ORLANDO, Fla. - A framework for cooperation between regional transmission organizations (RTOs) was outlined today by the Alliance.

"We believe it is important for regional transmission organizations to address the so-called ´seam´ issues; that is, coordination between RTOs," said J. Craig Baker, vice president - transmission policy for American Electric Power (NYSE: AEP), speaking on behalf of the Alliance. "Our proposal is a creative, innovative approach to addressing those issues. It is important that these RTOs work together to facilitate super-regional transmission reliability and competitive generation markets.

"This framework is designed to enhance competition," Baker said. "Implementing this approach across multiple RTOs would result in increased opportunities for transmission customers by further reducing transmission charges compared to other configurations while providing nondiscriminatory access to generation. The framework would increase opportunities for generators by making it more cost-effective for generators in Missouri to reach customers in North Carolina or generators in New Jersey to reach customers in Michigan."

Baker was addressing Infocast´s "Developing Transcos in the RTO Era" conference in Orlando. Companies in the Alliance are American Electric Power, Consumers Energy (NYSE: CMS), Detroit Edison (NYSE: DTE), FirstEnergy Corp. (NYSE: FE) and Virginia Power (NYSE: D). On June 3, 1999, the Alliance submitted to the Federal Energy Regulatory Commission (FERC) a proposal to form an independent, regional transmission organization and is waiting for approval. The Alliance has requested that the FERC act on its RTO proposal by the end of the year. Once approved, the Alliance will become one of the largest independent RTOs in the world.

"The Alliance is a large, regional RTO that will provide customers access to almost 72,000 megawatts of generation connected to the Alliance," Baker said. "We are now looking at the next step: a framework that allows neighboring RTOs to participate in coordinated regional planning, develop reciprocity pricing and conduct other activities necessary to provide customers increased access and reliability. For example, if our proposal is adopted, for a minimal cost Alliance customers would have access to 175,000 megawatts of generation by facilitating a super-regional transmission grid through this inter-RTO cooperation."

The framework principles outlined today call upon RTOs to develop inter-RTO cooperative agreements to:
-- participate in coordinated regional planning;
-- coordinate operations;
-- develop comparable Available Transmission Capacity (ATC) determination and posting;
-- develop market-based congestion management solutions;
-- establish and participate in a dispute resolution process for inter-RTO disputes;
-- develop inter-RTO price discounting reciprocity to include waiving a single transaction charge on certain inter-RTO transactions during pricing transition periods;
-- negotiate compatible long-run pricing structure for use after transition periods;
-- and provide for incremental pricing for new projects which would strengthen inter-RTO connections or alleviate congestion caused for price discounting reciprocity.

"The inter-RTO price discounting reciprocity is an important element of this framework," Baker said. "We are proposing to waive transmission fees in order to facilitate competitive generation markets. If a transmission path would have three or more transmission charges levied by cooperating RTOs, our plan would have the RTO where the generation is located waive one charge under most circumstances.

"If the charge to be waived would be on a constrained path, the waiving RTO could develop a bidding process for capacity capped at the price that would be charged without reciprocity," Baker said.

The benefits of this framework are many, Baker said.

"This plan would share the benefits equitably among customers, generators and transmission owners," Baker said. "It places generation in neighboring RTOs on a level playing field. As an added bonus, this system would be simple to administer."

American Electric Power, headquartered in Columbus, Ohio, serves portions of Ohio, Indiana, Michigan, Kentucky, Tennessee, Virginia and West Virginia. Consumers Energy (www.consumersenergy.com), headquartered in Jackson, Mich., and the principal operating subsidiary of CMS Energy Corp., serves much of Michigan´s lower peninsula. Detroit Edison (www.dteenergy.com), headquartered in Detroit, Mich., and the principal operating subsidiary of DTE Energy, serves southeastern Michigan. FirstEnergy (www.firstenergycorp.com), headquartered in Akron, Ohio, serves northern and central Ohio and western Pennsylvania. Virginia Power (www.vapower.com), headquartered in Richmond, Va., and a subsidiary of Dominion Resources, serves portions of Virginia and North Carolina.

Information about the Alliance can be found at http://www.alliancerto.com.