Additional transmission will not be needed to integrate Entergy (NYSE:ETR) into MISO, according to Jennifer Curran, executive director of transmission infrastructure strategy with MISO.
In testimony MISO filed with the New Orleans City Council, in which the RTO supported Entergy’s decision to join it, Curran also noted that transitional studies are designed to plan projects that will improve the economics and efficiency of Entergy’s market participation.
The city council is considering the request for change of control with a decision expected sometime this year, MISO said March 26.
According to a Feb. 16 city council resolution, an evidentiary hearing is to begin Sept. 18.
Curran said the pending MISO cost allocation transition tariff request and FERC Order 1000 are compatible, adding that from a regional planning perspective, Entergy will be subject to the same regional planning protocols during the transition period as the rest of the MISO footprint. Order 1000 “will require a cost allocation protocol to be developed with Entergy whether Entergy is an integral part of the MISO region or an adjoining region,” she said.
Once integrated, Entergy will participate in the annual transmission expansion plan as a transmission owner, providing to MISO information and data related to its transmission system to be included in the planning process. Entergy will also participate as a stakeholder, providing its review and input on the process and proposed plan.
When integrated, Entergy will collaborate with MISO on system impact and facilities studies when necessary, Curran added.
Retail regulators’ roles will not be altered if Entergy joins MISO, she said, noting that the retail regulator loses no authority over project funding decisions or financial decisions normally reserved to it. A retail regulator may add projects to the MISO transmission expansion plan (MTEP), she said, adding that assuming no harm is identified, MISO will add the project to the list of projects submitted to MISO’s board of directors for inclusion in the plan.
She also explained how costs of projects identified in the MTEP are allocated. For instance, transmission constructed locally for ongoing local needs is generally recovered from local customers. For larger ongoing reliability and market efficiency upgrades of 345 kV and higher and of at least $5m in direct costs, 80% of the cost is allocated more locally to loads that benefit from the project, with 20% of the cost of the upgrades shared equally by all loads, she added.
Entergy will be subject to that cost allocation plan when it integrates with MISO, but in a modified manner, she said, adding that MISO has proposed a transition cost allocation plan to address cost allocation issues during a transition period associated with the Entergy integration. The proposed transition is necessary as the planning areas have not been comparably planned through a common process based on common criteria, she said.
Defining the existing MISO footprint and Entergy’s area as different planning areas is important as, for instance, geographic areas with a significant amount of total load, or about 30,000 MW or more, are best planned for as a subset of MISO’s region, Curran said.
In his testimony, Richard Doying, vice president of operations for MISO, explained the benefits associated with MISO’s markets to Entergy’s members and customers. Net annual benefits for the existing MISO footprint have been estimated to be between $1.2bn and $1.6bn, he said, adding, “Those benefits will only increase with Entergy’s membership in MISO and will be realized by Entergy’s members and customers.”
Furthermore, the overall lower energy cost within the MISO market region lowers the cost of purchased power by external market participants, he said.
Doying also noted that transmission capacity sharing occurs today between Entergy, MISO, Southwest Power Pool and neighboring utilities due to the interconnected nature of the network transmission system.
The sharing of transmission capacity will not create reliability risks to the electric system, he said, noting that MISO and PJM Interconnection have successfully used market-to-market redispatch to manage transmission congestion since 2005.
Like Curran, Doying said Entergy’s integration into MISO will not require transmission upgrades to accommodate increased power flows across the system. “The same transmission system will exist in Entergy the day before and the day of the integration of the Entergy system into the MISO market,” he said. “What will change is the population of units available to serve load within Entergy’s system and the optimization of the dispatch of those units to meet MISO-wide demand while honoring the operating limits of the transmission system.”
R. Wayne Schug, executive director, stakeholder engagement and strategic planning for MISO, also discussed benefits in his testimony. “MISO provides increased reliability and better congestion management through the energy and operating reserve markets and regional planning process,” he said. “In addition, as a member of a larger, more efficient market, Entergy will benefit by deferring the need to build as many power plants in the future.”
Schug also said MISO is preparing for full integration of Entergy by the end of 2013.
Among other things, he said MISO’s role will not change if the proposed transaction between Entergy and ITC Holdings (NYSE:ITC) is completed, noting that MISO’s role as the transmission provider and market administrator under its tariff will remain the same regardless of who owns the transmission assets.
The companies announced in December 2011 that ITC will acquire Entergy’s transmission business in a reverse Morris trust transaction.