Entergy Texas and ITC Holdings (NYSE:ITC) on Sept. 23 resubmitted to Texas regulators their joint application proposing to transfer Entergy Texas’ electric transmission assets to ITC (Docket No. 41850).
The Public Utility Commission of Texas (PUCT) authorized the Entergy (NYSE:ETR) subsidiary and ITC to withdraw their original application (Docket No. 41223) on Aug. 9 after regulators determined they would not be able to consider a mitigation plan intended to protect customers from higher transmission costs because the plan was submitted after the statutory deadline for submissions in the case.
Now that the application has been re-filed in Texas, the other Entergy operating companies and ITC will, by Oct. 1, take steps to re-start proceedings in Arkansas, Louisiana and Missouri, and continue in Mississippi and New Orleans, an Entergy spokesperson told TransmissionHub Sept. 24.
The updated application re-files the entire evidentiary record from the previous docket and includes the enhanced conditions that were submitted but could not be considered or included in the previous filing, including the mitigation plan designed to protect consumers from higher transmission costs through a rate reduction of $92.7m over five years.
In their application, the companies noted the plan was comparable to commitments that have been provided in other retail jurisdictions in which the Entergy operating companies function. Entergy and ITC have offered a total of $453m in rate-mitigation funds to lower Entergy customer rates across its four-state territory of Arkansas, Louisiana, Mississippi and Texas.
The companies developed the mitigation plan to address concerns from state regulators that the transaction benefits may not outweigh increased costs.
Because the re-filed case involves the record already considered in the previous case and a “limited amount of new information,” the companies asked that the PUCT hear the case itself rather than refer it to the State Office of Administrative Hearings, and that it act on an expedited basis and render a decision by the end of the year to meet the target date for closing the deal. In their re-filed application, the companies noted that the previous case had already been “subject to extensive discovery, and was thoroughly litigated and briefed.”
According to the filing, the proposed spin-off and merger of Entergy’ transmission assets across four states to ITC would “serve four key purposes that are in the public interest.”
Those purposes include transmission independence, which the companies said “fosters a robust wholesale market by eliminating any perception that transmission planning could be biased in favor of certain generation.”
The second purpose is an enhanced ability to manage capital investment needs in the current Entergy service area in the coming years. Third, the companies cited ITC’s “singular focus on transmission,” as well as its ability to operate transmission systems at a high level of service quality. Finally, ITC will bring a broader regional view to transmission planning that will build on the benefits of the Day 2 wholesale market that will be available when Entergy joins the Midcontinent ISO (MISO), the companies said.
Those four purposes “will provide benefits for [Entergy’s] customers beyond those expected from the move to MISO,” they said.
Under the deal, most of Entergy’s transmission assets across its 15,400-mile transmission network, as well as its liabilities, will be spun off into subsidiaries that will be placed under an Entergy transmission holding company, Mid South TransCo. That company will then be spun off to Entergy’s shareholders, then merged with a subsidiary of ITC, ITC Mid South, in an all-stock reverse Morris trust transaction. The structure of the transaction will allow it to be completed without tax consequences so that the tax basis of the transmission assets will remain unchanged, thus protecting customers from an increase in rate base, the companies said.
The merger will result in Entergy shareholders receiving 50.1% of the shares of pro forma ITC in exchange for their shares of Mid South TransCo, with existing ITC shareholders owning the remaining 49.9% of the combined company.
FERC approved the transaction on June 20, two months after ITC’s shareholders gave their OK. In addition to Texas, the transaction requires state regulatory approval from Arkansas, Louisiana, Mississippi, Missouri, as well as approval from the New Orleans City Council.
However, following the withdrawal of the application in Texas, the Louisiana and Arkansas Public Service Commissions (PSCs) on Aug. 21 and 23, respectively, decided to suspend hearing proceedings pending further action from the PUCT, and intervenors in Missouri filed a motion in August requesting that the Missouri Public Service Commission delay its proceedings. Those actions fanned speculation that the deal would die, though Entergy officials dismissed such speculation.