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October 25, 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. 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. An agenda will be sent out prior to the meeting.

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.

NEM CCRO Briefing and Conference Call on Next Steps of NEM's Risk Taskforce

NEM had an excellent briefing last week with representatives of the CCRO group, and they have offered to allow NEM experts to review the full work product in confidence before its roll out on November 19, 2002.

We have been asked to compile a list of names of people who wish to review the documents, and the documents will be sent directly to those requesting copies so the CCROs can keep track of who has a copy. Please send your name and email address to headquarters ASAP if you wish to receive a copy.

NEM will hold a follow up conference call for those who are interested in NEM's next steps on Wednesday, October 30, 2002, at 1PM EST. The dial in number is 703-788-0600, and the passcode is 209353.

FERC Technical Conference on Natural Gas Markets

FERC held a technical conference last week on the subject of natural gas markets. Four panel discussions were convened on forecasted supply and demand, applicability of the Commission's open season and open access requirements to LNG facilities, current policies on gathering and transmission applied to offshore facilities, and flexibility in pipeline operations.

The panel on forecasted supply and demand began with equity analyst assessments. Wayne Andrews of Raymond James noted that this year, with 725 gas rigs, gas production is falling at a rate of approximately 6% per year. Vello Kuuskraa of Advanced Resources International refuted arguments that there would be a supply crunch because: 1) there has been a strong and favorable reserve additions response and reserve per well response to recent drilling; 2) accelerated production is economically favorable; and 3) the nature of the resource base is different but not smaller. Mike Stice of ConocoPhillips on behalf of NGSA stated that FERC needed to improve pipeline permitting, improve LNG policy certainty, and eliminate discriminatory practices regarding open access and capacity. Greg Stringer of the Canadian Association of Petroleum Producers noted that Canadian gas supplies 16% of the U.S. market and that significant growth basins exist in Canada. Fred Fowler of Duke Energy Corporation on behalf of INGAA urged FERC to focus on the issues related to California and electric restructuring in general in order to provide relief from the negative press affecting the energy sector. Fowler urged FERC to: 1) improve market participant understanding of the difference between firm and interruptible pipeline services; 2) remove incentives under Order 637 for shippers to exceed contractual entitlements with no penalty except on critical days; and 3) expand the scope of blanket certificate regulations. Craig Chancellor of Calpine Corporation discussed the concentration of buyers and sellers in the market, the reduction in liquidity, the increase in market and price risk and the increase in market power for the few remaining suppliers. Chancellor recommended that FERC, "should not allow monopoly pipelines to make a 'run on the bank' through over collateralization of credit risk," and said, "pipeline's attempts to financially gold plate their system should be rebuffed." Mike Warren of Energen on behalf of AGA asked FERC to help AGA in its message to state commissioners to permit them to, "use gas supply hedging programs, fixed price supply contracts and other tools," to smooth price volatility. Warren also urged that negotiated rates not be eliminated. Paul Cicio of the Industrial Energy Consumers of America remarked on the lack of market integrity and recommended that trading be regulated, that better firewalls between regulated companies and their unaffiliated subsidiaries be instituted, and that more market information be provided.

The second panel discussed the application of open season and open access requirements to LNG import facilities. Phil Bainbridge of BP Energy Company recommended that FERC allow new proprietary LNG terminals that are not subject to the open access policy and also recommended that FERC streamline terminal permitting. Ron Billings of Exxon/Mobile Gas Marketing Company similarly argued that FERC should eliminate the open access requirement and cost of service regulation for LNG import terminals. John Hritcko of Shell NA LNG said FERC needed to take a more flexible approach to regulation of LNG terminals.

The full texts of the panelists presentations can be viewed at:

Standard Market Design Technical Conferences

The Commission issued a Notice providing further details on previously scheduled standard market design technical conferences. The November 6, 2002, conference will focus on pricing proposals for network upgrades and expansions. The November 19, 2002, conference will focus on the resource adequacy requirement (RAR) including: accommodation of state differences in reserve margins, resource adequacy and retail access; elements of RAR for use in retail access states; potential use of central procurement; penalty provisions; potential use of forward capacity markets; valuation of demand side resources used to satisfy RAR; and possible seams issues. The December 3, 2002, conference will focus on the transition to congestion revenue rights (CRRs) including: permitting regions to use an allocation procedure rather than a mandatory auction; allocation of CRRs to customers; ensuring competing LSEs can acquire CRRs for new load or load previously served by another entity; development of long-term CRRs to match the terms of long-term power purchase agreements; ensuring CRR revenues are properly returned to load; preventing use of CRRs to exert market power; and permitting regional variation in allocation of CRRs. FERC extended the deadline for filing requests to speak as follows: 1) November 6, 2002, conference-deadline of October 29, 2002; 2) November 19, 2002, conference and December 3, 2002, conference-deadline of November 7, 2002. The Commission also requested that those planning to attend a conference in-person should notify them via email at The full text of the Notice of Technical Conferences is available on the NEM Website. NEM has requested a seat on the CRR and RAR panels.

Commission Investigation into Enron Qualified Facility Designations

FERC launched an investigation into whether three Enron wind farms actually conformed with the representations in their 1997 applications for re-certification as qualified facilities (QFs) or whether Enron improperly retained QF benefits for these facilities by fraudulently transferring its ownership to partnerships it indirectly controlled. FERC will also examine whether each Enron facility actually satisfied the ownership requirements for QF status after Enron's merger with Portland General. The full text of the Order Initiating Investigation is available on the NEM Website.

DTE Filed Revisions to Proposal on Stranded Cost Transition Surcharge

DTE filed supplemental testimony in the proceeding to examine its proposed stranded cost transition surcharge. The revised testimony proposes a surcharge in the amount of $.0128/kWh, an increase from the previous proposal of $.0094/kWh. As a result of DTE's revisions, it also is no longer proposing to offset the surcharge with securitization savings. The full text of DTE's Supplemental Testimony is available on the NEM Website.

Commission Issues 2002-03 Energy Appraisal

The Commission issued its 2002-03 energy appraisal. The Report projects that electricity sales in the state will grow by about 2.4 percent in 2002. The Report notes that, "by October 1, 2002, over 4,500 industrial and large commercial customers representing a total demand of about 1,400 MW were being served by AES. So far, there has been almost no activity in the residential and very small commercial customer markets." The Report also projects that the state's natural gas deliveries for year 2002 will increase by about 4.8 percent. The full text of the 2002-03 Energy Appraisal is available on the NEM Website.

New Jersey
Basic Generation Service Bidder Information Documents

The utilities have released bidder information documents on the basic generation service auction that were discussed at recent information sessions. The full texts of the Bidder Information Documents and the Session Slide Show are available on the NEM Website.

Retail Natural Gas Choice Implementation Timetable Approved

The Commission approved Staff's proposed timetable for competitive retail natural gas implementation issues. Accordingly, supplier certification and credit requirements, a material default definition, provision of 12-24 months of usage and payment history to customers, certain switching and enrollment changes, and certain billing changes must be implemented by January 1, 2003. By May 1, 2003, customer information lists, provision of notice to customers of their ability to be excluded from customer lists, and provision of apples-to-apples notices on bills must be implemented. The remaining enrollment and billing changes are to be implemented on or after May 1, 2003, but the utilities must provide reports every six months beginning in July 2003 if the remaining changes are not implemented.

The Commission also clarified that competitive suppliers must provide prior notice by separate mailing to customers of the expiration of their contract term regardless of whether the contract is being subsequently renewed or the length of the term of the contract renewal. However, the Commission granted a waiver of this rule with respect to month-to-month contracts. The full text of the Order will be posted on the NEM Website when made available electronically.

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