FERC Filings
Initial Post Hearing Brief of EPSA re: The New PJM Companies, American Electric Power Co. and Central and South West Co.
Statement of the Case
EPSA offers the following observations concerning the important issues raised in this proceeding. First, restructured electric markets will result in more reliable service at a lower price. PJM estimates the restructuring of Midwest and Mid-Atlantic electric markets, following the integration of AEP’s transmission assets into PJM, will save consumers $300 million annually in production costs. Numerous witnesses testified that locational marginal pricing (“LMP”) will result in more reliable service than AEP’s transmission line loading relief (“TLR”) procedures. For example, Mr. Naumann of Exelon stated that LMP is more economic than TLRs because LMP dispatch considers both the impact of specific generators on a constrained flowgate and the cost to change the generation output. Mr. Naumann concluded that LMP “will relieve the constraint in the most cost effective manner.” Indeed, the market will experience a greater amount of relief from transmission congestion with LMP, at a substantially lower cost, than through the use of TLR.
Second, the efficient utilization of AEP’s transmission operations is the key to restructuring Midwest and Mid-Atlantic power markets. As Reem Fahey of Edison Mission explains:
To understand the importance of AEP’s full participation in PJM, one must first understand that the transmission grid serving the Midwest and Mid-Atlantic regions is not just a collection of separate control areas, but is, in fact, one vast, interconnected and interdependent system. Within this system, AEP holds a central role because of its geographic location and the size of its transmission and generation assets, which serves seven Midwestern and Mid-Atlantic states.
Third, EPSA members are active participants in wholesale power markets, helping to bring the benefits of wholesale competition to electricity consumers. Integrating AEP’s facilities into a fully-functioning RTO will allow EPSA members to participate in a robust competitive market where none exists today, in turn allowing customers access to new suppliers and products. EPSA members will also receive more reliable service than they do today under AEP’s TLR procedures.
Fourth, AEP’s transmission operations are inherently interstate in nature. AEP does not move Kentucky electrons or Ohio electrons or Virginia electrons. It moves electrons. The actions of one of these states, however, can impair the efficiency of AEP’s interstate operations. Such actions can harm the other states. The Intervening State Commissions’ recently stated:
[i]n this case, the Intervening State Commissions just as firmly believe that any final orders of the Virginia and Kentucky Commissions that would prevent AEP from joining an RTO effectively preempts any other State Commission from lawfully enforcing its own previously-issued orders, implementing their own unique statutory duties such as compromising the Illinois Commission’s ability to implement its state statutory duties and would thus adversely affect the reliability and economic efficiency of the PJM markets and much of the Eastern Interconnection. The result at present is that the Intervening State Commissions’ efforts to enhance interstate commerce are impaired, their common desire to improve regional reliability frustrated, and the benefits of the Settlement Agreements that AEP committed to provide to its customers in Indiana are not being realized.
Finally, state action cannot be allowed to frustrate the Commission’s initiatives to restructure wholesale bulk power markets. Here, the actions taken by Virginia and Kentucky are inconsistent with Section 205(a) of the Public Utilities Regulatory Policies Act (“PURPA”) and the Federal Power Act. It prevents other states from sharing in the obvious benefits to be derived from AEP’s efforts to join PJM and the integration of AEP’s assets into the PJM market. Put simply, the actions of Virginia and Kentucky are preventing AEP from joining PJM and are frustrating the development of robust competitive wholesale power markets in the Midwest and Mid-Atlantic. Such actions cannot stand particularly where, as here, the states’ actions are motivated by a disagreement with the Commission’s policy initiatives over the future direction of wholesale bulk power markets in the region – matters exclusively within the jurisdiction of the Commission.