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March 21, 2003
NEM's Annual Membership Meeting and National Restructuring Conference for 2003

This year’s Annual Membership Meeting and National Restructuring Conference will be held April 3 and 4, 2003, at the Hyatt Regency on Capitol Hill. Congressman Joe Barton, Chairman of the House Energy & Air Quality Subcommittee, Chairman Patrick Wood of the FERC, Chairman James Newsome of the CFTC, SEC Commissioner Campos, NARUC President David Svanda, Chair Klein of the TX PUC, Chairman Vasington of the MA DTE, Chair Spitzer of the ACC, and Commissioner Jones of the PUCO are all confirmed to be speakers at the event. Please note that the time of Congressman Barton's appearance may be impacted if his energy bill is in full committee mark-up at this time.

Our VIP reception will be held in the Senate Russell Caucus Room on the evening of April 3, 2003. This is one of the nicest rooms in the Capitol. Many thanks to LODESTAR, Itron, IMSERV and Constellation NewEnergy for sponsoring the reception.

The Agenda is hotlinked here for your convenience. A registration form is also hotlinked here for your convenience.

Speakers at NEM's April Conference - Presentation Materials Needed

Those NEM members that will be speaking at the April conference should forward to headquarters in electronic format bios and speeches that they intend to utilize ASAP. The materials will be posted on the NEM Website for access by the media, regulators, attendees, and other interested parties.

NEM Conference Call on Retail Marketing and Related Technology Implementation Issues

NEM is convening biweekly conference calls to discuss retail marketing and related technology implementation issues. The next call will be held Thursday, March 27, 2003 at 3PM EST. The dial-in number is 703-788-0600, and the pass code is 209353. An agenda for the conference call will be circulated prior thereto.

Senator Cantwell Announces That She Will Introduce The Energy Market Manipulation Prevention Act of 2003

Senator Cantwell plans to introduce The Energy Market Manipulation Prevention Act of 2003. The bill would protect ratepayers from Enron-like trading scams. Specifically it would: (1) direct FERC, if it finds that a utility or energy marketer has engaged or attempted to engage in market manipulation, to establish a benchmark cost-of-service rate, and order refunds of money collected in excess of that amount; (2) require FERC to revoke or modify an entity’s authority to sell at market rates if it finds: (a) it is charging unjust and unreasonable rates; (b) the utility or energy marketer has engaged or attempted to engage in fraudulent, manipulative or deceptive actions in wholesale markets; or (c) if the entity violates any other Commission rules; (3) require FERC to review on an annual basis the activities of the entities to which it has granted market-based rate authority to assess whether the utility or marketer has the market power to charge rates above a just and reasonable level; and (4) direct FERC to apply the existing “just and reasonable” standard to the review of market-based rate transactions, unless the contract in question contains language stipulating that the public interest standard shall apply. Even if the contract in question does contain “public interest” language, however, the bill directs FERC to waive its application if the Commission finds that one of the parties to the contract did not have reasonable bargaining power. The full text of the Cantwell Bill will be posted on the NEM Website when an electronic copy is made available.

FERC Technical Conference on Natural Gas Price Information

FERC Staff will convene a technical conference to discuss the adequacy of natural gas price information. Issues for consideration will include how data is collected, authenticity and reliability of quotes, coverage adequacy, whether and how information is checked, and what models will best promote price discovery. Conference participants are to include those who report, publish, and use natural gas price information. FERC requested that those with specific proposals for consideration make them available for posting prior to the conference. The conference will be held April 24, 2003, at 8:30AM. Additional details on the conference will be forthcoming. The full text of the Notice of Technical Conference is available on the NEM Website.

CAPUC Issues Interim Opinion in Phase 1 Adopting Pilot Program for Residential and Small Commercial Customers

The California PUC issued an Interim Opinion in the advanced metering, demand response, and dynamic pricing case. The decision adopts a statewide pricing pilot (SPP) designed to test time-of-use and critical peak pricing tariffs for a sample of residential and small commercial customers on an opt-out basis. The SPP will start this summer and run through the end of 2004. The adopted pilot is designed to test the impact of such dynamic pricing tariffs on the usage patterns of a small sample of such customers randomly selected statewide. The decision also adopts cost recovery mechanisms for authorized Phase 1 demand response programs. Demand response is defined as the ability of an individual electric customer to reduce or shift usage of demand in response to a financial incentive. The full text of the Interim Opinion is available on the NEM Website.

NEM Conference Call on Stranded Cost Recovery Mechanisms

NEM will convene a conference call on the stranded cost recovery mechanism in Michigan. The purpose of the call is to discuss proposed modifications to the mechanism to make it competitively neutral and to provide market participants with greater long-term certainty as to the magnitude of charges assessed. This call is being held to fine tune NEM's position prior to the March, 26, 2003, Commission Staff collaborative on the subject. The conference call will be held Monday, March 24, 2003, at 12PM EST. The dial in number is 703-788-0600, and the passcode is 209353. The full text of the Notice of Stranded Cost Collaborative and Staff Strawman is available on the NEM Website.

Consumers Energy Files 2003 Gas Rate Case

Consumers Energy filed a 2003 gas rate application. Consumers makes a number of proposals in the application that apply to choice customers as follows: 1) institution of a demand charge for transportation customers on Rate LT and Rate XLT to be assessed based on the customer's Historical Daily Demand Level; 2) lowering the monthly customer charge for Rate ST customers from $450 to $200 and raising the transportation charge from $.5891/Mcf to $.7594/Mcf; 3) institution of a new gas-in-kind percentage for transportation customers of 0.89%; and 4) institution of a holdover fee of $0.25/MMBtu per month for removal of gas volumes remaining in storage, to be assessed against customers and suppliers. The full text of Consumers' Application is available on the NEM Website.

New York
Order Issued on ConEd Phase 6 Retail Access Program

As urged by NEM, the Commission rejected ConEd's proposed backout credit reductions for Phase 6 of its retail access program. The Commission extended the backout credits for Phase 6 at Phase 5 levels pending the results of the unbundling proceeding. As a result, ConEd must provide bill credits of two mills per kWh for non-demand billed and one mill per kWh for demand billed retail access customers. The full text of the Order is available on the NEM Website.

Order on NFG Distributed Generation Pilot Program

The Commission has approved a gas distributed generation pilot program for NFG. The pilot will provide a maximum of $3 million in advances to customers over a term of no more than three years to fund approximately thirty DG projects. Although separate gas lines will not be required, metering must be installed to permit the measurement of incremental usage by the DG unit separately from other customer applications. The rates for the DG projects must be fixed for the term of the customer contract, and the customer must pay for necessary system upgrades. The full text of the Order is available on the NEM Website.

NEM Comments on Gas Cost Recovery Mechanism

In the context of the applications of Columbia Gas, DEO, and CG&E to adjust their Gas Cost Recovery (GCR) for the month of April, NEM has filed comments supporting the request of members Shell Energy Services and Energy America for an investigation into the GCR process. NEM asserted that the multiple changes in the GCR, administered on an uncertain basis, unfairly hinder competitive suppliers' ability to compete in the natural gas market. NEM also suggested that as part of the investigation the Commission should examine the utilities' timely exit from the merchant function. The full text of NEM's Comments is available on the NEM Website.

PUCO Initiates Proceeding on Declaring Ancillary, Metering, Billing & Collection Services Competitive

PUCO initiated a proceeding on the desirability, feasibility and timing of declaring that retail ancillary, metering, billing and/or collection service supplied to customers is a competitive retail electric service. PUCO is seeking initial comments by June 6, 2003 and reply comments by July 7, 2003. Staff issued questions on issues that are of particular interest, including: (a) what is a comprehensive definition of "ancillary services"; (b) what are the benefits other states have experienced in conjunction with making retail ancillary services competitive; (c) if metering service were declared competitive, who should be permitted to own the meter; (d) if metering service were declared competitive, who should be permitted to read the meter and have access and/or rights to the information; (e) should competitive retail ancillary services be made available only to larger C&I customers or to all customers; and (f) should electric distribution utilities be required to put retail ancillary services out for competitive bid. The full text of the PUCO Order is available on the NEM Website.

NEM Comments on Stranded Costs

NEM submitted comments pursuant to the inquiry on computation of "just and reasonable net stranded costs." NEM argued that any determination of costs that are stranded must necessarily address the issue of whether the "unavoidable" costs at issue are properly attributable to POLR-related services. NEM urged the Commission to implement embedded cost-based unbundled rates at the earliest possible time and to quantify the levels of migration and monitor utility mitigation efforts prior to developing just and reasonable methods to ensure utilities receive the appropriate revenue requirements based on the embedded costs associated with the actual services provided to migrating customers versus full sales customers versus POLR customers. NEM also urged that stranded costs be recovered on a competitively neutral basis. The full text of NEM's Comments is available on the NEM Website.

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