Arkansas regulators find Entergy’s move to MISO ‘in the public interest’

The Arkansas Public Service Commission (PSC) has determined that Entergy Arkansas‘ proposed move to the Midwest ISO (MISO) is in the public interest and conditionally granted the utility’s request to transfer functional control of its electric transmission facilities to MISO as well as to record and defer its MISO transition costs as a regulatory asset (Arkansas PSC Docket No. 10-011-U). 

Order No. 76, issued April 8, conditions the move requested by Entergy Arkansas and MISO on continued compliance with the commission’s conditions. It also “provides a clear path for the company to continue its efforts to integrate into the large regional grid operator in December 2013,” Entergy Arkansas said in a statement.

Order No. 76 is the latest ruling in the company’s ongoing quest to become a part of MISO.

On Aug. 3, 2012, the PSC issued Order No. 68, in which the PSC listed 19 separate conditions that would need to be satisfied before the commission could “reach a finding that [Entergy Arkansas’] application is in the public interest.”

In Order No. 72, issued Oct. 26, 2012, the PSC found that Entergy Arkansas and MISO had either “complied or substantially complied” with all of the Order No. 68 conditions except one, and that MISO had “sufficiently complied [with Condition 13] for the integration process to move forward,” the PSC said in its order.

After receiving additional testimony and issuing additional orders dealing with mostly technical issues, the PSC determined its conditions had been satisfied and issued Order No. 76.

“[The order] is one of the final regulatory actions in the process of bringing Entergy into MISO and allowing MISO to provide its proven transmission reliability, planning and lowest-cost energy to Arkansas and the rest of our new Southern Region,” John Bear, MISO president and CEO, said in a statement.

The PSC’s approval of Entergy Arkansas’ request to defer its MISO transition costs as a regulatory asset will allow those one-time costs to be reviewed at a future time and to be considered for recovery through base rates.

Witness testimony cited in the order indicates that the cost of integrating all Entergy companies into MISO by December would be approximately $105m, with Entergy Arkansas’ share of that being approximately $22m. In addition, Entergy Arkansas expects to incur additional costs of approximately $35m to maintain commission-directed alternatives to MISO membership through the expected integration date in December.

Those costs, according to the testimony, are “actual cash expenditures that will be incurred by the company over a multi-year period and deferred for future recovery, likely also over a multi-year period.”

The PSC’s order is significant for the Arkansas operating company as well as Entergy companies in Mississippi, Texas, Louisiana and New Orleans. Regulators throughout the four-state region in which Entergy utilities operate have conditioned their orders granting the Entergy companies within their jurisdictions permission to move to MISO upon Entergy Arkansas also joining MISO.

The Arkansas PSC noted that it will closely monitor the integration process to ensure parties comply. The next step is for MISO to file for a certificate of convenience and necessity with the PSC to move forward. 

MISO’s Bear expects to be able to take the necessary actions promptly and to remain on schedule. “We will proceed on our current schedule which fully integrates Entergy into MISO this December,” he said.

In conjunction with the integration, ITC Holdings (NYSE:ITC) will acquire Entergy’s transmission business in a reverse Morris trust transaction. The transaction will add 28,000 MW of load to its existing 26,000 MW, making it the largest load-serving transmission company in the United States, and add 15,700 miles to its 15,100 miles of transmission lines, making it the second largest transmission company on a miles-served basis, according to Joe Welch, ITC chairman, president and CEO.

ITC is currently in the process of setting a hearing schedule with the various state regulatory bodies involved and “expects to work through the regulatory process this summer,” an ITC spokesperson told TransmissionHub April 11. 

Federal regulatory approval is needed from FERC, and antitrust approval from the U.S. Department of Justice or the Federal Trade Commission. The IRS must approve the tax-free nature of the transaction. The transaction, pending regulatory and shareholder approval, is expected to close this year.

Entergy Arkansas is a subsidiary of Entergy (NYSE:ETR).