• Why an ISO?
• Overview of the Transmission Network
  in ECAR and MAIN
• Overview of Midwest ISO
  - Characteristics (pre-December 1997)
• Recent Developments

• Provides for non-discriminatory open access to regional transmission networks
• Eliminates pancaking of transmission rates
• Provides an effective way of dealing with loop-parallel flow issues (eliminates contract path transmission reservations)
• Provides an efficient way of implementing FERC Order 888 - one-stop shop for transmission service
• Provides an efficient mechanism for dealing with transmission congestion
• Enhances the secure operation of the regional transmission network
• Provides a mechanism for the efficient planning of the regional network
• Mitigates the market power of generation/transmission owners
• Creates generation markets
• Fosters competition among generators

• Should be geographically large
  • Deal with loop flow issues
  • Efficient operations
  • Assure network security
  • Assure efficient planning
  • Develop large generation market
• Must be truly independent - not controlled by owners
  • Meets FERC ISO principles
• Must recognize the interests of all stakeholders

• Highly integrated/interconnected transmission network
• Highest density of transmission in the eastern U.S.
  • 765 kV - 100 kV
• Operated by 31 transmission owners - IOU, TDU, Municipals
• Operates in 10 states
• Over 100,000 circuit miles
  • Over 13 billion dollar investment

• Background
  • Informal discussions late 1995/early 1996
  • Announced February 12, 1996 with six participants
  • Participants must be owners or control transmission assets
  • 13 Principles developed
  • Participants must sign MOU
  • Focus on transmission owners in MAIN and ECAR
  • Expanded to 26 participants

• Participants
  • AEP
  • BREC
  • Centerior
  • Cinergy
  • CILCO
  • CIPS
  • CMS
  • ComEd
  • Detroit Edison
  • DQE
  • EKP
  • Hamilton, Ohio
  • HEC
  • IMPA
  • IP
  • KU
  • LG&E
  • MPPA
  • NIPSCO
  • SIGE
  • SIPC
  • UE
  • WEPCO
  • WP
  • WPS
  • WVPA

• The Midwest ISO does not have direct functional control of generation
• Does not eliminate individual control area responsibility for generation/load balance
• Does not create a regional POOLCo or RPX
• Does create a single regional transmission control area

• Functional control
• Security and reliability
• Planning
• Non-discriminatory transmission service
• Pricing
• Standards of conduct
• OASIS

Ancillary services
Fiduciary duties
Liability/indemnification
Dispute resolution
Inspection and auditing

• Process all transmission service requests
• Schedule transmission service
• Manage transmission congestion
• Assure ancillary services are provided
• Coordinate transmission maintenance
• Coordinate generation maintenance
• Responsible for real-time system security
• Calculate ATCs
• Support OASIS

Calculation of ATC

Evaluate transmission service requests

Develop of ISO regional transmission plan

Coordination between ISO Planning and Operations

Coordination between ISO planning and local planning function

Ensure the development of an adequate and reliable transmission network to meet forecasted needs

• Applicable to eligible customers that have generation choice
• Network and point-to-point service
• Zonal rates of transmission owners maintained
• Location of load determines the zonal rate (postage stamp)
• Out-of-ISO and through-ISO services at average ISO rate

Later (after year 6)

• All load pays average ISO rate (postage stamp access charge)

Study of "Independent Regional Transmission Entity" announced 12/9/97

Impact on AEP?

Dec. 9 - 6 utilities bordering north and east of AEP announced the formation of "Independent Regional Transmission Entity" (IRTE)

Consumers Energy
Detroit Edison
First Energy
Allegheny Power
Duquesne Light
Virginia Power

AEP'S SITUATION
December 1997

• AEP lies between Midwest ISO and potential Transmission Organization on East & North
• The characteristics of the new Transmission Organization (Alliance) were unknown
• AEP would be influenced by both organizations
• Needed to learn more about the implications of developments before a decision could be made

• 100% in support of development of large regional ISO
• Need to be assured that ISO development is not detrimental to AEP interests

• To find a way to bring Midwest ISO and Alliance together
• To work with both organizations to achieve that goal