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Western Utilities Seek RTO Approval from FERC


Business Editors/Energy Writers

PORTLAND, Ore.--(BUSINESS WIRE)--March 29, 2002--A coalition of western electric utilities has asked the U.S. Federal Energy Regulatory Commission to find that the RTO West proposal submitted today meets FERC's minimum characteristics and functions for formation of a regional transmission organization.

Under the RTO West proposal, the region's electric transmission lines would function as a common carrier of wholesale electricity and enable one-stop shopping for wholesale transmission services throughout the Northwest geographic area.

"RTO West is designed to enhance reliability and create a more stable environment for investment in the generation and transmission resources needed to meet growing demand," Wayman Robinett of Puget Sound Energy, Chairman of RTO West, said. "Having a single control area for the region also would make the interstate market more efficient."

The coalition developing the proposal comprises Avista Corporation, Bonneville Power Administration, British Columbia Hydro and Power Authority, Idaho Power Company, NorthWestern Energy (formerly The Montana Power Company), Nevada Power Company, PacifiCorp, Portland General Electric Company, Puget Sound Energy and Sierra Pacific Power Company.

The utilities are asking FERC to review a plan developed by the utilities in a collaborative process over the past two years with regional stakeholders, including transmission owners, electric utilities without transmission, consumers, generators, marketers, regulators and elected officials.

"Our goal is that Northwest consumers will benefit from the formation of RTO West," BPA administrator Steve Wright said. "While this isn't the final step in the process, the time is right to present our regional progress to date to FERC."

During the FERC process, the Filing Utilities will be submitting additional information and examining issues that remain to be resolved. Some of the investor-owned utilities also require state approvals before the RTO can begin operations, anticipated about 2005.

Recognizing Canadian sovereignty, regulatory approvals are required in Canada for BC Hydro to participate.

An initial independent analysis indicates that the benefits of RTO West for the region exceed the operational costs. The independent study estimates that formation of RTO West would produce annual savings of about $300 million for the region.

Operation of RTO West would likely cost $125 million to $140 million annually, including the amortized start-up costs. This figure is based on benchmarking data from other RTOs across the country.

Recognizing fundamental differences between the West and other regions of the country, RTO West's structure differs from other RTOs being formed in the United States.

RTO West would reflect the region's large geographic spread and dispersal of loads and generation. RTO West's structure also reflects that hydroelectric power provides a significant amount of the generation in the region, in contrast to the rest of the country.

RTO West, an independent non-profit corporation, would have its own board and management independent of energy market participants. Independent governance is designed to ensure that buyers or sellers of electricity do not control transmission, assuring them of open access to all sources of generation.

Through a new pricing structure, RTO West would eliminate pancaking of rates. Currently, customers pay an additional transmission fee when electricity moves from one system to another. Under RTO West, the system would be analogous to motorists paying one fee to their home state for a license plate that allows them to drive their car anywhere within the country.

To avoid cost shifting among utilities, the utility customer pays RTO West a single access fee based on the cost of the facilities of the transmission owner. For example, a customer served from Bonneville Power Administration facilities will pay the BPA Company Rate. This prevents customers of one utility with historically low transmission rates from experiencing a sudden rate increase or cost shift.

RTO West is designed to help remedy congestion by giving transmission owners and developers of generation the appropriate economic signals, leading to the construction of new transmission facilities and placement of generation resources or demand-side alternatives in the most beneficial locations.

The filing can be reviewed at the RTO West web site: www.rtowest.org

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