The for-profit Alliance Regional Transmission Organization (RTO) received Federal Energy Regulatory Commission (FERC) approval Wednesday.
Separately, the commission gave Illinois Power Co. 30 days to negotiate a settlement over its request to leave the Midwest Independent System Operator (MISO). Citing changing conditions, the Dynegy Inc. unit asked to be allowed to withdraw from MISO to join the Alliance RTO.
FERC said Alliance fulfilled four "characteristics" established under Order 2000 and most conditions. Alliance has taken important steps toward satisfying key RTO characteristics and functions, including independence, scope and configuation, operational authority, short-term reliability, rate design, congestion management, parallel path flow, available transmission capacity calculation, and planning and expansion, said Commissioner Linda Breathitt.
However, the commission asked for more information from the Alliance organization about its plans for ancillary services, market monitoring, and interregional coordination. The commission has set Dec. 31, 2001, as the operational date for RTOs.
"I also stress the need for the Alliance companies to continue on certain issues in order to ensure that their significant efforts will culminate in the creation of a fair and competitive bulk power market in the Midwest Region," said Breathitt.
Under Order 2000, adopted in December 1999, FERC encouraged voluntary formation of regional transmission organizations. The federal oversight agency said larger regional organizations were needed to eliminate rate "pancaking"�the practice of billing a supplier of power several times as it passes through various control areas.
Members of Alliance�American Electric Power Service Corp., Consumers Energy Corp., Detroit Edison Co., FirstEnergy Corp., and Virginia Electric & Power Co., along with their 11 public utility operating subsidiaries�serve more than 26 million customers.
Among the issues to be addressed in the Midwest ISO-Dynegy negotiations, Breathitt said, are the interests of market participants, including state commissions and consumer representatives, in having the entire Midwest operated as a seamless market.
"I cannot stress enough the importance of establishing an arrangement that would allow the Midwest region to operate as a seamless, physical market," she said in written comments. Breathitt urged the parties to be mindful "of the ultimate goal of creating a competitive bulk power marketplace in the Midwest."