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Midwest ISO Approved; More Members Needed

Midwest ISO Approved; More Members Needed

FERC last week conditionally approved the formation of the 12-member Midwest independent system operator (ISO), but some commissioners expressed disappointment that more transmission-owning utilities from the region hadn't joined yet.

"I would have liked this order to send a much stronger signal that all public utilities in the Midwest should join the ISO," said Commissioner William Massey. He noted all the "major players in the proceeding" - including the utilities that shaped the ISO, the state commissions and customer groups - urged FERC to take this position. "But we failed to take any forceful action on this point.

"Having all the Midwest utilities in the ISO would provide an even more reliable system. It would create a larger market. It would vastly improve the operational features of the ISO," Massey remarked. "I'm concerned that this order will be considered the high-water mark for this Commission's ISO policy," he said, adding that it shouldn't be [EC98-24].

Even Chairman James Hoecker acknowledged that while the benefits of the Midwest ISO will be "demonstrable" in many respects, "other utilities need to join this organization." In this case, "we've got something good that clearly could be better."

Unlike its predecessors, the Midwest ISO is unique in that it is not related to a power pool or mandated by legislation. Rather, it is the product of a "tremendous amount of volunteerism" by the utility members, Hoecker noted. Currently, there are 10 investor-owned utilities and two non-public utilities that belong to the ISO, which covers 13 states and three reliability regions. The members include Allegheny Energy, Alliant, Ameren, CILCO, Cinergy Corp., Commonwealth Edison, Duquesne Light, Hoosier Energy, Illinois Power, LG&ampE Energy, Wabash Valley Power and Wisconsin Electric. The transmission-owning members will turn over operational control of their facilities to the regional ISO.

If the ISO had been in place in June, Massey said some companies insist the price spikes might have been prevented in the Midwest electricity market. "Participants have told us that [they believe] having in place a properly formed large regional institution would have made a difference this summer," he noted.

"For example, a properly formed ISO would have provided better coordination, offered planning on a regional basis, had a security coordinator that all users of the system could trust completely, would have had critical re-dispatch authority over a broad region, and would have created larger markets. The point is that we need to pay attention and make connections with what is happening in the real world and see how our policies can make a positive difference."

FERC's acceptance of the Midwest ISO application was conditioned on the regional group providing the Commission and the ISO's participants with a detailed list of the operating procedures of the ISO. In addition, FERC required the ISO to monitor the competitive and reliability effects of allowing current control-area operators to continue control-area functions.

Susan Parker

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