On May 25, 2009, market participants filed comments with the Public Utilities Commission of Ohio (“PUCO”) stating that the state should remain a member of regional transmission organizations (“RTO”) instead of forming its own transmission system operator.

In 2008, the Ohio legislature enacted Senate Bill 221, which required PUCO to examine whether continued participation of Ohio utilities in RTOs is in the interest of consumers in the state. Two Ohio utilities, American Electric Power Co., Inc. and Dayton Power and Light Co. (“DP&L”), are members of the PJM Interconnection, Inc. (“PJM”). Ohio subsidiaries of Duke Energy Corp. and FirstEnergy Corp. are members of the Midwest ISO (“MISO”).

The state commission issued an order seeking comments and general observations on how well system operators have fulfilled the goals of FERC’s Order No. 2000 as well as answers to 16 questions on RTO policies and pricing. PUCO also asked commenters to consider alternatives to RTO participation, including an Ohio-only system operator. A group of PJM members, two pro-competition industry groups and low-income consumer groups filed comments.

The PJM Power Providers Group (“P3”), which included the parent company of DP&L, said that the wholesale markets in PJM have met the goals of Order No. 2000 and improved reserve margins in the region. The Electric Power Supply Association (“EPSA”), representing competitive electric providers, agreed, stating that PJM promotes efficient markets, ensures reliable service at a low price and eliminates discrimination in transmission access. EPSA further argued that alternatives to RTO membership for Ohio are not cost-effective for Ohio consumers since it would require members to pay exit fees and possible new fees for market startup. In addition, the state would lose the reliability and security available in a larger regional market with large-scale, knowledgeable grid operators.

The COMPLETE Coalition, a pro-competition group whose members include National Grid and the American Wind Energy Association, said that regional planning is more cost-effective, and thus is saving money for Ohio consumers. The Coalition cited the recent auction that resulted in lower wholesale prices for FirstEnergy’s Ohio utilities as evidence that MISO is a well-functioning efficient market.

A low-income consumer group, the Citizens Coalition, disagreed and called on PUCO to mandate that any participating RTO be structured so that the Board is composed of at least 40 percent residential consumer representation by January 2010. As an alternative, the group proposed that PUCO should create an Ohio-only RTO that would have a Board of Directors with at least 40 percent residential consumer representation. The Ohio Office of Consumer Counsel agreed, stating that RTOs place little emphasis on retail electric customer value.

Additional information on implementation of S.B. 221 is available online at: http://www.puco.ohio.gov/PUCO/Consumer/Information.cfm?id=8496.