Entergy's Eternal Power Struggle: MISO Move Decades in the Making

by Luke Jones  on Monday, Nov. 26, 2012 12:00 am  

Years of controversy and litigation have led to Entergy Corp. joining a regional transmission operator, which manages Entergy’s power lines, and selling the lines themselves to a third party, ITC Holdings Corp. 

In a little more than a year, Entergy Corp. will hand over the reins of its electricity transmission business to a regional operator called MISO and then shift its focus entirely to power generation.

The transfer is decades in the making and has been met with quarrels and controversy almost every step of the way. In the end, Arkansas ratepayers should enjoy a small savings, in part because they will no longer be liable for the cost of energy they don’t need.

A regional transmission operator, or RTO, is a nonprofit that coordinates all generators within its footprint, calculates the costs and bids on the power and uses an algorithm to determine which line route will cost ratepayers the least. All of the Entergy Corp. operating companies, including Entergy Arkansas Inc., have been attempting to join an RTO since the late 1990s. Entergy Corp. even made a failed attempt to establish an RTO itself in the mid-2000s. Joining an RTO is important for Entergy for several reasons.

• First, the Federal Energy Regulatory Commission believed it was best for Entergy to have a singular focus: power generation.

• Second, large utilities are frequently accused of bias toward their own generators.

"In the current world, there's always going to be a perception by some parties that the entities that own generators and also own transmission … favor their own generators over other companies'," said Entergy Arkansas President Hugh McDonald.

For example, when Entergy Corp. decided to purchase two power plants belonging to KGen of Houston in 2010, it prompted an investigation by the U.S. Department of Justice's antitrust division, which believed Entergy was trying to abuse its control of transmission lines. The division allowed the $523 million purchase this month, provided that Entergy continue its move to MISO.

• The third, and most urgent matter, is Entergy Arkansas' exit from the infamous "system agreement" with other Entergy operating units. The system agreement has historically forced Arkansas customers to subsidize the cost of generating electricity that they don't need.

This odyssey started in the 1950s when Entergy Arkansas, then known as Arkansas Power & Light, joined with several other Southern utility companies to become part of Midsouth Utilities, which in 1989 became Entergy Corp.

Around the same time, AP&L joined the system agreement.

The agreement "establishes terms and conditions on how the Entergy system plans for its long-term generation and transmission requirements," McDonald said. "There are certain provisions in that contract that set the rules for how certain costs are allocated among operating companies and how other costs are borne by certain operating companies."

It was a smooth operation until, in 1982, FERC allotted Entergy Arkansas 36 percent of the building cost of Mississippi's Grand Gulf Nuclear Power Station.



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