FERC gives Midwest ISO the go-ahead as single RTO

By the OGJ Online Staff

HOUSTON, Dec. 19 -- In five key orders Wednesday, federal regulators moved to create a single regional transmission organization in the Midwest.

The orders approved the Midwest Independent System Operator (ISO) as the first official RTO in the country, but denied the same status to the Alliance RTO, finding that Alliance lacked sufficient scope to exist as a stand-alone RTO.

The order basically overturns a previous decision that the Alliance companies' proposal had sufficient scope to become a stand-alone RTO. Alliance was directed to explore, along with its designated 'Managing Member,' National Grid PLC, options for joining the Midwest RTO.

The Midwest RTO, a nonprofit based in central Indiana, will operate in some 20 states and the Canadian province of Manitoba. When merged with the Southwest Power Pool, it will stretch from Manitoba to New Mexico. The Alliance companies cover parts of 11 states from Missouri to North Carolina. FERC said Midwest may begin operating as an RTO as soon as possible, although it still must make some additional filings.

FERC said the Midwest RTO best satisfied the four conditions of independence, scope, congestion management, and market monitoring. Allowing two RTOs to operate in the Midwest would be a "second-best" solution that would compromise customers' interest, the commission said.

By assuming control over the transmission facilities of so many entities, FERC said the Midwest RTO should exercise a degree of standardization "not seen before in the Midwest." Regulators pointed to standardized interconnection procedures as an example. The commission said the decision also reflected the views of the midwestern state commissions.

State preferences
An "overwhelming" majority of Midwest state commissions and many others preferred the Midwest ISO as the surviving RTO, FERC said. State commissioners contended that multiple RTOs managed through seams agreements wouldn't work.

Other parties asserted National Grid would have a conflict of interest and an incentive to manage the Alliance RTO to benefit its New York market interests to the detriment of other suppliers in New York.

The Michigan Public Service Commission said FERC's "strong action" should "ignite "the wholesale electricity market in the Midwest. Michigan had been active with a coalition of other states, in urging the FERC to take such an action to promote a healthy and fully-functioning electric market in the Midwest.

"Chairman Wood and his colleagues should be commended for taking decisive action to break the logjam that has been hindering the electricity markets in the Midwest," noted Michigan Commissioner David Svanda.

Chairman Laura Chappelle added FERC's decision "should go a long way toward enabling the retail open access in Michigan to come to fruition."

The FERC also approved, or preliminarily approved, three related applications by the International Transmission Co. to become the first fully independent transmission company. ITC is a subsidiary of DTE Energy Co., Detroit, Mich. ITC proposes to maintain and develop transmission, while turning over to the RTO such functions as congestion management and curtailments, tariff administration, and security coordination.

DTE indicated it plans to sell ITC to a third party and FERC preliminarily approved the sale of the transmission facilities.

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