Entergy faces hurdle to joining transmission pact

Arkansas regulators want guarantees that their authority will be preserved if Entergy Corp.'s utilities join a regional transmission group, raising questions about whether the deal will go through.

That could complicate Entergy's plan to spin off its long-distance transmission lines to ITC Holdings Corp. Joining a regional transmission organization is required for the spin-off.

New Orleans-based Entergy, which owns utilities in Arkansas, Louisiana, Mississippi and Texas, wants to join Midwest Independent Transmission System Operator Inc.. The Carmel-based group directs movement of electricity in parts of 11 Midwestern states and the Canadian province of Manitoba.

The Arkansas Public Service Commission said in an Aug. 3 order that MISO has to preserve regulators' current powers. Some observers say they're not sure MISO will meet Arkansas' conditions.

"I think it puts them in a very, very difficult position," said David Cruthirds, a Texas lawyer who formerly worked for an independent power generator and now publishes a utility regulation newsletter.

Mississippi Public Service Commissioner Brandon Presley noted that Entergy Arkansas provides the only current physical connection to the MISO grid, and said it would be harder for Entergy to move its other five subsidiaries into MISO without that link.

MISO has projected Entergy and its customers will save $1.4 billion over 10 years by joining. That's because MISO will make sure Entergy customers use the power that can be produced most cheaply, even if it's far away from the company's southern territory. Joining a regional transmission group could also alleviate longstanding complaints that Entergy hasn't spent enough on its grid and used those wires to favor its own power plants over independent generators.

Kimberly Despeaux, Entergy's senior vice president for federal policy, regulatory and governmental affairs, said the company will file a petition with Arkansas seeking clarification or rehearing. Entergy and MISO have until Sept. 2 to file.

Among Arkansas' most important demands is that MISO state regulators get a majority vote on where transmission lines are built and who will pay for them. Arkansas also wants MISO regulators to have the power to file state regulators' views alongside those of MISO in petitions to the Federal Energy Regulatory Commission.

Despeaux said Entergy Arkansas can't meet the conditions on its own. Despeaux said that while Entergy and MISO may not be able to exactly meet the conditions, they would try to address Arkansas' concerns about losing authority.

Todd Hillman, a MISO executive, said the group is working on the Arkansas conditions and is consulting with current members and regulators.

Louisiana regulators have already approved MISO membership for Entergy Louisiana and Entergy Gulf States, though Presley said Louisiana reserved the right to demand the same conditions imposed by other regulators. Entergy Texas reached a key stage in its approval process last week, and Despeaux said Entergy hopes for final approval from Texas by the end of October.

In Mississippi, hearings were delayed while the South Mississippi Electric Power Association studies whether it wants Entergy to join MISO or any group. SMEPA generates and transmits power to 11 cooperatives in southern and western Mississippi. SMEPA, other cooperatives, cities and Louisiana's privately-owned Cleco Corp., would all be affected by the move.

Presley said that like Arkansas, he doesn't want Mississippi to give up any authority. "I think it's highly, highly important that states continue to have a strong voice, strong input on operations," he said.

The Arkansas order continues Entergy's bumpy history with the Public Service Commission there. The state's regulators say Entergy Arkansas' 687,000 customers have been charged billions of "unnecessary costs" since 1985 because FERC ordered a rough equalization of generation charges among Entergy's six utilities. Most of that money has flowed to Louisiana ratepayers.

Arkansas regulators want Entergy Arkansas to operate independently of the system's other utilities, saying that's the best way to shield Arkansans from more equalization payments. Arkansas has ordered independent operation by December 2013.

Entergy is under civil investigation by the U.S. Justice Department and has been sued by Mississippi Attorney General Jim Hood over claims that it has squeezed out generating competitors by manipulating or failing to invest in its transmission grid.

"These commissions have gotten a belly full of Entergy failing to build transmission and being hard to get along with in the wholesale markets," Cruthirds said.

DNJA