The Louisiana Public Service Commission on April 5 approved a proposed “Uncontested Stipulated Settlement” under which affiliates of Entergy Corp. (NYSE: ETR) can build a new gas-fired power plant in Louisiana.
Under the settlement the remaining parties to this docket – Entergy Louisiana LLC (ELL) and Entergy Gulf States Louisiana LLC (EGSL), PSC staff, the Louisiana Energy Users Group, Marathon Petroleum Co. LP, ArcelorMittal LaPlace LLC, Calpine Corp. and Occidental Chemical Corp. LLC – resolved all issues. The commission approved the settlement at its March 21 business and executive session, with the final written order issued on April 5.
In its application in this docket, the Entergy companies requested certification that the public necessity and convenience would be served by ELL’s construction of a nominal 550-MW combined-cycle gas turbine (CCGT) generating facility (called Ninemile 6) at an existing plant known as Ninemile Point Station located in Westwego, La.
In addition, EGSL sought certification of a Power Purchase Agreement (PPA) covering the purchase on a life-of-unit basis 25% of the capacity and associated energy of Ninemile 6. Entergy New Orleans Inc. (ENOI) will purchase 20% of the capacity and associated energy of Ninemile 6 under a similar PPA.
EGSL and ELL also both sought findings that the selection of the Ninemile 6 resource complied with the commission’s Market Based Mechanisms General Order.
The Entergy companies had told the commission that Ninemile 6 was proposed to provide generation needed in Entergy’s Amite South planning region, identified as the area east of the Baton Rouge metropolitan area to the Mississippi state line and south to the Gulf of Mexico, and particularly within the Downstream of Gypsy (DSG) sub-region within Amite South. They said the project was needed to provide an efficient generating unit to meet reliability needs within Amite South and particularly DSG and to reduce reliance on existing aging gas-fired generation, in addition to adding a resource to meet long term needs for load-following capacity.
Ninemile 6 was identified as a self-build option and market-tested in Entergy’s summer 2009 Request for Proposals for Long-Term Supply-Side Resources. The project was selected as the preferred choice because it was the lowest reasonable cost alternative of the viable resources identified in the Summer 2009 RFP.
The summer 2009 RFP process was overseen by an Independent Monitor, which reviewed the relevant documents, materials, and evaluation models and procedures used by Entergy Services Inc. (ESI) in conducting the summer 2009 RFP and the selection of the Ninemile 6 self-build project. The Independent Monitor concluded that the models and underlying assumptions were reasonable and accurately estimated the costs and benefits of the competing proposals.
The current estimate of the cost to construct Ninemile 6 is $721.145m, the commission noted in the final order. This estimate includes construction related financing costs (Allowance for Funds Used During Construction or AFUDC), and it also includes a general contingency estimate of about 9% (with indirect labor and AFUDC included, approximately 10%) of the total project cost estimate.
Construction of the project is expected to take around 35 months following ELL’s issuance of full notice to proceed to its construction contractor. As a result, the project is expected to enter service no later than April 2015, although this date could be advanced.
The project cost estimate ($721.145m) does not include projected costs of approximately $2.26m for the transmission upgrades needed to qualify Ninemile 6 as a network resource under Entergy’s Open Access Transmission Tariff and it does not include estimated costs of $1.34m needed to interconnect Ninemile 6 with Entergy’s transmission system.
ELL will own the project, but it will sell 25% of the capacity and associated energy of the unit to EGSL and 20% to ENOI under life-of-unit PPAs priced pursuant to Service Schedule MSS-4 of the Entergy System Agreement. The MSS-4 transaction with ENOI required approval of ENOI’s retail regulator, the Council for the City of New Orleans, which was obtained in February. As a result, ELL will retain only 55% of the capacity and energy of the project, and it will receive the MSS-4 revenues from EGSL and ENOI pursuant to the terms of the MSS-4 PPAs. Those receipts will be credited to ELL’s ratepayers as revenue offsets to the Ninemile 6 revenue requirement in any future revenue requirements determination.