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September 3, 2004
National Grid Nominated to Executive Committee


NEM is pleased to announce that National Grid USA has been nominated to NEMís Executive Committee. National Grid USA is a wholly owned subsidiary of National Grid Transco, an international, London-based company. National Grid USA will be represented within NEM by Sharon Rodriguez, Vice President, Retail Markets, Michael Calviou, Vice President, Transmission and Nancy Testani, Director of State and Regulatory Affairs.

Upcoming NEM Events

Please reserve the dates September 29-30, for NEM's Fall Industry Leadership Roundtable to be held in Boston. The meeting will be held at the Hyatt Harborside. Please reserve your room ASAP (617-568-1234 or 1-800-233-1234) to receive the NEM rate of $189 per night. Many thanks to Nate Owen and Bob Potter of Energy Services Group for hosting the meeting. Many thanks also to Mike Foley of First Data Corporation for offering to sponsor other parts of the meeting. A hotlink is provided here for registration.

NEM's Winter Executive Committee Meeting will be held in Newport Beach, California on January 19-20, 2005. Many thanks to Peter Weigand and Ian Carter of Commonwealth Energy (now called Commerce Energy Group) for offering to host this event.

Lastly, NEM's spring industry event will be held in Washington, DC at the Marriott Metro Center on either April 21-22, 2005, or April 26-27, 2005.

Comments Sought on National Interest Electric Transmission Bottlenecks

Transmission bottlenecks, caused by congestion in the transmission grid, threaten a grid's reliability. DOE filed a notice of inquiry seeking input on how to identify these bottlenecks and to designate those in critical corridors as National Interest Electric Transmission Bottlenecks (NIETB), implementing a major recommendation from the 2002 National Transmission Grid Study. The Electricity Advisory Board has recommended three criteria to be used when designating an NIETB: whether the bottleneck threatens national security, threatens grid reliability or poses a risk of significant increases in consumer cost. DOE seeks comments on the sufficiency of the above criteria. In addition, DOE seeks comments regarding which groups should be involved in identifying and designating a bottleneck as a NIETB, what role those groups should play as well as how DOE should subsequently deal with a NIETB. Comments must be filed by September 20, 2004. The full text of the Notice of Inquiry is available on the NEM Website.

Joint FERC and CFTC Investigation Reveal No Manipulation in 2003 Natural Gas Prices

After an extensive investigation, the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission found that the 2003 increase in natural gas prices was not the result of any organization or individual. Explaining the increase, CFTC cited market projections and statements concerning natural gas inventories in late November and early December 2003 as well as the cold weather during the first week of December 2003. Both agencies plan to continue monitoring the market for fraud and manipulation in addition to working to increase transparency in gas markets. To that end, FERC has scheduled a technical conference to discuss the need for regulations that require daily electronic posting of gas storage levels on September 28, 2004. CFTC will also participate in this conference.

Arizona
APS Rate Case Settlement Filed

A settlement in the APS rate case has been filed. The settlement prohibits APS from any self-build until 2015 unless APS obtains express authorization. The settlement requires APS to issue competitive solicitations by 2005 for long-term resources such as a new generating facility or interest in such a facility, but does not require APS to accept any specific bid. The settlement provides two options for retail customers to obtain service as well. The default option is standard offer service, in which APS provides all service to customers, which is billed at a rate regulated by the Commission. The second option is competitive services (direct access), which allows customers to choose service from a Commission-certified Energy Service Provider (ESP). Direct access customers with single premises demands of more than 20kW of usage or 100,000 kWh annually must use interval metering. Customers who choose direct access still have the choice to switch back to standard offer service. Direct access billing, then, may take any of three forms: utility consolidated billing, ESP consolidated billing or dual company/ESP billing. Payments are applied first to all APS charges and then to ESP charges. Additionally, the settlement requires APS to provide customer usage information, up to the past 12 months, to an ESP or to a customer upon written request. A hearing on the settlement will likely occur by year's end. The full text of the settlement is available on the NEM web site.

Maryland
Commission Proposal for Implementation of Renewable Energy Portfolio Standard

The Commission is proposing recommendations for RPS compliance, which is set to begin in 2006 with implementing regulations to be published by December 2004. The Commission recommends using a generator registration system created and maintained by the Commission and PJM, with PJM managing renewable energy credit (REC) creation. RECs would be awarded quarterly for PJM transactions and systems imports and annually for on-site generators. In addition, the Commission recommends an unrestricted, bilateral market for REC trading with information updated monthly. Penalties for not meeting standard RPS will be used to fund the Maryland Renewable Energy Fund. Comments are due September 17, 2004, and reply comments are due October 8, 2004.

Register for Electric Supplier Orientation Meeting

The Commission's Electric Supplier orientation meeting will held on September 14. Panel discussion topics include renewable energy portfolio standards (RPS), retail choice review and utility coordination. The meeting agenda is available on the NEM web site. Register online here.

New Jersey
BGS Auction Bidder Information Sessions

Registration is required for BGS information sessions taking place on September 10, 2004, in Philadelphia and September 17, 2004, in Washington, DC. These sessions will give an overview of the FP and CIEP auctions as well as explain rules and changes from previous years. Register online by September 3, 2004 here.

New York
Implications of Statements on Retail Competition and Unbundling

As in the past, the Commission boldly bases its authority to restructure upon its own interpretive regulatory authority rather than a specific legislative grant. It finds that its authority to restructure the natural gas and electricity markets is grounded in its statutory charge to ensure that rates are "just and reasonable." Once finding authority to take action, the Commission found that once a market is "workably competitive," the rates it produces will be "just and reasonable," signaling the appropriateness of a utility exit from that market. The Commission fully endorsed competitive markets by instructing utilities "to prepare plans to foster the development of retail energy markets." With market prices as the end goal, the Commission laid the first step for aggressive migration leading to such an end state. The Commission encourages such large-scale migration through several policies, namely by: 1) encouraging utilities to offer purchase of ESCO accounts receivable without recourse, 2) allowing utilities to design plans to encourage retail migration on their own, 3) willing to require development of such plans if utilities do not do so, 4) repealing the state action doctrine, 5) requiring compliance with the unbundling the embedded costs of service and 6) soon permitting auctions of large customers followed by auctions of small customers in a matter of years. In a somewhat contradictory statement, the Commission recognizes that there must always be an entity capable of providing service for all who request it, but also seems to indicate that 100% customer migration may be possible. NEM research has indicated that the utility's obligation to serve is limited to its delivery function and as such requiring utilities to exist the merchant function would be permissible. The full texts of the Policy Statement on Retail Competition and the Policy Statement on Unbundling are available on the NEM web site.

Pennsylvania
NEM Submits Testimony on Natural Gas Competition

NEM urged the Commission to take further steps to promote competition in the natural gas supply market. In order for utility rates to send proper price signals to consumers, NEM recommended that the Commission adjust the Purchased Gas Cost rate (PGC) on a monthly basis, an approach already used in Ohio. NEM also recommended that this price be offered without a corresponding utility fixed price option, which could confuse consumers and harm competition by creating a second "price to beat." In addition, NEM suggested reinitiating a campaign to educate consumers about choice programs. NEM also recommended allowing competitive suppliers access to utility customer lists and historical load data using web-based applications. Finally, NEM recommended that utilities purchase receivables without recourse and do so at a reasonable discount rate. The full text of NEM's testimony is available on the NEM web site.


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