ITC Holdings (NYSE:ITC) and Entergy Corporation (NYSE:ETR) filed their joint application with FERC Sept. 24, seeking commission approval to spin off and merge the electric transmission business of Entergy’s utility operating companies into a subsidiary of ITC.
“This is a significant milestone in our efforts to move toward closing the transaction,” ITC Holdings’ executive vice president and chief business officer Linda Blair told TransmissionHub Sept. 24.
The application seeks approval for Entergy to transfer approximately 15,800 miles of interconnected transmission lines at voltages of 69-kV and above and the associated substations in Arkansas, Louisiana, Mississippi, Missouri and Texas to ITC. Those assets will then be placed under the functional control of the Midwest ISO (MISO).
“We really believe this transaction ultimately supports FERC’s vision [of] moving more transmission under an independent model,” Blair said. “Our focus is to bring the needed investment to the transmission system in order to facilitate FERC’s vision of having an efficient, interregional, high-performing grid.”
The filing, under sections 203 and 205 of the Federal Power Act, comes less than three weeks after the two companies started the regulatory approval process by making their first joint filing with the Louisiana Public Service Commission (PSC).
The companies must still submit filings to state regulators in Arkansas, Mississippi, Texas, and Missouri, but Blair said those filings will be substantively similar.
“They are unique with respect to some of the financial elements, the rate impacts, returns on equity,” Blair said. “There are differences but I would say they are largely similar in the structure and the benefits of the transaction.”
In addition to approvals from the state public service commissions, New Orleans’ city council, and FERC, the IRS must approve the transaction as a tax-free exchange under a “reverse Morris trust.” Approvals must also be obtained from the Department of Justice and Federal Trade Commission, as well as ITC shareholders.
Upon closing, the transaction would make ITC one of the largest electric transmission companies in the United States, with more than 30,000 miles of transmission lines in 11 states between the Great Lakes and the Gulf Coast.
Meanwhile, Entergy’s operating companies will continue to own and operate their respective distribution and generation businesses and will provide customer service, billing, outage reporting and restoration services to homes and businesses in the region.
For their part, Entergy officials say spinning off its transmission to an independent transmission company “will provide greater capacity for investment, singular focus and excellence in operations,” Theo Bunting, Entergy’s group president of utility operations, said in a statement announcing the filing.
Entergy did not respond to requests for comment by press time Sept. 24.
ITC will establish and maintain a regional headquarters in Jackson, Miss., where Entergy’s transmission business is currently headquartered. ITC will also maintain offices and warehouses throughout the service territory to ensure a local presence and timely response to stakeholder and system needs, the companies said.
Approximately 750 Entergy employees, including key leadership personnel from Entergy’s transmission business, will become employees of ITC.
The companies are still eyeing a June 30, 2013 target date for closing the transaction. Blair said that though that schedule is “very do-able,” the companies are subject to the regulatory process, which can be lengthy.