Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Entergy on Edge

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

Fortnightly Magazine - October 2005

Louisiana retail ratepayers from the ICT proposal”—would really save as much as Entergy predicts, since he reports that Entergy already has paid out $97 million in transmission service credits on prior network upgrades. ( See Direct Testimony of Stephen Baron, La.P.S.C. Docket No. U-28155, filed Aug. 5, 2005 .)

FERC views the ICT plan only as a two-year experiment, given that many details remain to be ironed out.

For her part, FERC Commissioner Nora Mead Brownell has voiced a wait-and-see attitude: “While I agree with my colleagues that the ICT proposal is a step forward, I remain skeptical primarily given my experiences with Entergy over the last few years. Promises have been made, promises have been broken.” ( Docket EL05-52, concurring opinion, March 22, 2005, 110 FERC ¶61,295. )

A Physical Grid

To grasp the real import of Entergy’s plan—its implications for the rest of the utility industry—forget all those political debates on whether the ICT is truly “independent” of Entergy’s influence and control. Don’t worry whether FERC should permit individual utility companies to form their own quasi-RTOs, free from most federal regulation, in order to please recalcitrant state regulators. Rather, focus instead on the deeper question posed by the plan: Can Entergy create a regional grid system that relies solely on physical rights?

First, give credit to Entergy for its creativity. The ICT plan seeks to do much of what the other RTOs do. For example, the ICT provides for regional coordination of grid planning. Through its Weekly Procurement Process (WPP), a weekly solicitation of energy from IPP plants, Entergy’s plan would at last integrate IPP generation with utility-owned resources in a single, security constrained regional dispatch. Coupled with Entergy’s participant funding proposal (designed to encourage investments in new grid capacity), the WPP would allow Entergy to provide hedging rights against grid congestion as compensation to grid customers (such as IPPs) that fund supplemental grid upgrades.

At the same time, the ICT plan would offer one feature that other RTOs lack, and which FERC heretofore has not required: It would create and award transmission service rights as compensation and incentive for grid investments that boost grid capacity so as to facilitate additional long-term transmission service. Entergy offers this feature in recognition of the fact that grid investment is often “lumpy.” IPPs that fund grid upgrades to facilitate plant interconnections cannot always scale down their investments to the minimum level required by the facility in question.

Yet consider a very big question mark. Entergy’s plan would undertake all these tasks without financial rights. The plan fails to offer locational marginal pricing, whether nodal or zonal. No capacity market is present, such as ICAP or LICAP. The plan offers no true FTRs, as that term is commonly understood, since the congestion hedging rights and “lumpy” grid credits that it offers are tied to use only on the flowgates for which the upgrades were performed. That would make it difficult to trade these rights, a feature that FERC has insisted upon in its most recent orders.

Above all, the plan fails to provide any