RTO Status

Currently, no regional transmission organizations (RTOs) control transmission and reliability activities in the Midwest. However, there are three RTO proposals before FERC to operate in the Midwest: the Midwest ISO; the Alliance RTO; and the Southwest Power Pool (SPP) RTO. Membership in the proposed RTOs is currently very fluid. For example, on September 20, 2000, Illinois Power Company (Illinois Power) announced that it was withdrawing from the Midwest ISO and intends to join the Alliance RTO, pending regulatory approval.

In late 1995, many of the largest transmission utilities in the Midwest began discussions on creating a single independent system operator to operate the regional grids. Some transmission providers joined in the discussions because certain proposed state laws required joining an independent system operator as a prerequisite for participating in a retail access program. In 1996, the preliminary discussions led to the signing of a Memorandum of Understanding and negotiations proceeded throughout that year and 1997. However, in December 1997, Indianapolis Power and Light, First Energy, Detroit Edison and Consumers Power left the group. The latter three transmission providers are currently members of the proposed Alliance RTO. The remaining members of the Midwest ISO recruited new signatories to the agreement and filed a proposal with the Commission in 1998.

As of October 26, 2000, the proposed Midwest ISO was composed of 19 transmission providers located primarily in the MAPP or MAIN service areas. The 19 participants in the Midwest ISO were: Alliant Energy; Ameren Companies; American Transmission Company, LLC.; Central Illinois Light Co.; Cinergy Services, Inc.; Commonwealth Edison Company; Hoosier Energy Rural Electric Cooperative; Illinois Power Corporation (which, as noted above, has announced its intention to withdraw from the Midwest ISO); LG&E Energy Companies; Madison Gas and Electric; Xcel Energy (formerly Northern States Power); Northwestern Wisconsin Electric Company; Otter Tail Power Company; Southern Illinois Power Cooperative; Southern Indiana Gas and Electric Company (SIGECO); Utilicorp United; Wabash Valley Power Association, Inc.; Wisconsin Electric Power Company; and WPS Resources Corporation.

Pursuant to the Midwest ISO Agreement, the Midwest ISO will be organized as a non-stock, not-for-profit corporation. The participating transmission owners will transfer to the Midwest ISO functional control over all network transmission facilities above 100 kV and all network transformers whose two highest voltages exceed 100 kV.

The transmission owners will retain ownership of their transmission facilities, and will physically operate and maintain these facilities, subject to the Midwest ISO’s direction. Under the Midwest ISO Agreement, the transmission owners who are currently control area operators will continue to operate their control areas for local generation control and economic dispatch purposes. However, the transmission owners will follow the directives of the ISO for redispatching generation, curtailing load, and providing reactive supply, voltage control or other ancillary services. Under the provisions of Appendix E of the Midwest ISO Operating Agreement, the Midwest ISO’s duties will include calculating available transmission capability (ATC), maintaining OASIS information, receiving, approving, scheduling and confirming transmission service requests and providing or arranging for ancillary services under the tariff. The ISO will also function as the system security coordinator for its transmission-owning members. The Midwest ISO will not operate any centralized power markets; participants will rely on bilateral contracts for energy.

As of October 26, 2000, the proposed Alliance RTO consists of four Midwest utilities, American Electric Power Service Corporation, Consumers Energy Company, Detroit Edison Company and First Energy Corporation, and one Southeast utility, Virginia Electric and Power Company. The proposal includes the midwestern states of Michigan, Indiana, Ohio, Kentucky and West Virginia. On December 20, 1999, the Commission conditionally authorized formation of the RTO. On September 15, 2000, the Alliance Companies made a compliance filing with the Commission proposing to create the RTO in the form of a for-profit Transco. The Transco will be formed as a limited liability company that will be controlled and managed by its managing member, an independent entity with no affiliation as a market participant. According to the Alliance Companies’ filing, the Alliance RTO will own and operate transmission facilities that are divested to it by members of the Alliance Transco. The RTO would also operate transmission facilities of non-divesting transmission owners that have entered into an operation agreement with Alliance Transco for operation of those facilities. As with the proposed Midwest ISO, the pre-existing control areas will continue to exist under the Alliance RTO.

On October 13, 2000, SPP filed an RTO proposal with the Commission (Docket No. RT01-34-000). This filing replaces an earlier RTO proposal that the Commission rejected without prejudice on May 17, 2000. On October 16, 2000, Entergy Services Inc. made a filing with the Commission proposing to create an independent, for-profit Transco to operate under the oversight, and within the umbrella of, the proposed SPP RTO (Docket No. RT01-75-000).