Did You Know

State PUCs Support FERC’s Order Requiring AEP to join PJM;
Policy Dispute Arising from Dueling State Laws Highlights FERC’s Role in Regulating Wholesale Power Markets

The Indiana Utility Regulatory Commission, the New Jersey Board of Public Utilities and the District of Columbia Public Service Commission recently filed in support of the Federal Energy Regulatory Commission’s (FERC) Nov. 25, 2003, Order, which directed American Electric Power (AEP) to fulfill its voluntary commitment to join the PJM Interconnection.

A principal conclusion of their filing is that ensuring reliability and economic efficiency over a large regional electricity grid by enhanced interstate commerce requires authority that extends beyond any one state’s jurisdiction.

These pro-regional transmission organization (RTO) state public utility commissions (PUCs) joined their colleagues from Illinois, Maryland, Michigan and Pennsylvania, who, along with Ohio, had previously intervened in the proceeding.

“The Intervening State Commissions fully understand that the compelling economic and reliability issues in this matter are regional and multi-regional in scope and thus require regional and multi-regional solutions that no individual state commission can adequately resolve,” they told FERC.

“The scope of the August blackout underscores the need for broad regional and multi-regional solutions and frames the reality that AEP’s continued delay comes at a cost in terms of regional reliability.”

The interstate nature of the transmission system highlights FERC’s exclusive role in developing and implementing policies for regional wholesale electric power markets. Individual state approaches that fail to reflect the regional and interstate nature of the bulk power grid deprive consumers of the multiple economic, reliability and efficiency benefits that accrue to them when regional markets allow full access to their preferred sources of supply.

“The Intervening State Commissions are cognizant of AEP’s claim that if it joined an RTO it may violate recently adopted Virginia law or preliminary directives of the Kentucky Commission,” the pro-RTO commissions said.
“However, by failing to join an RTO in prior years, when the Virginia Law and the Kentucky Commission preliminary directives did not exist, after having made the commitment promptly to do so, there now exists probable cause to conclude that AEP has already failed to act in accordance with lawful orders of the Indiana commission.

The time to comply with those lawful orders has long since passed.” (emphasis in the original filing)

According to the filing, AEP’s exclusion from the PJM market has harmed the development of competitive electricity markets and hurt consumers in Illinois.

“AEP’s absence from PJM limits the Illinois Commission’s ability to carry out its statutory obligation to promote the development of competitive wholesale and retail energy markets that benefit all Illinois consumers,” the pro-RTO state PUCs said.

“Without AEP’s full and immediate integration into the PJM, Illinois retail customers will be denied access to the full range of benefits of Commonwealth Edison’s participation in PJM, including but not limited to an unhampered, broad supply market, protections from serious gaming opportunities, improved regional coordination and reliability, optimal utilization of generation and transmission facilities and regional planning for transmission upgrades.”

Finally, the PUCs told FERC that, in their judgment, keeping AEP outside an RTO would have adverse effects on reliability in the Eastern Interconnection.

“…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 preempt any other State Commission from lawfully enforcing its own previously-issued orders…and would thus adversely affect the reliability and economic efficiency of the PJM markets and much of the Eastern Interconnection,” the pro-RTO states said.

“The result at present is that the Intervening State Commissions’ efforts to enhance interstate commerce are impaired, their common desire to improve regional stability is frustrated and the benefits of the Settlement Agreements that AEP committed to provide to its customers in Indiana are not being realized,” the filing concluded.

The comments can be found on FERC’s web site at www.ferc.gov in Docket No. ER03-262. For more information, contact EPSA’s Douglas Austin at daustin@epsa.org, or call (202) 628-8200.