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Commission Watch

Is the "pathway concept" the answer to Virginia's qualms?
Fortnightly Magazine - July 1 2003

to PJM, but the commission asked for supplemental information and said it wanted to consider the application after FERC's proposed standard market design (SMD) was finalized. (This happened before the future of SMD was cast into doubt. See )

The state commission expressed fears over reliability, and it directed AEP to provide a cost-benefit study showing results of joining the RTO from the perspective of the parent company, the Virginia company, other AEP corporate entities, shareholders, customers, and Virginia ratepayers as a whole .

But the Virginia legislature got involved early in April, passing House Bill 2453, which delayed the date by which incumbent electric utilities with transmission must join a regional transmission entity (RTE). It pre-empted the state's restructuring law, which required utilities to join an RTE by Jan. 1, 2001. Now, utilities such as AEP and Dominion Virginia Power are not allowed to join an RTE prior to July 1, 2004, and may only transfer management and control of transmission assets to the RTE by Jan. 1, 2005, subject to state commission approval.

Prior to giving permission, the state commission must find that approval will: (1) ensure that consumers' needs for economic and reliable transmission are met; and (2) meet the transmission needs of electric generation suppliers that do not own, operate, control, or have an entitlement to transmission capacity.

The problem is that AEP, one of the largest investor-owned electric holding companies in the United States, operates in 11 states and would provide the link for PJM to expand its footprint and reach ComEd in Illinois through Virginia, Kentucky, Indiana, West Virginia, and Ohio.

FERC Jurisdiction

But the FERC issued an order April 1 accepting filings by AEP, ComEd, Dayton Power and Light Co., and Dominion Virginia Power (called the "New PJM Cos.") to further the process of their joining PJM. The facilities' integration was to take place in phases, with AEP notifying FERC it would not transfer facilities to PJM until May 1, 2003, at the earliest.

Protests were filed at FERC against the Virginia law by the Pennsylvania, Ohio, and Michigan commissions, asking FERC either to direct AEP to join an established RTO, or to require AEP to enter into an operating agreement with a third party, such as PJM, thereby contractually transferring control of its transmission. The commissions argued that individual states should not be allowed to interfere with the national goal of creating a strong wholesale energy market.

Exelon, parent company of ComEd, filed in support of the commissions, arguing that Virginia's enactment of the legislation will affect transfer of interstate transmission operations and development of wholesale energy markets, which are matters beyond any single state's jurisdiction. Exelon also argued that the Virginia legislation is prempted by FERC's exclusive jurisdiction over wholesale transmission in interstate commerce, and it may prevent customers of utilities in other states from obtaining benefits of RTO membership.

FERC in its April 1 order found that transfer of ComEd's and AEP's facilities to PJM control is consistent with the public interest, and the commission approved the transfer. FERC rejected the Virginia