Alliance RTO selects UK's National Grid as operator

By OGJ Online Staff

HOUSTON, Aug. 28 -- The Alliance Regional Transmission Organization Tuesday said it selected a unit of the UK's National Grid Group PLC to be operator of the proposed $12 billion independent Midwest electric transmission company, subject to regulatory approval.

The proposed for-profit company will manage 57,100 miles of electric transmission systems owned by 10 utility companies in 11 states, serving 41 million people, with a peak load of about 108 Gw. The agreement is subject to definitive agreements and a Federal Energy Regulatory Commission finding National Grid is not an Alliance RTO market participant.

The preliminary agreement calls for National Grid to contribute $75 million to the Alliance RTO. As participating Alliance RTO companies contribute transmission assets, the agreement calls for National Grid to invest between 5-20% of the value of assets contributed to the Alliance, or a higher percentage upon mutual agreement, subject to various limitations.

Over the life of the 7-year contract, National Grid said it expected to receive $14 million in fees. National Grid also would be eligible to receive incentive-based earnings, subject to FERC approval, by saving customers money and boosting grid reliability.

National Grid petitioned the FERC in May for a determination it is not a "market participant," making the company eligible to become manager of the Alliance RTO. Monday, National Grid submitted more information explaining how the company will meet, by the Alliance's operation date, FERC's independence requirements by divesting any remaining economic interests of affiliates in the power generation and supply markets.

National Grid said operation of the Alliance RTO will remain separate from the company's other transmission businesses, thus assuring its independence. National Grid US subsidiaries own and operate about 35,000 miles of transmission and distribution lines in New England, and it is a joint petitioner for an RTO in New England. The company also is in the process of acquiring Niagara Mohawk Holding Inc., a upstate New York energy services company.

The Alliance RTO, which was substantially approved by FERC Jan. 24, 2001, is expected to manage the electric transmission systems of companies in Indiana, Illinois, Kentucky, Michigan, Missouri, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.

Alliance member company Commonwealth Edison Co., a unit of Exelon Corp., Chicago, already has reported plans to divest its $10 billion of transmission assets into the Alliance transco.

Alliance member companies include Ameren Corp., St. Louis, Mo.; American Electric Power Co. Inc., Columbus, Ohio; Commonwealth Edison; Consumers Energy/Michigan Electric Transmission Co.; units of CMS Energy Corp., Dearborn, Mich; Dayton Power & Light, a unit of DPL Inc., Dayton, Ohio; FirstEnergy Corp., Akron, Ohio; Illinois Power, a unit of Dynegy Inc., Houston; and Northern Indiana Public Service Co., a unit of Nisource Co., Merrillville, Ind.

With 10 years experience in the UK, Nick Winser, director of engineering of National Grid in the UK, said the company expected to deliver savings by "substantially" reducing congestion costs and maximizing the operating efficiency of the existing transmission infrastructure.

Alliance member companies asked FERC to act in time for the company to begin operating by Dec. 15.