International Transmission Co. (ITC), a wholly-owned subsidiary of DTE Energy, has asked the Federal Energy Regulatory Commission to require that transmission “free riders” pay for the costs of using ITC’s transmission wires. ITC and its Michigan customers currently pay an estimated $15 million per year to cover the cost of uncompensated uses if its transmission system.

The phenomenon, known as “loop flow,” causes power to “flow” through Michigan transmission lines, even though the official bulk power trading paths by contract are through Ohio. ITC asked the FERC to direct the Alliance Regional Transmission Organization (Alliance RTO) to file rates for loop flow compensation.

“The current Alliance RTO protocols completely ignore the actual flow of power over transmission lines in favor of contract path fictions that fail to compensate transmission owners for actual use,” said Joseph Welch, president of ITC. “The result is that free riders get the benefit of ITC’s system and we get all the costs. This is not only unfair but inconsistent with FERC’s RTO policy.”

Members of the Alliance RTO include ITC and Detroit Edison, Ameren, American Electric Power, Consumers Energy, Exelon, FirstEnergy, Illinois Power, Northern Indiana Public Service, Dayton Power and Light, and Virginia Electric Power.

In its filing with FERC (Docket No. RTO1-88-000), ITC requests that the Alliance RTO modify its transmission revenue distribution protocols to compensate wires owners for loop flows. The companies in the Alliance RTO have adopted pricing and revenue protocols, which lock in the historic benefits for the free riders. The current protocols are an anachronism, Welch said, warning the independent transmission system espoused by FERC “will have a difficult time attracting enough investment to get off the ground.”

“We are losing $15 million a year on unscheduled uses of our system,” Welch said. “There is no way that a company can forego $15 million a year in revenue, which it should be rightfully collecting. We believe that FERC has to look at other methods of compensating transmission owners for these lost revenues.”

Independent transmission companies have been cited as being one of the key vehicles for undertaking the essential transmission upgrades, which are needed to provide the super highway for bulk power market liquidity. Analysts have stated that the California electricity crisis is due in part to constrained transmission corridors, which are in dire need of upgrades. ITC is scheduled to become the first fully independent transmission company created from the transmission assets of a vertically integrated utility, and plans to do so within the next 16 months.

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