Allegheny Power 2010 Annual Report Download - page 60

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On February 1, 2011, ATSI in conjunction with PJM filed its proposal with FERC for moving its transmission rate into
PJM’s tariffs. FirstEnergy expects ATSI to enter PJM on June 1, 2011, and that if legal proceedings regarding its rate are
outstanding at that time, ATSI will be permitted to start charging its proposed rates, subject to refund. Additional FERC
proceedings are either pending or expected in which the amount of exit fees, transmission cost allocations, and costs
associated with long term firm transmission rights payable by the ATSI zone upon its withdrawal from the Midwest ISO
will be determined. In addition, certain parties may protest other aspects of ATSI’s integration into PJM, and certain of
these matters remain outstanding and will be resolved in future FERC proceedings. The outcome of these proceedings
cannot be predicted.
MISO Multi-Value Project Rule Proposal
On July 15, 2010, MISO and certain MISO transmission owners jointly filed with FERC their proposed cost allocation
methodology for certain new transmission projects. The new transmission projects--described as MVPs--are a class of
MTEP projects. The filing parties proposed to allocate the costs of MVPs by means of a usage-based charge that will be
applied to all loads within the MISO footprint, and to energy transactions that call for power to be “wheeled through” the
MISO as well as to energy transactions that “source” in the MISO but “sink” outside of MISO. The filing parties expect
that the MVP proposal will fund the costs of large transmission projects designed to bring wind generation from the upper
Midwest to load centers in the east. The filing parties requested an effective date for the proposal of July 16, 2011. On
August 19, 2010, MISO’s Board approved the first MVP project -- the “Michigan Thumb Project.” Under MISO's proposal,
the costs of MVP projects approved by MISO’s Board prior to the anticipated June 1, 2011 effective date of FirstEnergy's
integration into PJM would continue to be allocated to FirstEnergy. MISO estimated that approximately $11 million in
annual revenue requirements would be allocated to the ATSI zone associated with the Michigan Thumb Project upon its
completion.
On September 10, 2010, FirstEnergy filed a protest to the MVP proposal arguing that MISO’s proposal to allocate costs
of MVP projects across the entire MISO footprint does not align with the established rule that cost allocation is to be
based on cost causation (the “beneficiary pays” approach). FirstEnergy also argued that, in light of progress to date in
the ATSI integration into PJM, it would be unjust and unreasonable to allocate any MVP costs to the ATSI zone, or to
ATSI. Numerous other parties filed pleadings on MISO’s MVP proposal.
On December 16, 2010, FERC issued an order approving the MVP proposal without significant change. FERC’s order
was not clear, however, as to whether the MVP costs would be payable by ATSI or load in the ATSI zone. FERC stated
that the MISO’s tariffs obligate ATSI to pay all charges that attach prior to ATSI’s exit but ruled that the question of the
amount of costs that are to be allocated to ATSI or to load in the ATSI zone were beyond the scope of FERC’s order and
would be addressed in future proceedings.
On January 18, 2011, FirstEnergy filed for rehearing of FERC’s order. In its rehearing request, the Company argued that
because the MVP rate is usage-based, costs could not be applied to ATSI, which is a stand-alone transmission company
that does not use the transmission system. FirstEnergy also renewed its arguments regarding cost causation and the
impropriety of allocating costs to the ATSI zone or to ATSI. FirstEnergy cannot predict the outcome of these proceedings
at this time.
Sales to Affiliates
FES has received authorization from FERC to make wholesale power sales to the Utilities. FES actively participates in
auctions conducted by or on behalf of the Utilities to obtain the power and related services necessary to meet the
Utilities’ POLR obligations. Because of the merger with FirstEnergy, AS is considered an affiliate of the Utilities for
purposes of FERC’s affiliate restriction regulations. This requires AS to obtain prior FERC authorization to make sales to
the Utilities when it successfully participates in the Utilities’ POLR auctions.
FES currently supplies the Ohio Companies with a portion of their capacity, energy, ancillary services and transmission
under a Master SSO Supply Agreement for a two-year period ending May 31, 2011. FES won 51 tranches in a
descending clock auction for POLR service administered by the Ohio Companies and their consultant, CRA International
on May 13-14, 2009. Other winning suppliers have assigned their Master SSO Supply Agreements to FES, five of which
were effective in June, two more in July, four more in August and ten more in September, 2009. FES also supplies power
used by Constellation to serve an additional five tranches. As a result of these arrangements, FES serves 77 tranches,
or 77% of the POLR load of the Ohio Companies until May 31, 2011.