On October 21, 2010, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) conditionally approved the move of Duke Energy Ohio, Inc. and Duke Energy Kentucky, Inc (collectively “Duke”) from the Midwest Independent Transmission System Operator, Inc. (“Midwest ISO”) to PJM Interconnection, L.L.C. (“PJM”). FERC found that Duke satisfied or will satisfy the contractual arrangement to withdraw from Midwest ISO, and the Commission approved Duke’s request to participate in PJM’s May 2011 capacity auction.
On June 25, 2010, Duke submitted their initial application to leave Midwest ISO and join PJM as of January 1, 2012. Duke also asked to be allowed to participate in PJM’s Reliability Pricing Model auction prior to switching to a new Regional Transmission Organization (“RTO”). Then on August 16, 2010, Duke submitted their Fixed Resource Requirement Integration Plan (“FRR Integration Plan”) detailing how Duke will meet PJM’s resource adequacy requirements beginning January 1, 2012.
The Commission rejected all requests that FERC modify the way in which a withdrawal from an RTO is evaluated. Currently FERC uses a three-prong test: 1) applicant must satisfy contractual withdrawal obligations; 2) the new arrangement must comply with Order No. 888 and Order No. 890; and 3) the replacement arrangement must be just, reasonable, and not unduly discriminatory.
FERC also accepted Duke’s FRR Integration Plan, and this plan will only apply to Duke Ohio since Duke Kentucky is transmission-dependent on Duke Ohio. Also, in approving Duke’s withdrawal, FERC emphasized this was an initial approval, and Duke will need to meet with stakeholders and seek Commission approval for several other issues. Final approval will be contingent on future proceedings and compliance filings. Some of the remaining issues Duke/PJM must address are:
1. Duke’s FRR Integration Plan through the date of full participation, June 1, 2014;
2. Duke must submit a revised power analysis within sixty days of the integration;
3. PJM may need to adjust zonal rates and the open access transmission tariff;
4. Duke and PJM must execute several contracts; and
5. Midwest ISO’s exit fee.
At the FERC monthly meeting on October 21, 2010, Commissioner LaFleur reiterated that membership in an RTO was through a voluntary compact, and once the contractual obligations are honored, FERC should not compel membership against an entity’s will. Chairman Wellinghoff and Commissioner Norris also endorsed the voluntary nature of RTOs, but both also said they hope withdrawals are rare. Commissioner Norris stated RTOs make decisions and plan around membership, and that task would be difficult with fluctuations in members.
A copy of the FERC order is available on their website and here.