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November 1, 2002
NEM Winter Executive Committee Meeting to Be Held in San Diego on January 16 and 17, 2003

NEM's Winter Executive Committee Meeting will be held in San Diego at the Sheraton San Diego Hotel & Marina, West Tower, on January 16 and 17, 2003. The meeting will start at 9AM on January 16 and adjourn before noon on January 17. This meeting will be for NEM Executive Committee Members only. As in the past, the Executive Committee will establish the policy positions and priorities for NEM for the coming year. A registration form is hotlinked here for your convenience. A block of rooms has been reserved at the rate of $189 per night. Place your reservations at 619-291-2900 or 888-625-5144. Reservations must be received by December 16, 2002, in order to guarantee the discounted rate.

All Executive Committeee Members are requested to attend. A draft agenda is hotlinked here for your convenience.

NEM's Annual Membership Meeting and National Restructuring Conference for 2003 - Invitation for Speakers, Sponsors and Exhibitors

Next year’s Annual Membership Meeting and National Restructuring Conference will be held April 3 and 4, 2003, at the Hyatt Regency on Capitol Hill. We have arranged for additional space to accommodate more attendees with a special room for exhibits and added sponorship opportunities. Breakfast and all breaks will be in the exhibition room that is adjacent to and visible from the general session. The Agenda is hotlinked here for your convenience. A registration form is hotlinked is hotlinked here for your convenience.

Members who wish to be speakers, sponsors or exhibitors should contact headquarters immediately. Government officials and PUC commissioners have already started to RSVP.

SEC Proposes Additional Rules to Implement Sarbanes-Oxley Act

SEC announced additional proposed rules to implement the Sarbanes-Oxley Act. The proposed rules pertain to use of non-GAAP financial information, MD&A disclosure of off-balance sheet transactions, and restrictions on insider trading during pension fund blackout periods. SEC proposed new Regulation G applicable when a company publicly discloses or releases material information that includes a non-GAAP financial measure. Regulation G would, "prohibit material misstatements or omissions that would make the presentation of the material non-GAAP financial measure, under the circumstances in which it is made, misleading, and would require a quantitative reconciliation (by schedule or other clearly understandable method) of the differences between the non-GAAP financial measure presented and the comparable financial measure or measures calculated and presented in accordance with GAAP." SEC also proposed to require that off-balance sheet transactions and relationships be reported in the MD&A section of a company's disclosure documents. Disclosure of off-balance sheet transactions would be required if there is more than a remote likelihood of the transaction having a material effect on the company (changing the current standard of "reasonably likely" to have a material effect on the company). The full text of the SEC Press Release is available on the NEM Website. The full text of the Rulemaking will be posted on the NEM Website when made available electronically.

Standard Market Design Conference on Tariff Liability Provisions

A technical conference will be convened on December 11, 2002, at 9:30AM on liability provisions in the Commission's proposed Standard Market Design (SMD) tariff. The purpose of the conference is to examine the following issues: 1) is it necessary to include liability provisions in the SMD tariff; 2) under what circumstances should liability protection be provided in the SMD tariff; 3) should liability provisions be adopted on a generic basis or on a regional basis; and 4) should the standards in the SMD tariff reflect what has been provided under state law. Requests to speak at the conference are due November 8, 2002. The full text of the Notice of Technical Conference is available on the NEM Website.

Order 888 Stranded Cost Marketing Option and Right of First Refusal Issues

FERC issued an Order pertaining to Order 888 treatment of energy costs in the stranded cost marketing option as well as restrictions on customer contract extensions made through the right of first refusal (ROFR). FERC clarified that, "the marketing option was intended to protect a departing customer from a low utility estimate of CMVE [competitive market value], which would result in a hgher stranded cost charge to the customer," and not to incent customers to exercise the marketing option even when a utility has appropriately estimated CMVE. The Commission also found that its, "existing policy of not imposing a limit on the length of contract extensions an existing transmission customer must match under a right of first refusal is just and reasonable." The full text of the Order is available on the NEM Website.

Clarification of Order 637

FERC issued an Order clarifying certain Order 637 issues. FERC decided to remove the term matching cap applicable to shippers exercising their right of first refusal (ROFR) to retain capacity. FERC clarified that, "where pipelines were required to implement the ROFR through tariff provisions and the tariff is not consistent with Commission policies, the approved tariff governs until it is changed by the Commission under Section 5. However, if an approved, existing tariff is silent or ambiguous on this issue, the regulatory ROFR is controlling." FERC affirmed its prior interpretation that a segmented transaction consisting of a backhaul and a forwardhaul to the same point that exceed contract demand is permitted. The full text of the Order is available on the NEM Website.

Utilities to Resume Procurement Responsibilities

The Commission issued an Order setting forth a regulatory framework for the electric utilities to resume their full procurement responsibilities on January 1, 2003. Inasmuch as the Department of Water Resources has entered into long-term contracts that provide a large percentage of bundled energy service requirements through 2008, the Order addresses the utilities ability to meet their residual net short (RNS) requirements. The Commission found that the remainder of the utilities RNS can be, "met through a combination of directly contracting with wholesale energy suppliers, purchases in the energy markets administered by the ISO, and purchases of demand-side resources, including distributed and self-generation." The Commission also ordered that a moratorium be placed on Edison, PG&E, and SDG&E's dealings with their own affiliates in procurement transactions as of January 1, 2003, pending a reexamination of affiliate rules. The full text of the Order is available on the NEM Website.

NEM Comments on Market Forces Rulemaking

The Commission initiated a rulemaking proceeding to examine the, "establishment of standards for determining whether or not prices are constrained by market forces and for determining, in a case when prices are unconstrained, if those prices are significantly higher than they would be if they were constrained." While recognizing the authority granted to the Commission to intervene in the markets, including imposing price regulations on marketers, NEM urged that Commission intervention in the market should be a last resort measure reserved for true periods of emergency. NEM argued that if the Commission showed a willingness to intervene in the market under less than emergency conditions it would send a severe, negative signal to participants in the natural gas market in Georgia as well as to participants in competitive retail markets across the country. The full text of NEM's Comments is available on the NEM Website.

Many thanks to Harry Kingerski of Shell Energy Services for his assistance with this proceeding.

Staff Requests Comments on Electric Competition

Staff has requested comments on electric competition in the state for the possible inclusion in a report to the General Assembly. Staff has requested comments on a number of issues including: 1) barriers to entry; 2) impediments to the establishment of competitive retail and wholesale markets in Illinois; 3) means of encouraging competitive retail activity; 4) necessary modifications to policies on interconnection of large generation and small generation as well as back-up rates; 5) the legislature and Commission's role in promoting load response; 6) the legislature and Commission's role in promoting load aggregation; 7) necessary modifications to the transition charge and market value index policies; 8) necessary modifications to customer switching rules; 9) the legislature and Commission's role in promoting advanced technologies for electric generation, transmission, distribution, or usage; 10) necessary modifications to affiliate standards; and 11) necessary modifications to reciprocity standards. Comments are due November 12, 2002, and should be sent to: The full text of the Request for Comments is available on the NEM Website. Members should submit their comments to headquarters by November 7, 2002.

Order on Telephonic and Internet Enrollment

The Commission issued an Order on telephonic and internet enrollment of electric customers. Contrary to the recommendations of NEM, and despite the Commission's finding that, "telephonic enrollment would be a valuable tool that could potentially advance [] development" of the retail market," the Commission concluded that telephonic enrollment is not permitted by the state restructuring law or electronic signature legislation. However, the Commission did find that internet enrollment is permitted under the state restructuring law and electronic signature laws and adopted rules for use of internet enrollment. The full texts of the Order and Internet Enrollment Rules are available on the NEM Website.

ALJs Issue Post Exceptions Proposed Order in ComEd POLR Proceeding

The ALJs in the proceeding on ComEd's petition to declare service to customers 3MW or above on Rate 6L as competitive have issued a post exceptions proposed order (PEPO). The PEPO adopts many of the recommendations of NEM. The PEPO concludes that the petition for competitive declaration should be granted by operation of law. The PEPO reasons that ComEd's petition has met the statutory requirements for a competitive declaration as follows: 1) ComEd has identified a subject customer segment or group of customers for the declaration; 2)RES flowed power and energy is a reasonably equivalent substitute service; 3) comparable prices for power and energy to Rate 6L are available; 4) customers with usage of 3MW and above are being served by more than one provider other than the electric utility or an affiliate of the electric utility; 5) ComEd has sustained a loss of business to alternative suppliers for the relevant customers; 6) ComEd has adequate transmission capacity into the service area to make electric power and energy reasonably available; and 7) there has been substantial customer switching in the relevant customer class. The PEPO also finds that new customers can initiate service under Rate 6L during the three-year transition period. The PEPO rejects Staff’s proposal to require ComEd to allow customers that are taking service from competitive suppliers to return to service under Rate 6L by giving thirty days notice prior to the end of their contract. The full text of the PEPO is available on the NEM Website.

New Jersey
Basic Generation Service Auction Information

The utilities have posted new drafts of the Basic Generation Service-FP and Basic Generation Service-HEP Supplier Master Agreements. The documents are available at: The next bidder information session for the Basic Generation Service auction will be held December 3, 2002, at the Westin Hotel in Philadelphia. Further details will be forthcoming.

New York
NEM Submits Trial Brief in ConEd Unbundling Proceeding

NEM submitted a trial brief in the ConEd unbundling proceeding. NEM argued that ConEd did not comply with Commission Orders requiring the filing of an embedded cost study but rather filed an avoided cost study. NEM also argued that ConEd's proposed stranded cost recovery mechanisms did not comply with Commission Orders because they did not use a two-part method in which competitive service costs would not be applied to customers that migrate. The full text of NEM's Brief is available on the NEM Website.

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