posted on Thursday, October 27, 2005 10:52 AM by Gunnar Birgisson

FERC Reconsiders Who Pays RTO Expansion Costs

In the midst of growing concerns among states and utilities about the costs of joining RTOs, FERC has agreed to take a second look at an order allocating several utilities' costs of joining the PJM Interconnection.  On October 17 FERC announced that it would reconsider its May 2005 holding that the costs associated with integrating American Electric Power (AEP), Commonwealth Edison, and Dayton Power & Light Company into PJM should be recovered from the three companies' customers, rather than all PJM customers collectively.  Citing the need for regulatory consistency with other cases in which a utility becomes a new member of an existing Regional Transmission Organizations (RTO), as well as serious policy concerns raised by the companies and the Public Utility Commission of Ohio (PUCO) who had requested rehearing of the prior order, FERC agreed that imposing the costs of joining an RTO solely on the customers of a new member could have the unintended effect of discouraging utilities from joining an RTO.  This outcome would stand in direct contravention to FERC's long-pursued goal of encouraging RTO membership.  FERC also evinced sensitivity to PUCO's assertion that, had it known that the Ohio customers of AEP and Dayton would bear the full cost of their joining PJM, it might not have approved the move of the two utilities to PJM.

In its October 17 order, FERC also encouraged the parties to settle the issue of how AEP, Commonwealth (an Illinois utility), and Dayton would recover the non-capital expenses incurred by PJM in integrating the companies into its interconnection.  These costs totaled $31.6 million and went to reimburse PJM for the costs of developing systems and infrastructure to support their integration.  FERC promised to hold a trial-type evidentiary hearing on the issue if a settlement is not forthcoming.  [American Electric Power Service Corporation on Behalf of Appalachian Power Company, et al., 113 FERC ¶ 61,050 (2005)]