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. 

"It didn't sit well for Arkansas consumers on the decision that FERC made," McDonald said.

FERC's decision resulted in litigation, and McDonald said courts eventually decided that costs among companies in the system agreement needed to be distributed "roughly equally" among them.

That decision was challenged again in 2001. Natural gas prices had spiked, driving up energy production costs in Louisiana and Texas, while Arkansas ratepayers were enjoying the lower costs of coal-fired and nuclear generating plants.

"The Louisiana Public Service Commission said that the system agreement was not working right," McDonald said. "They had never really defined 'roughly equal.' The LPSC complained that 'roughly equal' should mean fully equalized. All the operating companies should be exactly the same on their rates."

Effectively, regions with lower production costs would subsidize more expensive regions. Arkansas' costs were about 30 percent below the average within the Entergy system.

"We — Entergy Corp., and all its operating companies — opposed the LPSC," McDonald said. "We did not believe that allocating all costs on an equal basis across the operating companies' customers was the right thing to do. We thought the customers in the respective states should receive the benefits of costs associated with the investments made in those states."

As FERC began evaluating the LPSC's complaint, Entergy Arkansas began evaluating leaving the system agreement. It's not a small decision: An eight-year notice is required.

"It is a long time," McDonald said. "It's part of the agreement. Any operating company can leave, but they have to give the others eight years' notice. It takes eight years to plan for and build a coal plant."

It took FERC four years to reach a decision on the LPSC's complaint. On Dec. 19, 2005, its "final order" ruled in favor of the LPSC, declaring that costs would be distributed equally among operating companies.

"Every time the Arkansas Commission challenged accusations by FERC, they lost," said Edward Skinner, a utilities lawyer in Arkadelphia. "Finally, Entergy Arkansas said enough is enough."

Sure enough, on the same day, McDonald gave Entergy Arkansas' official notice of leaving the system agreement.

Entergy Mississippi Inc. subsequently gave its exit notice in 2007, and Entergy Texas Inc. is considering its own exit, but Entergy's three Louisiana operating companies are, so far, staying in the agreement.

 

 

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