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March 15, 2002
NEM Master Netting and Marginning Agreement Taskforce

NEM will convene a meeting to start the drafting of a Master Margin and Netting Agreement. The first NEM meeting on a Master Margin and Netting Agreement will take place by conference call on March 27, 2002,at 2PM.(The Meeting in Houston for March 29 has been cancelled as it is Good Friday.) The bridge number for the conference is 703-788-0600, and the passcode is 209353. Chris Bernard from Entergy-Koch has offered to coordinate this effort. Given the various agreements currently in use, the Enron collapse underscores the importance of standardizing margin and netting requirements to avoid future credit crunches in the energy wholesale marketplace. Maximum participation is encouraged. Those interested in participating should call NEM headquarters at 202-333-3288 or Chris Bernard at 713-544-5433 or email us at info@energymarketers.com. A draft document will be circulated to those who are interested before the meeting.

EEI will conduct a meeting on this topic on April 11, 2002, and NEM and its members will also be present for this meeting.

NEM Annual Membership Meeting and National Restructuring Conference

Senators, FERC, PUC and FTC Commissioners have confirmed for NEM's Annual Membership Meeting and National Restructuring Conference to be held June 20 and 21, 2002, at the Marriott Metro Center in Washington, DC. An updated agenda, registration form and electronic brochure is hotlinked here for your convenience.

NEM Risk Valuation, Management and Financial Accountability Taskforce Meeting

NEM's Risk Valuation, Management and Financial Accountability Taskforce will hold a one day meeting at the Georgetown Club in Washington, DC on April 18, 2002, beginning at 11AM and lasting no later than 5:30PM. The purpose of the meeting is to forge consensus on accounting and disclosure standards to promote the proper valuation of energy assets, equity securities and forward energy contracts, including derivatives.

Maximum industry participation is encouraged. Those planning to attend the meeting should respond ASAP to info@energymarketers.com.

Status of NAESB Quadrant Activities

The NAESB Board of Directors accepted both the Retail Electric Quadrant (REQ) and the Retail Gas Quadrant (RGQ) governance procedures for the purpose of REQ and RGQ joining NAESB on March 7, 2002. Future plans include: 1) finishing segment procedures for each of the 4 segments for the REQ and the RGQ; 2) recruiting 40 Members to file applications to join the REQ and 40 Members to file applications to join the RGQ by May 7, 2002; 3) having at least 5 Members who have filed applications to join the REQ and the RGQ declare membership in each of 4 segments of the REQ and the RGQ by May 7, 2002; 4) holding elections for both the REQ and RGQ Board of Directors and Executive Committee Members by the end of May 2002; 5) having new REQ and RGQ EC Members attend the first NAESB EC Meeting in Seattle, Washington at Boeing Company on June 13-14, 2002; and 6) having new REQ and RGQ Board of Directors attend the first NAESB Board Meeting in Seattle, Washington at Boeing Company on June 28, 2002.

The draft Segment Procedures provide that the supplier segment of the REQ be comprised of "persons engaged in the competitive sale of electricity to end users." The draft Segment Procedures provide that the supplier segment of the RGQ be comprised of, "persons engaged in the competitive retail sale of natural gas and/or capacity, including marketers, aggregators, producers, asset managers and pipelines." The draft REQ and RGQ Supplier Segment Procedures both provide that a, "trade association may join the Supplier Segment as a Voting Member; provided the members of the trade association are under-represented in the Supplier Segment. Only the Supplier Segment Membership may determine if a trade associationís members are under-represented as Voting Members in the Supplier Segment." Those interested in joining should complete a Membership Application and Revocable Proxy available at www.gisb.org/naesb.htm.

With respect to the Wholesale Gas Quadrant, the annual plan includes finishing the development of the contract for purchases and sales of gas, constructing an electronic contract for the base contract for purchase and sales of natural gas, modification of the Funds Transfer Agreement as necessary, developing XML technical implementation for the base contract, determining if an "energy day" standard is needed, determining if a standard transportation services agreement is needed, and determining if a model financial hedging agreement is possible.

Working Paper on Standard Market Design

Staff gave a presentation at this week's agenda meeting on the upcoming, "Working Paper on Standardized Transmission Services and Wholesale Electric Market Design." The Working Paper will set forth the policy framework for the standard market design "Giga-NOPR." It will discuss an updated single transmission tariff, new transmission service for all customers utilizing locational marginal pricing for congestion management, day-ahead, real-time, and operating reserves markets and the role of the market monitoring unit. The Working Paper will not address scope and governance issues. Comments on the Working Paper will be due March 27, 2002. The full text of Staff's Presentation is available on the NEM Website. The full text of the Working Paper will be posted on the NEM Website when made available electronically.

NEM Comments on Wholesale Electric Standard Board

NEM filed comments on the Joint Filing on a wholesale electric standards board. NEM argued that the industry needs an integrated one-stop shop for commercial and reliability standards, not the proposed "coordination" of NAESB and NERC activities recommended in the Joint Filing. NEM argued that the "coordinated" yet bifurcated approach of the Joint Filing, subject to the jurisdictional uncertainties of NAESB and NERC, will be extremely slow, costly and potentially counterproductive. NEM recommended that FERC either select one organization or process to establish both reliability and commercial standards or institute its own procedures and propose standards subject to sixty days notice and comment. NEM argued that either of these methods would allow industry participants to better allocate their time and resources. The full text of NEM's Comments is available on the NEM Website.

Illinois
Commission Issues Order on Peoples and North Shore Gas Small Volume Transportation Programs

The Commission has issued Orders approving small volume transportation programs for Peoples and North Shore Gas. The Orders adopt many of NEM's recommendations. The Commission ordered that: 1) the utilities' proposed enrollment limits for Rate 1 customers should be increased to 13% for year 1, 24% for year 2, and 33% in year 3; 2) the twelve month minimum stay requirement will not apply until enrollment limits for Rate 1 customers are reached; 3) suppliers can provide single billing and may offer the service through account agency or Rider SBO; 4) the utilities proposal for the storage component of Required Daily Delivery Quantity is approved pending the results of a collaborative on rules to govern heating degree-day sensitive storage; 5) daily delivery tolerances of plus or minus 10% and monthly delivery tolerances of plus or minus 2% shall be used except the delivery tolerance will be eliminated on critical days; 6) the utilities proposed aggegation charge is reduced to $0.49 per customer; 7) the $2,000 application charge, $200 per pool component of the aggregation charge and the $10 per customer pool activation charge are approved; 8) the LDC billing option charge is $0.50 per customer bill with up to five lines of supplier charges plus $0.02 per line for up to two additional lines and a charge of $0.01 per message line for up to five lines is approved; and 9) customer enrollment via internet and telephone must be permitted in the utilities tariffs. The full texts of the Order on the Peoples SVT Program and the Order on the North Shore Gas SVT Program are available on the NEM Website.

Maryland
NEM and Staff Submit Briefs on Standard Offer Service

NEM filed a brief on Standard Offer Service (SOS) arguing that the restructuring law requires that SOS be provided by competitive suppliers directly to retail customers rather than on a wholesale basis to the utility as an intermediary. NEM also argued that the Commission may only delay implementation of competitive provision of SOS subject to the conditions set forth in the statute, a finding the electricity market is not competitive or if no acceptable competitive proposal to supply SOS is received. Furthermore, the statute provides that the Commission can only extend utility-provided SOS for residential and small commercial customers. NEM argued that the competitive bid process for SOS must be properly structured to include the full energy supply and commercial costs of providing the service in order to will foster the growth of the competitive market. The full text of NEM's Brief is available on the NEM Website.

Staff argued in its Brief that the Commission could choose to delay competitively provided SOS merely because it might be logistically impossible to implement the system before the statutory deadline. Staff argued that the statute does not require that suppliers be permitted to provide SOS directly to customers and that a competitive bid to provide wholesale supply constitutes competitive selection of suppliers. Staff said that the Commission may require that the utilities provide SOS and/or POLR for residential and small commercial customers, for as long as the Commission deems necessary. The full text of Staff's Brief is available on the NEM Website.

Competitive Metering Working Group Meeting

Staff will convene a meeting of the competitive metering working group on April 10, 2002, at 10AM. The meeting will be held in the Commission's 19th floor hearing room. Further details will be provided when made available.

New Jersey
Basic Generation Service Working Group Agenda

Staff has released an agenda for the March 27, 2002, Basic Generation Service (BGS) Working Group meeting. Topics of discussion are to include pricing terminology, current BGS pricing, customer and demographic issues, and pricing goals for customer segments. The full text of the Agenda is available on the NEM Website.

New York
Unbundling Proceeding Embedded Cost of Service Studies Filed and Comments Submitted on Procedural Schedule

The utilities embedded cost of service studies are required to be filed today. The full texts of the following studies are available on the NEM Website: NYSEG (Electric), NYSEG (Gas), and Central Hudson (Electric & Gas). Additional utility studies will be posted on the NEM Website when made available electronically.

NEM and others submitted comments on Judge Stockholm's proposed procedural schedule for review of the utilities' embedded cost studies. NEM requested clarification of the process for review of the utilities' revised filings that are to include lost revenue recovery mechanisms and are due June 15, 2002. Staff contended that the schedule was too compressed and proposed that a procedural schedule be set after the parties have an opportunity to review the utilities' embedded cost studies. The utilities argued that a five-day response time to discovery requests is too short. The full texts of NEM's Comments and Staff's Comments are available on the NEM Website.

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