ITC Holdings (NYSE:ITC) and Entergy (NYSE:ETR) are in the thick of the regulatory approval process for their proposed transaction but, so far, have seen no surprises, ITC CEO Joseph Welch said April 24.
“We are now starting to see formal testimony from commission staffs and interveners, which provides us a good sense as to the issues and concerns that parties may have with the proposed transaction,” Welch said during the company’s 1Q13 earnings call. “We and Entergy anticipated these concerns and they have not been surprising.”
The Arkansas and Louisiana PSC staffs submitted testimony earlier this month, an ITC spokesperson told TransmissionHub April 25.
ITC’s acquisition of Entergy’s transmission business requires state regulatory approval from Arkansas, Louisiana, Mississippi, Missouri, as well as approval from the New Orleans City Council and FERC. Louisiana, Arkansas and New Orleans also raised concerns about the transaction in FERC filings in January.
ITC and Entergy have filed for approval in all jurisdictions and expect decisions by the fall, with transaction close scheduled to occur this year.
Issues raised so far include Entergy’s integration into the Midwest ISO (MISO); how rates associated with ITC’s business model differ from traditional state utility regulation; and what role state commissions may have in participating in transmission regulation, given that ITC’s rates are regulated by FERC, CFO Cameron Bready said.
“I’m, frankly, not expecting a great deal of difference in what we see coming out of the other jurisdictions,” Bready said.
Settlements with the jurisdictions are clearly preferable to their alternative, adjudication, both executives said. Settlements allow “custom tailoring,” and can “bring externalities into the decision process,” whereas resolutions that come out of hearings and adjudication by nature are limited by the laws of each state, Welch said.
The CEO cautioned that though iterations of the same issues may materialize in different states, advancing through the regulatory process will be complicated, given the number jurisdictions involved.
“Being able to put a piece of thread through the eye of five needles gets very difficult with different laws that pertain to each one of the states and what jurisdictional capabilities [they] have,” Welch said. “This is an important process and I just caution people to not read into it more than what they see. … I don’t expect to see a lot of differences but we will see some uniqueness in each one of the filings as they come because they’re going to start to try to get to that unique solution that is best for each one of those states. Our job is then to find a common ground where we can bring it together in one comprehensive deal.”
In 1Q13 and 1Q12, ITC expensed external legal, advisory and financial services fees of $8.7m and $2.4m, respectively, and certain internal labor and related costs of approximately $2.3m and $1.5m, respectively, related to the Entergy transaction, according to the company’s 10-Q filed April 24.