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Commission Watch

FERC's AEP ruling begs the question: Can the feds bypass states that block transmission reform?
Fortnightly Magazine - January 2004

Timeline

April 1998 - AEP, CSW file joint application at FERC to merge.
Dec. 1999 - FERC issues Order 2000 (final RTO rules).
Mar. 2000 - FERC OKs AEP/CSW merger, on condition of RTO membership.
June 2000 - AEP, CSW consummate merger.
July 2002 - FERC grants RTO choices of five utilities (Ameren, AEP, ComEd, Illinois Power, DP&L), but says MISO and PJM must combine markets.
July 2002 - FERC OKs bid by FirstEnergy and NIPSCo to join MISO through participation in GridAmerica.
Dec. 2002 - AEP signs agreement, agrees to transfer control of East Zone grid assets to PJM West, applies to Ind., Ky., Ohio, and Va. for permission to join PJM.
Feb. 2003 - Virginia enacts law barring RTO membership w/o OK from state PUC.
Mar. 2003 - State PUCs in Mich., Ohio, and Pa. propose RTO-lite plan, with AEP ceding functional grid control to any independent party, consistent w/ rules governing TransLink's membership in MISO.
June 2003 - FERC staff suggests compromise: Split AEP East grid zone between "yes" and "no" states.
July 2003 - Kentucky denies permission for AEP to join PJM.
Sept. 2003 - AEP offers another plan: It would join PJM on limited (pre-SMD) terms, w/o markets, central dispatch, or LMP.
Oct. 2003 - GridAmerica begins operations within MISO (Ameren membership pending).

Pieces to the Puzzle

How States, Utilities Fit in the Midwest

Because of its huge geographic scope, American Electric Power (AEP) has become the most important player in the creation of a larger PJM, exerting influence on how other utility companies would wheel their power to market.

AEP's Grid Network. AEP owns transmission assets over a broad geographic area located in Michigan, Indiana, Ohio, Kentucky, West Virginia, Virginia, and Tennessee. Its merger partner, Central and South West Corp. (CSW), operates in Arkansas, Louisiana, Oklahoma, and Texas.

Affected States. AEP so far has been stymied by the Kentucky PSC's denial of transfer of AEP's transmission facilities to PJM. (See Ky.P.S.C. Case No. 2002-00475, July 17, 2003, 227 PUR4th 156.) Virginia state law prohibits transfer of control of transmission facilities prior to July 1, 2004-and then only after approval by the Virginia commission. By contrast, regulators in Ohio simply threw up their hands, declaring, "there are too many unresolved issues beyond [our] jurisdiction for the commission to have a meaningful review."

The Illinois Outcrop. With some former Alliance group companies opting to join PJM, the state of Illinois would stand as the westernmost extension of PJM, with areas of MISO actually situated to the east, in Indiana and Ohio. Dynegy's Illinois Power, for example, had planned initially to join PJM, but later switched allegiance to MISO. At press time, Ameren Corp. confirmed it is in exclusive negotiations to buy Illinois Power Co.

The Dayton Island. DP&L is another company held hostage by geography. It also would connect to PJM via its interconnection with AEP, but the company has no firm transmission through AEP allowing it to connect to PJM. Even if it were operationally feasible to attempt to integrate DP&L into PJM prior to AEP, DP&L