Arkansas Regulators Lay Groundwork For Fall Entergy-miso Hearings

To the general public, it will appear seamless, but a huge reorder of the state’s electricity transmission system will be debated this fall at the Arkansas Public Service Commission.

Today, state regulators hosted a technical conference at the PSC with representatives of Midwest Independent System Operator (MISO) and Entergy Arkansas, Inc. (EAI). Entergy Arkansas wants to join the Carmel, Ind.-based regional transmission network as it exits its system agreement with its parent company, Entergy Corp., and other state Entergy subsidiaries.

Entergy projects net benefits of between $192 million and $263 million from 2013 to 2022 by joining MISO. The projected net benefits are the estimated production cost-related savings, minus increased administrative and transmission costs. Entergy said it would save $163 million to $221 million if it joined SPP, which is still lobbying for Entergy Arkansas to join its transmission group.

While today’s conference was informational in nature, PSC staff and commissioners zeroed in on questions surrounding how EAI and MISO would integrate their entities by December 2013.

When quizzed as to how Entergy Arkansas will formally transition into MISO, executives said those details are being hammered out. Working groups exist between the two entities that are coordinating those efforts.

Questions were raised on Entergy Arkansas’ agreement process to join MISO, if allowed, and whether it must wait on its sister organizations, which have also indicated they want to join MISO.

"We are focused with laser vision on EAI because EAI will be first to exit its system agreement," said PSC Chairwoman Colette Honorable. "We want to take this up at evidentiary hearings. We’d like you to get with your counsel and be prepared to address that this fall."

The Arkansas PSC will have to approve a "change of control" order to allow Entergy Arkansas to join MISO or any other group.

Public regulators are sensitive to details of how the transition will occur and how much independence Entergy Arkansas may gain or lose with the new arrangement. Ultimately, the commission’s decision could hinge on how a move may impact Arkansas residential and industrial ratepayers’ bills.

MISO officials said Entergy will be responsible for planning its own resources and it will make independent decisions as to what electricity generation units it will commit to MISO. However, transmission decisions and the costs associated with that will be influenced by MISO’s governing board, which will have minority Entergy representation.

The move also poses "seam" issues between MISO and SPP, which could also impact the costs of a deal. SPP argues that there could be extra burdens placed on its transmission system that it will need to be compensated for by MISO if it includes Entergy. Generation plants and transmission lines shared by electric utilities that operate within the borders of both groups’ state boundaries must coordinate shared costs for those assets’ usage.

In addition to the expected net benefits of $192 million to $263 million, MISO’s major arguments to the PSC to allow Entergy’s membership in its organization is that it is significantly larger than SPP, which will result in a larger scale operation to access Entergy Arkansas’ electricity needs.

MISO also contends that its Day 2 market – a mechanism that allows generation and transmission entities within regions to plan for the movement of electricity and to control the costs associated with it – is a competitive advantage over SPP.

Entergy Arkansas must file final testimony with the commission on the planned venture by next Thursday, August 25. PSC hearings on the issue begin on September 7.