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Entergy's Power Play
The ITC merger and link-up with MISO.
The thing to know about Entergy’s bid to join the Midwest ISO—and its plan to first sell its transmission lines to burgeoning grid giant ITC—is just how many moving parts are involved.
Instead of consolidating the transaction within a single application filed at the Federal Energy Regulatory Commission, where regulators and industry stakeholders might debate the full range of issues, the three principals have sliced and diced their deal into many separate smaller pieces, each with its own docketed proceeding at FERC. This makes it difficult for would-be opponents to get a handle.
Much will depend on whether Entergy’s planned sale of its grid assets to ITC will clear FERC approval by June as planned, six months ahead of Entergy’s anticipated integration into MISO in mid-December, which is timed to coincide with the date that Entergy’s Arkansas distribution utility will quit Entergy’s long-running multi-state system agreement. So it won’t be until the last weeks of 2013 when the Entergy retail arm will bring in its generation and load to join MISO as a transmission-dependent market participant.
But if clearance is delayed or denied on the ITC sale—designed as a tax-free merger conducted through a Reverse Morris Trust—Entergy could end up still possessed of its grid network come December. And in that case, Entergy would end up joining MISO as a full-fledged transmission owner (TO), with different tariffs and an entirely different set of regulatory consequences.
If all goes well, and ITC acquires Entergy’s grid in June as scheduled, MISO will immediately take functional control over the newly acquired lines. Yet with ITC joining MISO as owner of a multi-state grid network, minus the historic generation and load that grid network was meant to serve, that means MISO for six months would operate the new ITC lines in “Day One” mode—without a day-ahead or real-time energy market within Entergy’s four-state service territory (to be known as “MISO South”). That will make it impossible for MISO to price and reconcile congestion through its bid-based, security-constrained dispatch. Think “RTO Lite.” There simply won’t be any nodal locational prices (LMP) within Entergy during this interval.
Nor would MISO have control during this interval over Entergy-area gen plants for redispatch, or for balancing or other ancillary services. Entergy instead would serve as balancing authority for MISO South during this time, requiring FERC approval of still another custom-designed, temporary tariff.
Also in limbo are the templates and protocols for the forward-looking transmission formula rates that will set the revenue requirements for the transmission assets newly placed under MISO’s functional control. Using those formulas, MISO would calculate and collect a new transmission access charge for each of four newly created wholesale transmission pricing zones, as it does now for its many other member TOs.
ITC has promised to reveal its proposed, forward-looking transmission formula rate templates, with spreadsheet entries fully populated with the requisite cost data, in a tariff application to be filed with