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Presentation to Federal Energy Regulatory Commission

Why PJM?. Presentation to Federal Energy Regulatory Commission Kathryn L. Patton, Sr. Vice President and General Counsel June 26, 2002. Operational Reasons For IP Joining PJM. IP has 345 kV Interconnections with 4 Utilities: Ameren, AEP, ComEd and TVA Imports for Native Load:

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Presentation to Federal Energy Regulatory Commission

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  1. Why PJM? Presentation to Federal Energy Regulatory Commission Kathryn L. Patton, Sr. Vice President and General Counsel June 26, 2002

  2. Operational Reasons For IP Joining PJM • IP has 345 kV Interconnections with 4 Utilities: Ameren, AEP, ComEd and TVA • Imports for Native Load: • 50% of Imports for Illinois Power’s Native Load Came from ComEd and AEP • Exports: • 60% of Exports were Delivered to the ComEd and AEP Systems • 19% of Exports from IP System Served Load in PJM • 25% of Exports from IP system Served Load in ComEd and AEP Service Territories

  3. Interconnections CE MECS 200 2812 IP CILCo AEP 572 937 287 CWLP 307 11250 409 LGEE 280 230 Ameren TVA EEI SIPC

  4. CILCO WISCONSIN CINERGY OTHER 2.1% ELECTRIC 1.9% 3.0% COMMONWEALTH 3.5% EDISON LG&E 33.1% 4.5% AMEREN 10.4% AEP TVA 17.0% 24.5% Imports for Native Load From Source Transmission System Based on Year 2000 Actuals

  5. LG&E SIPC CILCO MIDAMERICAN CWLP 0.3% 1.6% 0.7% 3.8% 0.2% TVA 14.6% AEP 41.1% AMEREN 18.7% COMMONWEALTH EDISON 19.0% Exports From Illinois Power Transmission System by Transmission Ties Based on Year 2000 Actuals

  6. AMEREN SOUTHERN OTHER 3.0% COMPANY 13.9% PJM WISCONSIN 1.4% 19.4% ELECTRIC 3.1% MIDAMERICAN 5.5% ENTERGY TVA 9.6% 19.3% AEP COMMONWEALTH 10.6% EDISON 14.2% Exports by Load Served (Ultimate Sink Transmission System) Based on Year 2000 Actuals

  7. Customer Value of PJM Membership • Liquid and Competitive Market • Access to Diverse Supply from Historic Supply Sources • Encourages New Generation • Promotes Retail Access • Lower Administration Charges in Long Term • Timing of Start-Up Much Sooner • Transmission Service By End of 2002 • Full LMP/Market Implementation by End of 2003

  8. Other Benefits to IP of Joining PJM • Transparent and Robust Market • Experienced Operator • Has Been Up and Running for a Number of Years • Already Worked through Start-Up Problems • Efficient Stakeholder Process • All Transmission Owners Offer Retail Choice • Rate Design Doesn’t Shift Costs to Others • Results in Greater Opportunity to Recover Transmission Revenue Requirement • Quick Start-Up

  9. Why Not MISO? • Strands Illinois Power: • IPs Only Strong Interconnection With MISO Is Ameren, and Ameren Has No ATC Either Into or Out of IP For This Summer • Historic Supply Is Not Sourced From Ameren • Generation Exports Don’t Serve Ameren • Inefficient Stakeholder Process • Few Transmission Owners Offer Retail Choice • Rate Design Results in Cost Shift and Traps Generation in MISO (discouraging new generation) • Market Start-Up Delayed Until Late 2004/Early 2005

  10. Why Not MISO? • Inexperienced Operator • Numerous Start-up Problems • Inaccurate ATC • OASIS Frequently Down • Slow Response to Service Requests • Slow Response to Customer Inquiries • Over 55 FERC Tariff Change Filings in Last 1 ½ Years • Killed Liquidity at Cinergy Hub, which was One of the Most Liquid Trading Points in Industry • Degradation of Service from Pre-MISO

  11. Illinois Power’s Commitment • Illinois Power is Fully Committed to Joining PJM • Will Join as a Transmission Owner, or • Part of Independent Transmission Company • Illinois Power Does Not Intend to Spend Any More Money Toward Start-Up of an RTO Until FERC Issues a Final and Unequivocal Order. • Illinois Power Already Spent $6.5 million to Leave MISO and $7.5 million to Develop ARTO. Annual Net Income for Transmission is Only ~ $7.9 Million/Year.

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