September 28, 2001


 Trigen Elected to NEM Executive Committee

NEM is pleased to announce that Trigen has been elected to NEM's Executive Committee. Trigen is a leading developer, owner and operator of industrial, commercial, institutional and district energy systems in North America. Trigen combines the use of highly efficient energy technologies including combined heat and power (CHP) systems with flexible, customer-centered business structures to deliver innovative and reliable utility solutions. Dennis Haines, Vice President, General Counsel and Corporate Secretary, Mark Hall, Vice President of External Affairs, and Craig Bennett, Staff Attorney, will represent Trigen within NEM.

 Caminus Nominated to NEM's Executive Committee

NEM is pleased to announce that Caminus Corporation has been nominated to NEM's Executive Committee. Caminus Corporation is the world's leading vendor of Energy Trading and Risk Management Systems for participants in competitive energy markets. Dr. Ralph D. Masiello, Executive Vice President of Corporate Development, John A. Andrus, Executive Vice President of North American Software Operations, and Dr. Michael J. Denton, Vice President, North American Strategic Consulting, will represent Caminus Corporation within NEM.

 NEM's Fall and Spring Meetings

All NEM members and prospective members are invited to join the Executive Committee for an open meeting on October 3-5, 2001, at the Palmer House Hilton in Chicago. A revised agenda for the meeting is hotlinked here for your convenience. Discussions at the meeting will include infrastructure security, and Paula Scalingi, Director of the Office of Critical Infrastructure Protection for the U.S. Department of Energy will join us for this topic. Also of note, the National Petroleum Council recently released a report entitled, "Securing Oil and Natural Gas Infrastructures in the New Economy," (hotlinked here) recommending an industry information sharing mechanism to share information on physical and electronic threats and solutions. Many thanks to Exelon, Nicor, Peoples, InBusiness Teleservices and Encorp for sponsoring the meeting.

Please also mark your calendar for April 1 and 2, 2002, the Annual Membership Meeting and National Restructuring Conference, that will be held at the Marriott Metro Center in Washington, DC.

 NEM Member Opportunity

White Pine Copper Refinery Inc. is interested in selling a surplus power plant. At one time, the plant provided electricity (60MW) for an integrated copper mining complex. The plant ran continuously from 1954 until 1996. The plant consists of two Riley coal or natural gas fired boilers and three Westinghouse 20MW steam turbine generators. The connections to the grid are via a 69kV American Transmission Company overhead line. Parties interested in receiving more information are urged to contact Barry Fay at (906) 885-7906 or

Federal Issues

 Barton Releases Electricity Bill

Congressman Barton has released a discussion draft of a bill entitled the "Electric Supply and Transmission Act." The bill incorporates a number of NEM's recommendations and provides as follows:

1) Interconnection costs must be just and reasonable, not unduly discriminatory or preferential and comparable to costs charged by the local distribution utility for interconnection by any similarly situated generating facility;

2) FERC is to promulgate rules to establish reasonable and appropriate technical standards for generation interconnection. If the rules are not enforced by the appropriate "non-federal regulatory authority," they can be enforced by FERC;

3) Back-up power rates for firm and interruptible service are to be just and reasonable and not unduly discriminatory or preferential. Back-up power rates should take into account actual incremental costs incurred to supply the back-up power during the period the service is provided as well as standby charges assessed against similarly situated generating facilities in the area;

4) State net metering programs should be implemented in conformance with federal standards;

5) Price responsive demand programs are to be developed by FERC in coordination with the states, RTOs, electric utilities, federal power marketing agencies and the Secretary of agency with the goal of reducing nationwide electric demand by five percent by the year 2004 relative to 2001.

6) With respect to retail wheeling in retail competition states, FERC may require the transmission of electric energy for the purposes of the sale of such energy to retail electric consumers served by local distribution facilities subject to open access;

7) FTC is to issue consumer protection rules requiring retail electric suppliers to provide information on the nature of service offered, the price of electric energy, a description of other charges and other information to assist retail electric consumers in making purchasing decisions;

8) FTC is to issue consumer information disclosure rules to prohibit the use of certain information without a consumer's prior written approval. This would not include switching and billing information;

9) Subject to state law, retail electric consumers may participate in aggregation programs if they are served by a local distribution company whose local distribution facilities are subject to open access;

10) An electric reliability organization is to be formed. FERC is to review the organization's proposed reliability standards;

11) FERC is to issue a rule on transmission pricing policies and standards for promoting the expansion of interstate transmission networks through incentive-based and performance-based rate treatments;

12) PUHCA is to be repealed and PURPA is to be prospectively repealed.

The sections on advanced metering and RTOs are to be provided later. The full text of the Bill is available on the NEM Website.


 FERC Initiatives on RTOs and Standards of Conduct

A number of important new initiatives were announced at FERC's Agenda meeting this week. Chairman Wood outlined future RTO initiatives. A series of RTO workshops will be held the week of October 15th to focus on core subject areas including congestion management, cost recovery, market monitoring, transmission planning, business and reliability standards, and the nature of transmission rights. The workshops will be followed by a rulemaking on market design and market structure to translate the eight RTO functions from Order 2000 into concrete protocols for the RTOs. This rulemaking is intended to produce a new pro forma tariff required of all public utilities and RTOs. Chairman Wood also recommended that jurisdictional utilities that do not join an RTO should have their market based rate privileges revoked, should not receive approval of mergers, and should have their transmission rates scrutinized.

FERC will be issuing a proposed rulemaking on the subject of standards of conduct for transmission providers. The proposed rule would apply one set of standards uniformly to natural gas pipelines and electric utilities. The proposed rule would require that all transmission customers be treated on a non-discriminatory basis and would prohibit the preferential sharing of information. Significantly, the rule would broaden the definition of "affiliate" to include all energy affiliates, not just marketing affiliates. Two options for the treatment of employees are also to be considered. The first option would maintain the status quo and the second option would require separation of the transmission function from all sales functions, including bundled sales. Chairman Wood indicated that the Commission must receive factual evidence on the costs and benefits of separation or the proposal will not be implemented. Commissioner Breathitt expressed concern with the federal/state jurisdictional aspects of requiring employees in the bundled sales function to be subject to these standards of conduct and suggested that this issue be posed as a question for comment rather than a concrete proposal. The rule would also provide a waiver process for entities to seek exemptions for operational and emergency reasons.

Additional items of note that were also discussed include:

  1. Chairman Wood discussed the use of yearly business plans to establish regulatory priorities and accountable timelines at FERC. The starting point is a five year strategic plan entitled, "Making Markets Work" that includes such concepts as standardization of interconnection, elevation of FERC's market oversight role, and assurance of a pro-competitive environment. All four Commissioners endorsed it and the Chair has asked senior staff to fill in the specific actions that will be taken to implement this plan.
  2. FERC will convene a series of energy infrastructure adequacy workshops to assess the current state of energy infrastructure, future demand, and existing constraints. These workshops will be open meetings for the four different regions of the country (North, South, Midwest, West). The first meeting will be held with the Western Governors Association on November 1-2, 2001, in Seattle.
  3. FERC and DOE will partner for a price responsive demand conference in February and an intelligent transmission technology initiative.
  4. The Commission received an update on California infrastructure, including recommendations for expansion of interstate and intrastate capacity serving the state. The Commissioners requested that quarterly public presentation updates on the subject be provided.

The full text of Chairman Wood's RTO Memo and Making Markets Work Draft are available on the NEM Website.

 Northeast RTO Mediation Report

The Commission issued a notice indicating it will accept comments on the ALJ's Report on the Northeast RTO Mediations. Comments are due October 9, 2001. The full texts of the ALJ's Report and the Notice Accepting Comments are available on the NEM Website.

State Issues

New York

 NIMO Merger Proceeding

A draft settlement proposal has been prepared in the NIMO merger proceeding. Due to confidentiality concerns, NEM members interested in reviewing the document should contact headquarters.

New Jersey

 Basic Generation Service Proceeding

The BPU will hold a legislative-type hearing to discuss the provision of basic generation service on October 4, 2001, at 9:30AM in the BPU Hearing Room.


 PUC Winter Reliability Assessment Meeting

The PUC will host a winter reliability assessment meeting on October 12, 2001, at 1:30PM in Hearing Room 1 of the Keystone Building in Harrisburg. The purpose of the meeting is to discuss how utilities, competitive suppliers and PJM are planning to respond to energy demand and supply interruptions this winter. Demand side response programs will also be discussed.


 Staff Report on Mid-Sized LDC Gas Choice Programs

Staff released a report with recommendations on mid-sized LDC gas choice programs as well as a draft SEMCO tariff incorporating the recommendations. Staff recommends that:

  1. Customer enrollment should be phased in for MGU at 10%, 20%, 40% and 100% levels beginning in 2002, and all customers should be able to participate by June 2005. Customer enrollment for SEMCO should be phased in at 40%, 60% and 100% levels beginning in 2002, and all customers should be able to participate by April 2004. Customers should be able to enroll in a program at any time during the year.
  2. A customer's selection of a Supplier should be effective until (i) terminated by the customer or supplier, (ii) the Supplier becomes disqualified from participating in the choice program, or (iii) the company receives an enrollment for that customer from another Supplier. A customer must stay on a choice tariff for at least 12 months before returning to sales service, although the customer should be permitted to switch between Suppliers. If a Supplier defaults, the customer should return to the LDC's sales tariff, but the customer should have 60 days to find and switch to another Supplier before being required to remain on the sales tariff for 12 months.
  3. Customers that stay on a Choice tariff for at least 12-months and then voluntarily switch back to the LDC should be provided a sales service that includes a GCR Factor. Choice customers that are forced back to the LDC's sales service because of a Supplier default or actions beyond the customer's control, should pay the higher of the market based commodity rate or the GCR based commodity rate for up to three months. Choice customers returning to the LDC sales service because of a Supplier's default, should not have to stay with the LDC for a 12-month period before they can switch back to a Choice tariff. Choice customers forced back to a sales service who choose another Supplier should not be charged a $10.00 switching fee.
  4. LDCs should provide supplier of last resort services to non-transportation customers within their service territories.
  5. The Daily Delivery Obligation (DDO) proposal and Failure Fee proposed by SEMCO should be adopted.
  6. The buy/sell agreement proposal of SEMCO should be adopted. Suppliers should be required to provide their price to the LDC 3 days before the end of the prior billing cycle, and the utility, within 21 days, will pay the Supplier based on gas delivered times the price per Mcf billed less fees. When a Supplier has more than one pool and delivers a monthly cumulative amount of gas that is different from the total DDOs issued, the utility should allocate any gas shortages to the highest priced pools first, and any gas excesses to the lowest priced pools first when making remittances.
  7. Suppliers on SEMCO's system should not be required to demonstrate firm capacity only that they retain pipeline capacity sufficient to meet their customer requirements. MGU should be permitted to assign capacity at its actual cost. If MGU sheds pipeline capacity by not renewing existing contracts, Suppliers should have to demonstrate via an affidavit that the Supplier possesses firm primary capacity to MGU city gates for the five winter months equal the capacity turned back by MGU.

Staff maintained that NEM's proposal to have the Commission create an electronic bulletin board for market clearing pipeline capacity would require more detail and study preventing implementation at this time but that they would be interested in hearing more about the proposal. Comments are due on Staff's Report by October 11, 2001. The full text of Staff's Report and the Draft SEMCO Tariff are available on the NEM Website.

 NEM Brief in Detroit Edison Unbundling Proceeding

NEM submitted a brief urging the Commission to reject Detroit Edison's proposal to use a bill message to communicate Retail Access Service Tariff charges in lieu of unbundling its C&I rates. NEM argued that this approach did not satisfy the requirements of state law and urged the Commission to reject Detroit Edison's application and require a new application be filed. The full text of NEM's Brief is available on the NEM Website.