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May 31, 2002
Financial Engineering Associates, Inc. Elected to NEM's Executive Committee

NEM is pleased to announce that Financial Engineering Associates, Inc. (FEA) has been elected to the Executive Committee. FEA is the leading source for pricing models and risk management analytics designed specifically for the energy market. Mark B. Garman, Ph.D., President, Laurent Birade, Vice President of Corporate Strategy, Carlos Blanco, Ph.D., Director of Global Support and Educational Services, Angelo Barbieri, Ph.D., Director of Financial Engineering, Cheryl Morgan, Energy Markets Specialist, and Sarah E. Althoff, Vice President of Strategic Alliances will represent FEA within NEM.

NEM Executive Committee Leadership Nominations

The Leadership of the NEM Executive Committee will circulate nominations for the National, Regional and State Policy Chairs and Co-Chairs for the coming year prior to the June 20 Membership Meeting and Conference. A special meeting of the Executive Committee is scheduled for the evening of June 19 from 6PM-8PM at the Marriott Metro Center to consider the structure of the Executive Committee and to vote on the nominations. Drinks and light hors d'oeuvres will be served at the meeting. We need RSVPs ASAP.

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. All Congressional members and Staff of the Conference Committee on the Energy Bill have been invited to the NEM VIP reception to be held on the evening of June 20, 2002, in the Senate Hart Office Building Room SH-216. If you plan to attend the conference and the reception, we need your security information ASAP. The Marriott Metro Center will only extend a discounted rate for 1 more week and limited to only 10 rooms. After that time the room costs will increase to $250/night. If you have problems signing up, please call headquarters at 202-333-3288.

NEM's Risk Valuation, Management and Accountability Task Force Accepting Suggestions and Proposals for Industry Code for Risk Management and Financial Disclosure

NAESB, DOE, EEI and a group of industry CROs have contacted NEM to offer assistance with this project. Please send comments and suggestions to or contact headquarters with your recommendations ASAP.

Many thanks to Lee Taylor, Harry Fry, Mike Walker, Bob Young, Kim Detiveaux, Dennis Sobieski, Mike Prokop, Ron Lukas, Trip Ray, Gordon Allott, Ray O'Connor, Paul Messerschmidt, Jennifer Feinstein and Greg Towstego for their assistance with this project.

NEM Employment Opportunity

New positions are being created in NEM for individuals with advocacy and marketing experience. Interested persons should email their resumes in confidence to NEM headquarters ASAP.

FTC NOPR on National Do-Not-Call Registry User Fee

FTC issued a follow-up NOPR to its rulemaking on a national do-not-call (DNC) registry. FTC is proposing that if a national DNC registry is instituted that a user fee be imposed to cover the costs of implementation. FTC proposes that telemarketers and their clients pay an annual fee of $12 for each area code of data accessed. The fee would be waived for firms seeking data on five area codes or less and would be capped at a maximum annual fee of $3000. Comments on NOPR are due June 28, 2002. The full text of the User Fee NOPR is available on the NEM Website.

CFTC Meeting on Changes in Regulation of Intermediaries

CFTC announced that it will convene a public meeting on June 6, 2002, at 10AM to receive statements on potential changes in the regulation of intermediaries under the Commodity Futures Modernization Act (CFMA). The full text of the Meeting Notice is available on the NEM Website.

Staff Paper on Rate Ceiling for Capacity Release Transactions

Staff has issued a Paper on a rate ceiling for capacity release transactions. FERC waived the maximum rate ceiling for capacity release transactions of less than one year through September 20, 2002. Staff has asked for comments on whether the ceiling should be reimposed, permanently removed, waived for an additional experimental period, or if alternatives to removal of the price ceiling exist. Staff raised the following issues for comment: 1) whether removing the price ceiling made a difference to the market given the ability of shippers to make bundled sales at market-based rates; 2) whether the waiver of the price ceiling for released capacity has contributed to natural gas price volatility; 3) whether the ability to release capacity at above-ceiling rates induced releasing shippers to make additional pipeline capacity available; 4) whether there were situations in which releasing shippers did or would be able to exercise market power in the absence of a price ceiling; and 5) whether one year was the correct definition of short-term for the purpose of allowing uncapped release transactions. Comments are due July 1, 2002. The full text of the Staff Paper is available on the NEM Website.

Dominion to Host RTO Summit

Dominion will host an RTO summit on June 13, 2002, from 10AM to 2PM to receive input on its RTO decision. The meeting will be held at the Omni Richmond Hotel in Richmond, Virginia. Additional details will be posted on

California Senate Considers Bill on Unlawful Electric Power and Natural Gas Practices

The California Senate is considering SB 2000 on "Unlawful Electric Power and Natural Gas Practices." By the terms of the bill, any person engaged in the business of generating, selling, distributing, transferring, marketing, or trading electricity or natural gas is prohibited from engaging in or knowingly facilitating the following conduct: 1) physical withholding of electricity; 2) economic withholding of electricity by submitting bids above the reasonable price for that electricity in a fair and competitive market; 3) creating, prolonging, or using shortages or outages; 4) scheduling electricity with the intent or knowledge that it will create congestion or the false impression of congestion or will result in a congestion counterflow payment or compensation to reduce congestion; 5) selling electricity to a person in another control area knowing that a similar amount of electricity will be repurchased in the original control area to avoid market rules; and 6) selling, distributing, transferring, marketing, or trading electricity or natural gas between subsidiaries of the same company. Those who engage in this conduct will be required to disgorge the profits of that conduct as well as pay three times the amount of the disgorgement in damages. The full text of SB 2000 is available on the NEM Website.

Order on Standard Offer Service

Contrary to many of NEM's recommendations, the Commission issued an Order on standard offer service (SOS) providing that: 1) it can extend the electric utilities obligation to provide SOS upon a finding that the retail electric supply market is not competitive or that no acceptable competitive proposal has been received; 2) the Commission can delay the competitive selection of an SOS provider for any reason consistent with the public interest; 3) the electric restructuring law permits competitive selection of electricity suppliers to provide either retail or wholesale SOS or both; 4) an electric utilities obligation to provide SOS ends July 1, 2003, unless extended by the Commission for residential and small commercial customers; and 5) the electric utilities remain obligated to perform SOS pursuant to the terms of the settlements. The Commission has requested additional comments on the following issues: 1) the definition of small commercial customer; 2) under what circumstances should default or POLR service be provided and under what circumstances should competitive suppliers perform this service; 3) the state of electric competition in Maryland; and 4) procedures to implement a wholesale or retail SOS bidding process, what factors to consider in whether or not to conduct SOS bids, and the time frame needed to conduct the bids. Comments are due June 21, 2002. The Commission also directed that the parties resume discussions on other SOS matters and provide an updated status report by July 19, 2002. The full text of the Order is available on the NEM Website.

New York
Order on Lost Revenue Recovery Mechanisms

The Commission issued an Order clarifying its decision on lost revenue recovery mechanisms. Affirming NEM's arguments, the Commission stated that, "customers who migrate to ESCOs must be able to avoid the utility's retail service costs. No market can develop if the ESCO customer must continue to pay the utility for retail service the utility no longer provides." The Commission also said that no customer should be able to avoid paying for POLR service. The Commission further explained that it will not allow lost revenue recovery when customers migrate unless the utility "appropriately manages and mitigates its costs and its customer base and/or sales are below those assumed in its rate proceeding."

The Commission also rejected ConEd's objection to the incremental cost study methodology. The Commission reasoned that if all joint and common and administrative and general costs were exclued and the extent of the contestable market was limited to less than 100% it would produce a study that, "would not include all costs which a customer should be able to avoid in migrating to an ESCO." The full text of the Order is available on the NEM Website.

RG&E Files Draft Electric and Gas Tariffs and Revenue Recovery Mechanism

RG&E filed draft electric and gas tariffs as well as a proposed lost revenue recovery mechanism in the unbundling proceeding. RG&E proposes to continue the revenue recovery mechanism in its currently effective gas tariff. RG&E proposes to include a net lost revenue recovery mechanism for the difference between the competitive service credits and its unitized short-run avoided costs for electric customers. The full text of the RG&E Filing is available on the NEM Website.

RG&E Standby Rate Conference

A conference will be convened for RG&E to present its standby rate tariff filing. The conference will be held on June 11, 2002, at 10:30AM in the 19th floor boardroon of the PSC's Albany offices. The full text of RGE's Proposed Standby Delivery Service Rates is available on the NEM Website.

Staff Report on Supplier Consolidated Billing

Staff has filed a report on supplier consolidated billing. Staff recommends that: 1) the existing LDC consolidated billing rules should apply reciprocally to CSP consolidated billing; 2) competitive suppliers should be required to provide the relevant LDC and Staff written notice at least 30 days in advance of its initial offering of consolidated billing service in the service territory of each LDC; 3) competitive suppliers should be required to establish adequate financial security for estimated liability associated with the collection and remittance of state, local, and special regulatory consumption taxes; and 4) an interim consolidated billing implementation plan providing for EDI transaction workarounds on a utility-by-utility basis should be implemented rather than full EDI development and associated LDC billing system modifications. Comments are due on the report by June 27, 2002. The full texts of Staff's Report and the Order Soliciting Comments are available on the NEM Website.

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