

The ALJ in the unbundling proceeding has ruled that the parties should focus their current efforts on resolution of Issue 1 - unbundled embedded cost study methodology and Issue 5 - functional areas for cost unbundling. The initial comments that are due July 17, 2001, and the reply comments that are due July 30, 2001, are to be limited to these issues. The remaining issues are to be addressed beginning in August and a prehearing conference is scheduled for August 23, 2001, to set a further procedural schedule for their consideration. Initial comments on Issues 2-4 are due October 1, 2001, and reply comments are due October 15, 2001.

Staff has circulated a counterproposal to NYSEG's Price Protection Plan. Due to confidentiality concerns, NEM members interested in reviewing the document should contact headquarters.

The Commission is requesting comments on Staff's proposed rules to implement HB 9 on natural gas supplier requirements. The proposed rules pertain to: 1) requirements for supplier certification, including filing of general, technical, managerial and financial information, a 31 day approval process, and utility discretion to require posting of financial security from suppliers; 2) requirements for provision of competitive natural gas service, including requiring suppliers to provide Staff with contract disclosure information, format of marketing materials, written, telephonic and Internet enrollment rules, customer complaint resolution, and customer billing format; 3) supplier annual reporting requirements; 4) provisions for requiring natural gas companies with more than 15,000 customers in the state to provide open, equal nondiscriminatory distribution service; 5) enforcement procedures for noncompliance with the rules; and 6) utility requests for cost recovery.

The Commission also asked for comment on: 1) why the gas industry should or should not be treated differently than the electric industry with respect to any proposed rule; 2) additional requirements for natural gas companies necessary to implement the rules pertaining to competitive natural gas service providers; and 3) whether a working group should be formed to address the technical aspects of the rules being proposed.

Initial comments are due July 10, 2001, and reply comments are due July 24, 2001. NEM members are asked to forward their comments to headquarters ASAP because we will be out of the office for most of next week for the NEM Executive Committee meeting in Boulder. Staff will entertain questions on the proposed rules at a conference on June 29, 2001, at 10AM in Hearing Room 11A of the Commission's offices. The full text of the Order and Proposed Rules are available on the NEM Website.

PECO issued an RFP for natural gas suppliers to provide all or part of firm capacity in the amount of 30,000 Dth/d, beginning November 1, 2003, for a ten-year term subject to renewal. Proposals are due July 18, 2001. The full text of PECO's RFP is available on the NEM Website.

The Commission issued an Order adopting final retail access rules on licensing, customer information, marketing, enrollment and switching, billing and payment, load profiling, and dispute resolution. The Commission decided to adopt an opt-out approach for the release of customer information and also decided that customers should have the option as to which charges a partial payment should apply to on a consolidated bill. Competitive service providers that want to convert a pilot program license to a permanent license to participate in retail access must submit a written request to do so by August 31, 2001. The full text of the Order and Final Retail Access Rules are available on the NEM Website.

The Commission has ordered the formation of a workgroup and the submission of utilities' proposals on wires charge issues including timing and coordination of adjustments, market price determination and rate design. The full text of the Order is available on the NEM Website.

PG&E requested Commission approval of its proposed open season procedures to offer firm capacity beginning January 1, 2003, for terms of up to fifteen years. PG&E requested expedited approval of the proposal because a number of interstate pipelines have or will have open seasons, which may elicit sufficient interest such that they could build into California and potentially serve PG&E's existing noncore customers. PG&E argues it wants to be able to present customers with a "competitive alternative." The full text of PG&E's Filing is available from NEM headquarters.