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Entergy on Edge

Can a single utility dispatch a regional grid system without a financial market?

Fortnightly Magazine - October 2005

software, but now holds those efforts in abeyance, hoping that the ICT plan might resolve some problems. ( For details, see Audit Report on Gen. Operating Limits, FERC Dkt. PA04-17, Dec. 17, 2004; 109 FERC ¶61,281, Dkt. No. EL05-22, Dec. 17, 2004; and Protest of Cottonwood Energy, pp. 7-8, appendix, FERC Dkt. No. ER05-1065, filed Aug. 5, 2005 .)

Entergy, also, has not stood still. Though state regulators in the South have remained skeptical of FERC’s vision, Entergy has sought to comply. The company has pushed for grid reform, of one kind or another, for at least the last half-dozen years—if you start your count with the company’s initial attempt, back in 1999, to create a “Transco” (an independent free- standing transmission-only company), and then continue with the company’s more recent but ill-fated attempts, first with the Southwest Power Pool (SPP), and later with the SeTrans group, to form a regional transmission organization (RTO) with sufficient scope and configuration to pass muster under Order No. 2000 .

A key factor is the sizeable portfolio of IPP capacity (17,500 MW owned by independent power producers) that blankets the Entergy footprint. If properly integrated in a least-cost dispatch, this cheaper merchant capacity might well displace a significant portion of Entergy’s older, less-efficient and costlier fleet, saving millions for ratepayers. Entergy’s own studies bear this out. Appearing for the Southeast Electricity Consumers Association (SeECA), consultant James Dauphinais (Brubaker & Associates) testified earlier this year that, “according to Entergy’s numbers,” the utility’s market purchases of gas-fired IPP generation saved $870 million for its ratepayers in 2002-2003. These savings, he said, greatly would exceed the value of transmission service credits that Entergy would owe to the IPPs, under current FERC policy, in exchange for grid network upgrades for which the IPPs had paid over the same period.

Overall, says Dauphinais, reports from Entergy point to a $30 million annual cost savings for ratepayers for each percentage-point decrease in use of the utility’s oil- and gas-fired generating units, in favor of IPPs. ( See Affadavit of James Dauphinais, pp. 12-13, on behalf of protest of SeECA, FERC Dkt. No. EL05-52, filed Feb. 4, 2005 .)

A Wait-and-See Attitude

Now comes Entergy with its immensely complex ICT grid plan, first proposed in April 2004 ( FERC Dkt. No. ER05-699 ), and modified this past spring, after FERC ruled on its jurisdictional status. ( See Dkt. No. EL05-52, March 22, 2005, 110 FERC ¶61,295, and FERC Dkt. ER05-1065, filed May 27, 2005 .)

On the surface, the plan would create independent accountability for the transmission grid, as called for in FERC Order No. 2000, with special attention paid to planning and expansion. Will the model work? Can it improve grid access for IPPs and reduce energy costs for Entergy’s ratepayers?

On a positive note, Entergy’s ICT plan already has elicited copycat plans from Duke and Warren Buffett’s MidAmerican Energy, each filed at FERC on July 22. ( See Duke Energy, Dkt. No. ER05-1236; MidAmerican Entergy, ER05-1235. ) The attraction is obvious: any electric utility could create its own self-contained “lite”