The Federal Energy Regulatory Commission rejected two key elements of
Southern Company Services, Inc.'s proposed Regional Transmission Organzation 
(RTO)
and encouraged the company to explore joining neighboring utilities in an RTO 
for the
Southeast. The Commission did not act on other issues raised by Southern.

Southern's proposal for a for-profit gridco (grid company) that would include 
only
new wholesale transmission services and have the benefits of certain rate 
incentives
going to others rather than the RTO operator are inconsistent with FERC's RTO 
policy,
the Commission said. Under Southern's proposal, existing owners' transmission 
facilities
related to bundled retail service or native load would not be under the 
gridco's control.
As a result, the vast majority of total transmission load would not be under 
the RTO's
tariff, operation or direction.

The RTO rule requires all transmission facilities operate under the transco. 
In
addition, Southern could not plan, design and operate a regional grid in a 
manner that
maximizes efficiency if the transco controlled only a small part of the RTO 
load, the
Commission said in rejecting Southern's proposal.

As an alternative to filing a revised RTO proposal, the Commission asked that
Southern consider joining neighboring utilities in an RTO in the Southeast. 
The
Commission directed Southern to file a report by July 13, 2001, on progress 
in forming a
Southeastern RTO.