We Gotta Get Out of this Place: LG&E and KU Ask to Leave MISO

Unimpressed with the touted benefits of RTO membership, LG&E Energy has petitioned FERC to allows its operating utilities Louisville Gas & Electric and Kentucky Utilities to withdraw from the Midwest Independent System Operator (MISO).  LG&E Energy instead wants Tennessee Valley Authority to serve as the utilities' reliability coordinator and the Southwest Power Pool as administrator of their tariffs.  In a particularly stinging rebuke, LG&E Energy claims that even with separate entities administering reliability and  the tariff, the arrangement would be superior to the one with MISO.   The utilities want their withdrawal to take effect by the summer of 2006.

The two utilities were anchor members of MISO, but have been looking to bolt for some time.  In 2003, the Kentucky Public Service Commission had ordered the utilities to perform cost-benefit studies on MISO membership.  A study by an outside consultant had concluded that costs outweighed benefits.  Predictably, MISO disagreed, citing a litany of benefits such as reliability and consistent regulatory control.  Reports suggest that the utilities' decision to leave was heavily influenced by the significant costs incurred by MISO as it devised and then operated its Day 2 market, which includes LMP-based energy markets.  The utilities will seek a simpler regime for their control areas, based on the independent coordinator of transmission (ICT) model pioneered by Entergy.  The MISO is on record stating it will not seek to block the utilities' withdrawal, but the amount of an exit fee remains to be quantified.