The unit, American Transmission Systems, Inc. (ATSI), would join the Midwest ISO as either a transmission owner or as part of an Independent Transmission Co. (ITC), FirstEnergy said in a statement.

ATSI owns and operates FirstEnergy's transmission assets, including 7,000 miles of high voltage power lines, in Ohio and parts of western Pennsylvania.

The agreement, which includes provisions that ATSI will remain part of the Midwest ISO at least through 2004, will be filed with the Federal Energy Regulatory Commission by May 28.

FERC approved the Midwest ISO as the nation's first regional transmission organization (RTO) in December 2001. RTOs are responsible for ensuring that the wholesale electric transmission system is operated reliably and fairly.

"The Memorandum of Understanding provides flexibility for the continued development of an ITC, including the Alliance Gridco, in which other Alliance companies can participate," Stan Szwed, vice president of Transmission for FirstEnergy, said in the statement.

The Alliance companies, which include FirstEnergy, have been negotiating with the Midwest ISO since late December to determine the feasibility of operating an ITC under the umbrella of the Midwest ISO.

FirstEnergy's transmission assets owned by its Pennsylvania Electric, Metropolitan Edison and Jersey Central Power & Light operating companies will continue to be operated by the PJM (Pennsylvania-New Jersey-Maryland) Interconnection, LLC, the grid operator for the U.S. Mid-Atlantic.

The Indiana-based Midwest ISO controls an interconnected transmission grid in all or parts of 15 states and part of Canada. The inclusion of ATSI adds about 14,000 megawatts of peak power load to the Midwest ISO, an increase of more than 15 percent, the ISO said in a statement.

One megawatt serves about 1,000 homes.