April 27, 2001


 NEM Summer Policy Development Meeting

NEM Executive Committee members are reminded that the summer policy development meeting will be held June 28-29, 2001, at the Hotel Boulderado in Boulder, Colorado. Please mark your calendars. Rooms at the Historic Boulderado are very limited. Agenda items will include NEM's strategy for summer shortages, the development of National Guidelines for Advanced Metering and Distributed/Self Generation, strategies for upcoming "bottom-up zero rate base utility unbundlings," long-term fixed price programs and the next steps on National Energy Technology Policy development and implementation. Strawman proposals will be circulated shortly. Please also send headquarters your nominations for next year's Regional, State and National Policy Chairs and Co-Chairs.

 NEM Executive Committee Conference Call

The Executive Committee conference call has been rescheduled for May 3, 2001, at 2PM EST. The purpose of the call is to discuss organizational issues, an agenda for the June 28-29, 2001, Executive Committee meeting, future leadership of the Executive Committee and Regional Policy Chairs. The conference call number is 303-248-1820 and the passcode is 428358.

 NEM-FERC Meeting Scheduled

NEM will be meeting with FERC's Office of Markets, Tariffs & Rates on June 1, 2001, from 2PM-3:30PM EST. A tentative list of issues that has been developed for discussion that day include RTO development (slow pace, independence, access, ATC, seams, configuration, California takeover of transmission) and price caps. NEM members will meet for lunch prior to the meeting. Those NEM members interested in participating should contact headquarters ASAP.

 L.A. Times Article on FERC and Western Markets

The L.A. Times article discusses possible FERC action to implement price mitigation measures for California and western markets. The article also features NEM comments on how load-shifting measures could yield greater benefits to consumers than hard price caps. The full text of the L.A. Times Article is available on the NEM Website.

 Albany Times Union Article on NYSEG Price Protection Plan

A Times Union article discussed concerns voiced by marketers and the NY Attorney General on NYSEG's proposed price protection plan that would freeze rates for seven years. The article quotes NEM on the effect of freezing rates below market and the eventuality that customers will have to pay the losses. The full text of the Times Union Article is available on the NEM Website.


 Mitigation and Monitoring Plan for CA Wholesale Electric Markets

The Commission established a year long mitigation and monitoring plan for the California wholesale electric markets providing that each gas-fired generator must file with the Commission and the CAISO, on a confidential basis, heat and emission rates for each generating unit. The CAISO will use these rates to calculate a marginal cost for each generator, and when there is a power shortage, the ISO's market price will be limited to the marginal cost of the highest-cost generator called on to run. Price mitigation will be implemented when power reserves fall below 7.5 percent.

Additional provisions of the plan: 1) increase the CAISO's coordination and control of generation plant outages; 2) require sellers with participating generator agreements (PGAs) to offer all their available power in real time as a condition of their use of the ISO's interstate transmission lines; 3) establish price mitigation, based on market-oriented principles, for available capacity in real time when there is a reserve deficiency; 4) beginning June 1, 2001, require public utility load serving entities to establish demand response mechanisms in which they will identify the price at which load would be curtailed; 5) establish a single market clearing price auction for the real-time market.; and 6) place conditions on public utility suppliers' authority to sell power at market-based rates.

The Commission is seeking comments on whether the ISO should prospectively institute a surcharge on power sales to cover generators' past unpaid bills and whether all non-hydroelectric generators in the West should be subject to price mitigation during a power shortage. The Commission also instituted an investigation into wholesale prices for electric sales by public utilities throughout the West. The full text of the Order is available on the NEM Website.

 FERC Order on RTO West

The Commission accepted parts of a proposal for a western RTO to span eight states. The Commission accepted the proposed scope, configuration, governance structure and code of conduct of RTO West but deferred consideration of the market-monitoring plan. The Commission also accepted the governance structure of the proposed independent transmission company, TransConnect. The full text of the Order is available on the NEM Website.

 NEM Comments on NYISO Load Curtailment Program

NEM has submitted comments supporting NYISO's proposal to incent Day-Ahead Economic Load Curtailment Program. The program provides incentive payments for load reduction and will allow qualified providers to bid their demand reduction a day ahead. NEM argued it will encourage price responsive demand. The full text of NEM's Comments is available on the NEM Website.

 NEM Comments on PJM Reliability Assurance Agreement (RAA) Filing

NEM has submitted comments on PJM's proposed changes to increase the period of time over which an LSE must commit generation resources to PJM and deficiency payment liability. NEM argued the changes are allocation controls that neither improve reliability nor improve the liquidity of the markets and may damage both. The full text of NEM's Comments is available on the NEM Website.

 NEM Testifies at FERC in Favor of Electronic Tariff Filings

NEM appeared at FERC to support its proposal to require the use of XML for more standardized electronically filed tariffs. The proposal proposes the use of section-based tariffs as opposed to tariff sheets, the need for a standardized tariff structure, and XML format to be used for filings to facilitate database management. NEM discussed the principles in its National Energy Technology Policy, urging the use of uniform Internet-based information and data exchange to facilitate restructuring. Comments on the NOI are due June 25, 2001. The full text of the NOI is available on the NEM Website.

State Issues

New York

 NY Unbundling Proceeding

NEM is actively participating in the NY unbundling proceeding, and NEM has volunteered to coordinate "Issue 5" - what services should be offered competitively and unbundled from utility rates in the state of New York. Please refer to the NEM Issue 5 Straw Proposal. Member input is requested on all six of the following policy issues. NEM's thoughts on these issues must be compiled and sent to the service list by May 4. Therefore, please send your comments on each issue to headquarters ASAP, but no later than April 30, 2001:

(1) the method for calculating unbundled costs; (2) methods for performing forward-looking incremental cost studies; (3) the rate treatment that should be accorded stranded costs or competitive losses; and (4) the degree of statewide consistency in defining utility functions, assigning costs, and defining customer classifications (among other issues) that is needed to promote the development of retail markets; (5) functional areas to which utility costs should be assigned and distinguish those functional areas with the most promise of becoming competitive from those that will retain a monopoly status; and (6) interutility inconsistencies.

The following procedural schedule has been established for the proceeding:

Party contributions on 6 issues due to compiler - May 4, 2001 (NEM Member input needed by April 30, 2001); Compiler issues summary - May 10, 2001; Party comments to compiler - May 15, 2001; ALJ and all parties receive issue write-ups - May 18, 2001; Prehearing Conference at PSC Albany offices - May 23, 2001; Technical Conference on cost of service studies at PSC Albany offices - May 31, 2001-June 6, 2001; Meeting to decide next steps - June 6, 2001; Comments due - July ?, 2001; and Reply comments due - July ?, 2001

 EDI and Uniform Billing Practices Orders

In two decisions designed to facilitate a single bill for service, the Commission has adopted EDI standards applicable to transactions including customer switching and transferring a customer's history, usage and billing data. An implementation schedule will begin with a phased testing plan this year to test participants' technical capabilities. The Commission also adopted a set of uniform business and payment processing practices using the EDI protocol. The Commission not only directed the utilities to incorporate the practices into their operating procedures and billing service agreements, but also adopted individual billing costs for the eight largest utilities, representing the cost avoided when an ESCO renders the bill. The full text of the Commission Press Release on the Orders is available on the NEM Website. The full Order will be available shortly.

 NYSEG Price Protection Plan Trade Secret Ruling

The ALJ in the NYSEG Price Protection Plan proceeding denied NYSEG's request for trade secret protection underlying their attempt to seek approval fo a seven year fixed price program. The ALJ held that a regulated utility has no protected interest because it is not supposed to be in the competitive marketplace. NEM has submitted comments on appeal strongly supporting the ALJ's ruling, particularly in light of the unbundling ordered by the Commission last month. The full text of the Ruling and NEM's Comments is available on the NEM Website.

Relatedly, the Commission issued an Order to put NYSEG on notice that it is not inclined to increase the rates of its current restructuring plan or to extend rates currently in effect without a review of NYSEG's cost information in at least the level of detail required for gas utilities. The Commission noted that NYSEG is requesting that the 5% rate decrease to be effective March 3, 2002, instead be modified to a 5% rate increase effective March 3, 2002, through the term of the plan, resulting in a $330 million increase in revenues from those NYSEG would have otherwise collected. The full text of the Order is available on the NEM Website.

 Order on NYSEG Retail Access Credit Tariff Filings

The Commission rejected NYSEG's tariff provisions that limited the floating back-out credit with 2 mill and 4 mill adders that ESCOs won. The Commission rejected NYSEG's request to recover the adders and held that NYSEG avoids costs when customers move to retail access and to surcharge customers for the same costs would double recover them. The Commission also held that the restriction of the 4 mill adder to non-demand customers is appropriate and that any customer that switches to an ESCO on or before June 1, 2001, is exempted from the requirement that a returning customer remain with NYSEG for twelve months. The full text of the Order is available on the NEM Website.

 Standby Rate Proceeding

The procedural schedule for comment on the Staff's standby rate straw proposal is as follows: initial comments due - May 15, 2001; Staff circulates modified straw proposal - May 22, 2001; and reply comments due - June 12, 2001. Concerns have been raised about the applicability of the proposal to wholesale generators using electric energy as station power. The full text of the Standby Rate Proposal is available on the NEM Website.

 O&R Phase 2 Proposed Settlement

A proposed settlement in O&R phase 2 gas proceeding for the period of November 1, 2001 to October 31, 2003, provides as follows: 1) a back-out rate of $0.08/Mcf for firm transportation customers receiving a single bill from O&R and $0.10/Mcf for firm transportation customers will dual billing; 2) defer implementation of the unbundling provisions established in the Unbundling proceeding until October 31, 2003; 3) possible implementation of a marketer POLR pilot program; and 4) separate rates for firm sales and firm transportation customers will be set to recover gas in storage working capital costs. Statements in support or opposition are due May 1, 2001. The full text of the Proposed Settlement is available on the NEM Website.

 Staff Proposal in Keyspan Gas Proceeding

Staff has circulated a back-out rate proposal in the Keyspan gas proceeding. Due to confidentiality concerns, NEM members interested in reviewing the proposal should contact headquarters. The next meeting in the proceeding will be held May 3, 2001, at 11AM at the Commission's Penn Plaza offices.

New Jersey

 Third Party Supplier Fee Proceeding

The Board has approved the parties' agreement to hold the TPS proceedings in abeyance. The utilities' current fee structures will remain in effect, and the utilities will file updated TPS fee proposals on August 1, 2001. Staff will convene a status conference on or before September 15, 2001, to discuss proposed resolution of the utilities' filings. If necessary, hearings will be held.

 NUI Elizabethtown Gas Phase II Negotiations

The NUI Elizabethtown gas phase II negotiations will commence on May 2, 2001, at 1:30PM at the company's Union offices.


 Recommended Decision in FirstEnergy-GPU Merger Proceeding

A recommended decision was issued by the ALJ in the FirstEnergy-GPU merger proceeding supporting approval of the merger with certain conditions including: the company must flow merger-related savings to ratepayers by extension of the transmission and distribution rate caps from December 31, 2004 to December 31, 2007; the company must apply to the Commission and obtain authorization before withdrawing GPU Energy's transmission facilities from the operational control of PJM; a Service Quality Index (SQI) must be adopted to improve reliability; and the overfunded GPU Energy pension fund must be protected. In the related POLR proceeding, the ALJ rejected GPU Energy's proposed deferral tracking mechanism, instead recommending that Met-Ed and Penelec be permitted rate increases. Exceptions to the recommended decision are due May 7, 2001, with responses due May 14, 2001. The Commission is tentatively scheduled to rule on the decision on May 24, 2001. The full text of the Recommended Decision is available on the NEM Website.


 Retail Access Rules

The following procedural schedule has been established for consideration of the proposed retail access rules: Prefiled testimony due - May 1, 2001; Rebuttal testimony due - May 7, 2001; Commission hearing - May 10, 2001; Staff files revisions to proposed rules - by May 10, 2001; Comments on rule revisions and hearing issues due - May 21, 2001; and Commission issues final order - on or around June 29, 2001.

Other Issues

 Uniform Electronic Transactions for UBP

A draft proposal for development of uniform electronic transactions to support Volume 1 of the UBP document has been prepared. A conference call will be scheduled in May in to consider the proposal. The full text of the Draft Proposal is available on the NEM Website.