Remarks by Glenn Ross
Manager, Transmission Policy, Virginia Power
Alliance RTO Presentation
Legislative Transition Task Force
June 23, 1999

Alliance RTO Proposal

Virginia Power and four other eastern and midwestern electric utility companies - known as the Alliance RTO - have agreed to form an independent regional transmission organization.

Our vision in forming this organization was to develop and implement a regional transmission organization (RTO) that facilitates competitive electric markets in the Commonwealth through a business model that provides flexibility. We also sought to develop at the same time an entity that would fulfil the goals of the Virginia Electric Utility Restructuring Act, passed by you and your colleagues during the 1999 session.

In the Alliance model, all electric suppliers would have equal, nondiscriminatory access to the electric power grid and to wholesale and retail customers. Virginia Power believes this is the best solution to promote fair and effective competition.

Besides ourselves, the Alliance members include:

• Consumers Energy;
• Detroit Edison;
• FirstEnergy; and
• American Electric Power.

Together, the members control 43,300 miles of transmission lines from Michigan to North Carolina - have combined service territories of approximately 124,000 square miles - and generating capacity of more than 71,000 megawatts.

If approved, the Alliance would be one of the largest regional transmission entities in the United States - the largest in terms of miles of transmission lines controlled - the largest in terms of generating capacity and control area peak load - and tied for second largest in square mileage of the combined service territories.

Alliance RTO Filing

The proposal for the Alliance RTO was filed with the Federal Energy Regulatory Commission in early June. If accepted as filed, the proposed Alliance RTO can fulfill SB 1269's statutory requirements for Virginia electric utilities to join or establish regional transmission entities by Jan. 1, 2001.

Virginia Power has kept an open dialogue with the State Corporation Commission throughout the Alliance filing development process to be sure the commission staff is informed about our progress toward meeting the goals of the electric utility restructuring legislation.

• We met with SCC staff three times in the past two months to discuss the Alliance proposal and filing requirements.
• The SCC staff has attended Alliance steering committee meetings and has been updated periodically.
• Virginia Power is responding to the SCC's May 26 request for comments on proposed guidelines for transfer of control of assets to such regional entities.

Alliance RTO Goals and Structure

The Alliance RTO will advance the goals of competition and reliability in the Commonwealth by:

• Providing nondiscriminatory access to the transmission system, including forbidding preferential treatment of incumbent generation owners or their affiliates.
• Monitoring to recognize market power if and when it exists and working to mitigate any effects.
• Simplifying congestion management on the system by allowing it to be dealt with internally.
• Establishing a pricing structure to provide access to a larger number of generation resources both inside and outside Virginia.

The proposed structure would allow the creation of a publicly held independent transmission organization that would control and operate, and perhaps own, transmission facilities. This would give transmission owners the flexibility to maintain or divest ownership of their facilities, while ensuring independent operation.

The Alliance will be managed and controlled by an independent board of directors guaranteeing the Alliance's independence from any market participant. Potential board members will be identified by an independent executive search firm. All board members will be prohibited from having any material business relationship with any member or user of the ISO.

The Alliance RTO would continue to support the FERC Order 888 standards of conduct in the same way transmission owners are required to do so now. Through these standards of conduct, FERC Order 888 fosters open, nondisciminatory access to transmission systems.

We look forward to working with the task force and keeping you up to date on the progress of the Alliance. We congratulate you on your appointment and wish you the best as you begin the most important task of overseeing the development of retail electric competition in the Commonwealth. I'd be happy to answer any questions.

Alliance RTO members

	Generation Capacity	Control Area Peak Load	Sq. Miles Service Area	Miles of Transmission
AEP	23,900	20,600	45,400	22,000
Consumers Energy	8,000	7,500	27,800	5,300
Detroit Edison	10,300	10,700	7,600	3,000
FirstEnergy	12,000	12,000	13,200	7,000
Virginia Power	17,600	16,300	30,000	6,000
Totals	71,800	67,100	124,000	43,300

Alliance RTO size compared to similar transmission organizations in U.S.

	Gen. Capacity (MW)	Control Area Peak Load	Sq. Miles Service Area	Miles of Transmission
Alliance	71,800	67,100	124,000	43,300
CA ISO	44,500	45,500	124,000	31,000
ERCOT	56,000	54,000	200,000	35,200
ISO-NE	23,300	21,400	63,000	8,200
Midwest ISO	66,500	57,500	116,000	40,000
New York ISO	31,000	28,700	48,000	19,000
PJM	56,000	49,500	48,700	8,000

CA ISO - California ISO

ERCOT - Electricic Reliability Council of Texas

ISO-NE - ISO New England

PJM - Pennsylvania-New Jersey-Maryland Power Pool