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Commission Watch

Irregular seams affect ratemaking policies.
Fortnightly Magazine - November 1 2003

concludes, is to eliminate RTORs, which are the through-and-out rates that constitute the rate pancaking and "in a very real sense constitute the seam."

Still, FERC lamented that even with elimination of the MISO and PJM RTORs, "in the near-term the region still will be riddled with seams," with the through-and-out rates under the individual-company tariffs "acting as toll gates that impede the realization of more efficient and competitive electricity markets in the region and that preserve a competitive advantage for the non-RTO participants' merchant functions." FERC specifically pointed to AEP, Ameren Services Companies on behalf of affiliates, Union Electric Co. and Central Illinois Public Service Co., ComEd, First Energy Corp., Illinois Power, Northern Indiana Public Service Co., and DP&L. "We find that the through-and-out rates under the tariffs of these individual former Alliance Companies, for transactions sinking in the proposed MISO/PJM footprint, may be unjust," FERC said. It initiated a separate investigation into their RTORs in and . They believe that because the tariffs of all transmission providers within the proposed PJM-MISO footprint are the subject of Federal Power Act (FPA) Section 206 investigations in those two dockets, it would be administratively efficient to permit filings to support lost revenue recovery and to propose transition rate mechanisms (and actual rates) to be presented as filings for review in Phase II proceedings in these dockets.

The new PJM companies argue that FERC has not found the RTORs to be unjust and unreasonable per se, because it is leaving them in place as just and reasonable rates applicable to transactions outside the PJM/MISO footprint. But they further argue that if the investigation of individual RTORs in results in a finding that application of those rates within the proposed PJM/MISO footprint is unreasonable, it would be appropriate to consider transition rate design issues in phase II of that proceeding.

Meanwhile, GridAmerica had two out of three members begin operations under MISO on Oct. 1, 2003. Grid-America LLC is a for-profit independent transmission company, and its transmission facilities are owned by GridAmerica Co. members, including American Transmission System Inc., a FirstEnergy Corp. subsidiary; and NIPSCO, a NiSource subsidiary. Pending Missouri and Indiana state regulatory approval, it also includes Ameren.

GridAmerica disagrees with the new PJM companies. The company wants FERC to clarify that parties seeking to increase rates or file transitional rate mechanisms must do so through fresh section 205 rate filings, and not as phase II compliance filings in Ameren argues, "It is not clear how interested parties would be permitted to comment on any SECA-type mechanisms proposed by a transmission owner if that proposal is submitted on compliance."

But parties also are fighting over how to eliminate RTORs and the method of calculation of the new cost recovery mechanism to replace the RTORs.

GridAmerica asked FERC to require that both MISO and PJM RTORs should continue to apply to any transaction involving a company located in the MISO/PJM Super Region that has not eliminated its individual through-and-out rate, and to conditionally accept MISO's filing. It also wants FERC to reject PJM's proposal to