News January–March 2006
News Release: March 17, 2006 | View Printable PDF Version |
Docket Numbers: EC06-4 & ER06-20 |
Commission conditionally approves the withdrawal from
Midwest ISO of LG&E, Kentucky Utilities
The Federal Energy Regulatory Commission today conditionally approved
a proposal by two Kentucky utilities to withdraw their transmission
facilities from the Midwest Independent Transmission System Operator.
Louisville Gas and Electric Co. and Kentucky Utilities Co., the
operating subsidiaries of E.ON US, will withdraw from the Midwest
ISO and will delegate transmission tariff administrative duties
to the Southwest Power Pool, serving as an Independent Transmission
Organization. The proposal also calls for the federal Tennessee
Valley Authority to serve as the companies' reliability coordinator.
"Today's order demonstrates the Commission's commitment to voluntary
participation in regional transmission organizations. The Commission
will honor contractual obligations regarding withdrawal rights,"
observed Commission Chairman Joseph T. Kelliher.
In approving the companies' exit from Midwest ISO, the Commission
sought to ensure that the existing contractual rights of transmission
service customers will continue to be honored. The Commission
determined that with additional conditions, the withdrawal request
meets the requirements of the Transmission Owners Agreement, which
governs membership obligations and withdrawal rights for Midwest
ISO members.
The proposal's "commitment to hold existing customers harmless"
meets the contractual obligation in the Transmission Owners Agreement
relating to withdrawals, the Commission said. "These existing
customers will enjoy the same service and pricing that they would
have been entitled to receive," if these companies had not withdrawn
from the RTO, the Commission said. The proposal was conditioned
to ensure that existing transmission customers in the utilities'
control area will not have to pay additional transmission rates
or ancillary service rates, the Commission noted.
The Commission accepted LG&E and Kentucky Utilities' proposal
to delegate certain tariff administration duties to the Southwest
Power Pool. The Commission directed the utilities to finalize
arrangements regarding their proposal to rely on the Tennessee
Valley Authority to serve as reliability coordinator. LG&E and
Kentucky Utilities' proposal calls for them to rely on TVA's Joint
Reliability Coordination Agreement with the Midwest ISO and PJM
Interconnection to address interregional coordination and seams
issues.
In order to provide sufficient stability to the companies' transmission
system, the Commission directed the companies to clearly identify
the responsibilities and protocols for the utilities, Southwest
Power Pool and TVA.
The Commission's order also addressed remedies for merger-related
market power concerns that may arise. The Commission approved
the merger of the two Kentucky utilities in 1997, based in part
on the utilities' commitment to relinquish control of their transmission
facilities to the Midwest ISO.
The operational independence of the Southwest Power Pool is a
critical element in considering the utilities' withdrawal from
the Midwest ISO, the Commission said. The companies' proposal
that their transmission system be operated by an Independent Transmission
Organization and a reliability coordinator would generally address
any vertical market concerns, with additional independence requirements.
"[I]ndependent, non-market participant transmission planning is
essential to mitigating, over the long-term, the vertical market
power concerns." the Commission stated in today's order.
The Commission accepted the Kentucky utilities' proposed exit
fee methodology and directed the companies to file their final
exit fee calculation within 30 days after their withdrawal from
the Midwest ISO.
The Commission dismissed the proposed mechanism for LG&E and Kentucky
Utilities to recover system expansion costs and transmission upgrades
from individual customers, deeming it "premature."
The Midwest ISO, a not-for-profit corporation and Commission-approved
regional transmission organization, independently operates the
Midwest ISO transmission system, which covers all or part of 15
states, including Kentucky, as well as the Canadian province of
Manitoba, with 97,000 miles of transmission lines.
Until last year, E.ON US, a U.S. subsidiary of the Düsseldorf,
Germany-based energy company E.ON, was known as LG&E Energy.
R-06-18
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