November 2, 2001


 NEM Winter and Spring Meetings

Please mark your calendar for NEM's winter meeting to be held in Houston, Texas on January 17 and 18, 2001. Chris Bernard of Entergy-Koch and Tami Pallas of CMS MS&T have generously offered to sponsor the winter meeting. Please also mark your calendar for April 2 and 3, 2002, (PLEASE NOTE: the April dates have been changed) the Annual Membership Meeting and National Restructuring Conference, that will be held at the Marriott Metro Center in Washington, DC. Please contact NEM headquarters if you are interested in speaking, sponsorship or table-top space at the conference.

 Member Feedback Requested on NEM-EEI Collaboration on Provider of Last Resort

NEM has been approached by EEI to collaborate on a Provider of Last Resort (POLR) position. NEM needs immediate feedback on whether this collaboration should be pursued. EEI has commissioned a policy paper on POLR structure and pricing, to be made public in two weeks, evaluating the current provision of POLR service and how the structure of POLR service should be changed to encourage retail market development. EEI has also prepared a document on establishing "Safety-Net Services." Summaries of these documents have been sent under separate cover. The full texts of EEI's POLR and Retail Market Development: Competition at the Crossroads Document and Safety-Net Services Document are available on the NEM Website.

 NEM Keynote Speech and Requests for Commission-NEM Member Conference Calls

Craig Goodman, President of NEM, delivered a keynote speech at this week's Institute of Public Utilities conference urging commissions to apply lessons learned from the telecommunications markets to the restructuring of U.S. energy markets. Commissioners attending the conference from New Jersey, Connecticut, Washington and Virginia requested that conference calls be established to discuss issues to advance competition in their respective states. NEM was also requested to address the House of Representatives of the state of Rhode Island. Members interested in participating in these initiatives should contact headquarters ASAP. The full text of NEM's Presentation is available on the NEM Website.

 Georgia's Office of Consumers Affairs Offers Evaluation of Deregulation

Georgia's Office of Consumer Affairs discussed the effects of deregulation in the state at this week's Institute of Public Utilities conference. Gas industry complaints have risen from 208 in early 1998 to 8,596 as of June 2001. Current Georgia market issues identified included uncollectible debt, service for low income and high-risk consumers, stable prices, and viable, fair competition. The political movement to reverse deregulation in the state was also discussed. The full text of the Georgia Consumer Affairs Presentation is available on the NEM Website.

 Restructuring Today Article on State Action Disclaimer

Restructuring Today featured an article on NEM's reaction to the U.S. Supreme Court's decision not to review the Trigen v. OGE state action defense case for which NEM had submitted a brief. The article discusses NEM's alternative recommendation that PUC commissioners adopt standard contract disclaimers to put utilities on notice that anti-competitive conduct pursuant to a published tariff will not necessarily be afforded antitrust immunity. The full text of the Restructuring Today Article is available on the NEM Website.


 Order Approving NYISO Virtual Bidding Proposal

FERC issued an Order accepting NYISO's revisions to its OATT and Services Tariff to implement virtual bidding effective November 1, 2001. These changes allow market participants to bid non-physical (virtual) generation and load into the day-ahead market and settle the bids in the real-time market. FERC also approved NYISO's proposed credit policy requirements but required NYISO to revise the formula for determination of the amount of the collateral to reflect a seven-day collaterization period. The full text of the Order is available on the NEM Website.

State Issues

New York

 PSC Order on Distributed Generation Pilot Program

The Commission approved a three-year RFP pilot program for the use of distributed generation in the utility distribution planning process to begin in the 2001-02 planning season. Criteria for the consideration of distributed generation proposals include: 1) RFPs should only be issued for system needs that require at least 18 months to satisfy from the date they are recognized; 2) satisfaction of the system need by distributed generation must be technically feasible; 3) distributed generation is to be considered as a means of satisfying load growth or the need for expansion or construction of a unit substation or area substation or, at the utility's discretion, for projects on a radial distribution feeder on which load may be temporarily islanded; and 4) distributed generation is to be considered only for projects above specified threshold costs. Each utility must issue a maximum of 2 RFPs in each of years two and three of the pilot, except that ConEd must issue 4 RFPs in year three. Up to one-half of these required projects may be satisfied with utility-owned distributed generation.

The Commission also found that utilities need not be permitted to recover lost revenues in rates from the installation of distributed generation when the lost revenues are factored into bid evaluations. The Commission also directed that utilities need not evaluate environmental impacts in assessing competing distributed generation proposals. The Commission decided to require the parties to continue negotiations on standardized core contract terms. It also delayed consideration of the arguments pertaining to costs and benefits of distributed generation-related system enhancements and fair allocation amongst customers pending a review of the pilot program. The full text of the Order on Distributed Generation is available on the NEM Website.

 PSC Order Approving Standby Rate Guidelines

The Commission approved Standby Rate Guidelines providing that standby delivery service is sufficiently different from full delivery service to justify some difference in treatment, but that insufficient data exists to justify creation of a separate service classification(s) for standby service at this time. Applicable service classes are to be determined based on customers' maximum potential, or contract, demand. Standby customers unique usage characteristics are to be reflected in rate design through the use of a fixed demand charge to recover the cost of local facilities and a daily, as-used, on-peak demand charge to recover the cost of shared facilities. Interval metering is required of all standby customers with contract demands of 50kW or greater. The Commission directed that all customers should be required to bear a proportionate share of the responsibility for the recovery of stranded production costs.

The Commission found that there are no limits to a state's design of standby delivery service rates under FERC's PJM Order once unbundling of energy is accomplished, and therefore, wholesale generators may be charged the standby delivery rates set forth in the Guidelines. The Commission ordered the utilities to file new rates based on the Guidelines within six months and required that the utilities set forth the method for allocating costs between contract demand and as-used demand charges in the filings. The full text of the Order on Standby Rate Guidelines is available on the NEM Website.


 NEM to Testify in ComEd Delivery Services Proceeding

NEM will testify in the upcoming hearings in the ComEd delivery services proceeding on pro-marketer positions involving embedded cost methodologies for rate design and credit calculations, use of electronic signatures, use of distributed generation, and the exit of utilities from all competitive products, services, information and technology.


 Order on Code of Conduct

The Commission has clarified its previous Order on Code of Conduct requirements. The Commission directed that the Code of Conduct should only apply in instances where both regulated and unregulated services are provided and should not apply to those relationships involving only regulated services or only unregulated services. The Commission also clarified that application of the Code on Conduct should not be limited to retail open access activities but rather to all relationships involved in both regulated and unregulated services among electric utilities or to alternative electric suppliers offering regulated services in Michigan and their affiliates. The full text of the Order is available on the NEM Website.

 Consumers Brief in Electric Unbundling Proceeding

Consumers submitted a brief arguing that state restructuring law does not require it to produce a new, unbundled cost of service study for the purposes of this electric C&I rate unbundling proceeding. Consumers also argued that software constraints prevent it from developing a new study at this time. The full text of Consumers Brief is available on the NEM Website.

 Briefs on Consumers Request for Interim Rate Relief

Initial briefs have been submitted on Consumers' request for interim rate relief. Staff maintains that Consumers has failed to demonstrate a sense of financial urgency, substantial need or compelling circumstances to justify interim rate relief. The Attorney General echoed Staff's argument and also asserted that consideration of rate relief related to reclassification of base gas as working gas in storage should be deferred until the final rate phase of this case. Consumers maintains that it currently has a significant revenue deficiency that will increase over the winter months and that its' request for interim rate relief should be granted. The full texts of the briefs of Staff, the Attorney General and Consumers Energy are available on the NEM Website.


 Allegheny Power Makes Customer List Available for Virginia Choice Program

Allegheny Power will electronically provide to Competitive Service Providers its most recent Customer List for a $300 annual fee. The list will be updated twice annually and will be provided on a designated web-site. The full text of the Allegheny Power Customer List Request Form is available on the NEM Website.


 CAPUC Seeks Comments on Suspension of Direct Access

The Commission is requesting comments on issues concerning the effect to be given to contracts entered into on or before the effective date for suspension of direct access, September 20, 2001, including the renewals of such contracts. The Commission is also concerned about cost-shifting and minimizing cost impacts to bundled electric customers. Comments are requested on the following: 1) whether September 20, 2001, or an earlier date should be established for suspending the right to acquire direct access service?; 2) are there alternatives to suspending direct access as of a date before September 20, 2001, that would still alleviate cost-shifting problems, and can the Commission adopt any such proposed alternative without new legislation?; 3) what effect should be given to renewals of contracts originally entered into prior to the effective date of the suspension of direct access?; 4) what effect should be given to provisions in contracts that allow the buyer to add more facilities to be served after the date on which direct access is suspended?; and 5) are there any other types of contract provisions that the Commission should consider in terms of applying the suspension? The Commission also requested copies of contracts executed and/or offered between electric service providers and direct access customers, the number of contracts and amount of load contracted for between January 17, 2001, and September 20, 2001, and the percentage of contracts entered into with renewal and add-on provisions. Initial comments are due November 2, 2001, and reply comments are due November 8, 2001. The full text of the Ruling Requesting Comments and Appendix are available on the NEM Website.