March 2, 2001


 White House to Brief NEM Members on Administration Energy Strategy at its April 3 Annual Membership Meeting and Restructuring Conference

The Director of the Vice President's Energy Policy Development Group will hold a "closed-door" meeting with NEM members at its Annual Membership Meeting and National Restructuring Conference on April 3-4, 2001, in Washington, D.C. Leaders from Congress, NARUC, academia and the industry have also confirmed. A hotlink to the event is provided here for your convenience. NEM, Keyspan, Lodestar PowerTrust, and AES New Energy are hosting a VIP Reception in the U.S. Capitol Building the evening of April 3rd. Members and guests who wish to attend must provide their name, social security number and birth date to headquarters ASAP for security reasons. Please use this hot link to register for the reception. NEM members that wish to distribute logo items at the conference should contact headquarters. Please note that hotel rooms may be limited

 Michigan PUC Seeks NEM Input on Retail Markets

The Michigan PUC requested NEM input on the structure of its retail market. NEM representatives with a serious interest in Michigan should contact headquarters ASAP so we may form an advisory team.

Federal Issues

 Murkowski Introduces National Energy Security Act of 2001

Senator Murkowski introduced a National Energy Security bill providing for:

  1. Creation of an organization, overseen by FERC, to set rules for the interstate transmission grid;
  2. Prospective repeal of the PURPA requirement that utilities purchase power at full avoided cost rates;
  3. Repeal of PUHCA;
  4. A tax credit of 50 cents/1,000 cubic feet for natural gas produced from marginal wells;
  5. FERC to report to Congress on a process for certification of gas pipelines with recommendations for legislation;
  6. Reclassification of natural gas pipelines as eligible for 7 year depreciation to encourage infrastructure investment;
  7. Reclassification of electric power generation facilities and transmission infrastructure as eligible for 7 year depreciation to encourage new electric power supply;
  8. A 10% investment tax credit for purchase of distributed power in business;
  9. A 5 year DOE R&D program to improve reliability, efficiency, safety and integrity of natural gas transportation and distribution infrastructure and for distributed energy resources; and
  10. Establishment of a DOE-FERC taskforce on review and permitting of interstate gas pipelines.

The full text of the National Energy Security Bill and a Summary of its Provisions are available on the NEM Website.

 Chairman Hebert Testimony on National Energy Policy

FERC Chairman Hebert testified before the House Subcommittee on Energy and Air Quality about natural gas and a national energy policy. Chairman Hebert discussed that the Commission's statutory role in natural gas markets is focused primarily on transportation, not commodity prices, and the Commission has no direct authority to regulate prices charged by natural gas producers. He further noted that since wellhead decontrol and the Commission's open access transportation program, a well-functioning competitive market for the sale of natural gas commodity has existed. Finally, he discussed that the Commission can help mitigate price increases by exercising its jurisdiction over the certification of new pipeline projects to ensure supplies reach the market. The full text of Chairman Hebert's Testimony is available on the NEM Website.


 NEM Answer to Complaint Against Natural Gas Marketers

NEM filed an Answer to the pleading filed by a consumer group that alleged that natural gas markets don't reflect legitimate forces of supply and demand and that requested the Commission issue an Order setting a natural gas price benchmark of $2.74/MMBtu. NEM argued that higher wholesale natural gas prices do not indicate that markets are failing to work and that market prices, by definition, just and reasonable. NEM also argued that the Commission should not reverse fifteen years of price decontrol by instituting a price cap based on three months of higher than expected natural gas prices. The full text of NEM's Answer is available on the NEM Website.

 NYISO Technical Bulletin Released

NYISO has released Technical Bulletin 66 on the calculation and posting of ATC and TTC as applied to the New York Control Area. The full text of Technical Bulletin 66 is available on the NEM Website.

State Issues

New York

 Order on Competitive Metering

The Commission issued an Order on competitive metering, including a revised manual for the provision of electric metering. The Commission found that the proposed back-out credits filed by the utilities do not reflect the administrative, general, common, and customer care costs associated with metering and directed the utilities to file revised back-out credits, to be effective by March 1, 2001. The Order also provided that: 1) end-use customers, with a peak electricity requirement of at least 50 KW in two consecutive months may deal directly with MSPs and MDSPs rather than going through ESCOs; 2) large time-of-use customers should continue to be eligible to own their own meters; 3) the utility distribution system ends at the connection to the meter on the line side of the meter socket or the line side terminations at the test block, and the entity owning the meter should not determine the demarcation point; and 4) an MSP should not be required to establish an escrow arrangement to provide secure storage for all passwords, protocols and meter operating parameters, because such a requirement is expensive and burdensome. The full text of the Order is available on the NEM Website.

NEM Comments in Distributed Generation Proceeding

NEM filed comments on the Committee Report on integration of distributed generation in utility planning processes. NEM urged that: 1) utilities should be economically indifferent in the choice of using distributed generation as opposed to building new distribution company facilities; 2) standardized interconnection contracts, approval processes and interconnection requirements should be established; and 3) insurance requirements create an impediment to distributed generation projects. The full text of NEM's Comments is available on the NEM Website.

Many thanks to Steve Vandenberg with Hess for his assistance writing these comments.

 Straw Proposal 2 in POLR Proceeding

Staff prepared a second straw proposal in the POLR proceeding. Staff indicates they will entertain questions about the document at the pre-hearing conference scheduled in this proceeding on March 5, 2001. The full texts of the Straw Proposal (Clean) and Straw Proposal (Redlined) are available on the NEM Website.


 Summary of PUC Report on Electric Competition in Texas

Lorraine Bucci of Exelon Energy has prepared an excellent summary of the PUC's Report to the state legislature on the "Scope of Competition in Electric Markets in Texas." The full texts of the Summary as well as the PUC Report are available on the NEM Website.

Many thanks to Lorraine Bucci and Scott Brown of Exelon Energy for this excellent summary.


 Testimony in FirstEnergy-GPU Proceeding

First Energy-GPU has submitted rebuttal testimony in the merger proceeding opposing the proposal that the estimated $150 million merger savings be given back to ratepayers as a reduction in the CTC. They argue that such a proposal would interfere with MetEd and Penelec's entitlement to dollar for dollar recovery of non-utility generation stranded costs. They maintain that merger savings will be reflected in the cost of service used to establish rates. FirstEnergy-GPU also submitted testimony objecting to the proposal that the merger be premised on maintaining the generation rate cap at present levels. The full text of the FirstEnergy-GPU Rebuttal Testimony is available on the NEM Website as follows: Witness 1, Witness 2, Witness 3, Witness 4, Witness 5, Witness 6, Witness 7, and Witness 8.

OCA and Staff have filed direct testimony on the POLR issues in the FirstEnergy-GPU proceeding. OCA witnesses argue that GPU has not satisfied the standard to allow a rate increase for POLR customers and GPU gave no consideration to the results of its T&D operations in developing the request for rate relief. The full text of OCA Testimony is available as follows: Witnesses 1 and 2, Witness 3, and Witness 4.

Staff argues that GPU's proposed deferred tracking mechanism violates the state electric restructuring law and is generally faulty because it will send improper price signals to the market, be anti-competitive, increase costs to ratepayers and do harm to GPU's financial health. Staff does support GPU's proposal to increase the generation rate cap but only to the extent necessary for GPU to earn an adequate rate of return. The full text of Staff's Testimony is available on the NEM Website as follows: Witness 1, Witness 2, and Witness 3.

 Distributed Generation Workshop

The initial meeting of the distributed generation working group will be held March 6, 2001. NEM members interested in attending should contact headquarters ASAP. The full text of the Meeting Agenda is available on the NEM Website.


 Monongahela Power T&D Separation Filing

Monongahela Power has submitted a transmission and distribution separation filing. The filing identifies facilities for initial control by PJM and for possible transco ownership. The full text of the Monongahela Power Filing is available on the NEM Website.

 Gas Marketer Certification Bill

NEM members have voiced concern about House Bill 9 on gas marketer certification. Preliminary analysis suggests that it may adversely effect the course of restructuring. NEM members interested in helping to address this issue are urged to contact headquarters ASAP. The full text of House Bill 9 is available on the NEM Website.


 Virginia Power Functional Separation Plan

The Commission has established a procedural schedule for the proceeding on Virginia Power's functional separation plan for generation, transmission and distribution functions. The schedule is as follows: Virginia Power Prefiled Testimony - May 1, 2001; Notice of Protest - May 15, 2001; Prehearing Conference - June 22, 2001; Comments - August 15, 2001; Protests and Protestants Prefiled Testimony - August 24, 2001; Staff Prefiled Testimony - September 7, 2001; Virginia Power Rebuttal Testimony - September 17, 2001; and Public Hearing - October 10, 2001. The full text of the Order is available on the NEM Website.

 Staff Report on Retail Access Rules

The Commission has granted Staff an extension to March 13, 2001, to file its Report on proposed retail access rules. The proposed rules will be posted March 6, 2001. Comments on Staff's Report are now due April 6, 2001.

Other Issues

 Revised GISB Strawman on Energy Industry Standards Board

A revised GISB Strawman has been drafted detailing the structure of a new standards organization for electric and gas which would be divided into four quadrants: Wholesale Gas, Wholesale Electric, Retail Gas, and Retail Electric. The full text of the GISB Strawman is available on the NEM Website.