The Potomac-Appalachian Transmission Highline (PATH), American Electric Power's transmission joint venture with Allegheny Energy, has received approval from the Federal Energy Regulatory Commission (FERC) for transmission incentives to help support construction of the approximately 290- mile, extra-high voltage transmission line from West Virginia into Maryland.

The joint venture filed a proposal for rate treatment with FERC Dec. 28, 2007. The companies requested and FERC granted four incentives for the project:

• An incentive return on equity for new transmission of 14.3 percent. 
• Recovery of a return on 100 percent of prudently incurred  transmission-related CWIP prior to the project's in-service date. 
• Recovery of all startup business and administrative costs incurred  prior to the time the rates go into effect. 
• Authorization to recover all prudently incurred development and  construction costs if the PATH project is abandoned as a result of  factors beyond the control of PATH or its parents.

As part of its decision, the commission set the requested formula rate for hearing and settlement judge procedures. The formula rate will go into effect March 1, 2008, subject to refund, pending the outcome of the hearing or settlement discussions.

"FERC's approval of incentives for PATH clearly recognizes the need for transmission investment in this region and the benefits PATH will provide. PATH addresses significant reliability concerns, including overloads that will occur on more than thirteen existing transmission lines in Maryland, West Virginia, Virginia and Pennsylvania as soon as 2012 if the line is not built," said Michael G. Morris, AEP chairman, president and chief executive officer. "Incentives for transmission projects recognize the diligence required to bring new transmission on line and the advanced technology necessary to enhance reliability. We need transmission investment, and incentives to encourage that investment, if our country is going to eliminate the weakest reliability areas, fully utilize existing generation and support development of renewable generation."

The PATH project includes approximately 244 miles of 765-kV extra-high voltage transmission from AEP's Amos substation near St. Albans, West Virginia, to Allegheny's Bedington substation, northeast of Martinsburg, West Virginia. Another 46 miles of twin-circuit 500-kV transmission will be constructed from Bedington to a new substation to be built near Kemptown, southeast of Frederick, Maryland. The total project is estimated to cost approximately $1.8 billion. AEP's estimated share of the project is approximately $600 million.

The PATH project will employ advanced transmission technologies to make it the most reliable, efficient and environmentally sensitive project possible. Extra-high voltage transmission inherently costs less and requires less land to carry the same amount of power than other transmission designs, and new 765-kV designs reduce line losses 40 percent over older designs. That means the PATH line will transport electricity more efficiently and reduce the power generation necessary to meet electricity demand. Additional advancements in 765-kV and 500-kV conductor designs and new control technologies in the project's substations also will enhance the reliability and efficiency of the PATH lines compared with other transmission lines.

PJM Interconnection, the regional transmission grid operator for a 13- state area, approved construction of PATH in June 2007 and identified June 2012 as the date by which the PATH project needs to be operational. The costs of the PATH project will be allocated to all electric utilities who serve retail customers in the PJM region.

AEP and Allegheny have begun work on routing studies and environmental assessments for the project. The companies anticipate seeking regulatory approvals for the project from the utility commissions in both West Virginia and Maryland in the fourth quarter of 2008, following the completion of the routing studies. AEP and Allegheny are committed to working with landowners, neighboring residents, business owners, affected communities and regulators to minimize the environmental and land-use impacts of the project.