Entergy Quizzed On Miso Move

If Entergy Arkansas were a football team, it would be shopping for a new conference. Or perhaps a new conference is shopping for Entergy.

The state’s largest utility opened another chapter today in its effort to separate itself from a system agreement with its parent company and other Entergy operating companies. Entergy Arkansas (EAI) served notice in 2005 that it wanted to find a new home for its transmission coordination by December 2013.

The Arkansas Public Service Commission (PSC) began a three-day hearing Wednesday in Little Rock to hear testimony and allow questioning of Entergy’s planned move to regional transmission operator, Midwest Independent Service Operator (MISO), an option opposed by Little Rock-based grid operator Southwest Power Pool (SPP) and other groups.

The hearing allowed a number of interested parties involving Entergy Arkansas’ move to lay out their positions beyond regulatory filings. Entergy and MISO executives testified and were cross-examined by SPP, other electric companies, PSC staff and the Attorney General’s office.

POSITIONS CLARIFIED
Several positions were clarified in recent pre-hearing filings and today’s testimony:

– Entergy Arkansas and MISO maintained their positions that the cost benefits, reliability and scale of a partnership made the most sense for both parties. The state’s large industrial users of electricity, represented by the Arkansas Electric Energy Consumers (AEEC), said it supported Entergy’s move citing expected lower transmission costs, potential rate decreases, and less uncertainty regarding future costs.

– But SPP argued that Entergy would be better served in its system because the cost savings would be greater and there would be stronger coordination between Entergy Arkansas and existing electric utilities in the state. SPP also said that a "public interest" standard needed to be considered by PSC commissioners so that all ratepayers in Arkansas were treated fairly by the Entergy decision.

– Several other electric companies doing business in Arkansas — including the Arkansas Electric Cooperatives, SWEPCO, OG&E and Empire — asked to be "held harmless" financially by Entergy’s move and called on the commission to propose more study of the MISO option before making a decision. Entergy officials said they could not guarantee a "hold harmless" provision as a condition of moving to MISO.

– While the Attorney General’s office said it had not reached a conclusion on which move made the most sense for Entergy Arkansas, the PSC staff (which is separate from the 3-person commission) called on a delay of a final order until the middle of next year to allow for more research.

"Staff is not persuaded by EAI’s plea for action based on the claimed near-term benefits of joining MISO. Staff’s analysis shows that EAI has substantially overstated the production cost benefits that would be realized in the near-term. At the same time, EAI has pinned its benefits on a transmission cost allocation deal with MISO that remains uncertain and poses significant cost risk if that deal is not approved and implemented. As the record stands today, there is no assured pot of gold requiring hasty action," said PSC staff general counsel Valerie Boyce in her opening testimony.

CROSS-EXAMINATION
During cross-examination, Entergy Arkansas President Hugh McDonald said that his first priority was to serve his customers with the most beneficial move to a new transmission coordinator. He also emphasized that time was running out to meet the December 2013 deadline and disclosed that a memorandum of understanding between MISO and Entergy Arkansas curtailed his ability to aggressively pursue a venture with SPP.

"There was exclusivity language that when you get to phase two that you couldn’t conduct phase two activities with any other RTO (regional transmission operator)," McDonald said. "We got to a point where we had to narrow our options."

"We can’t put SPP back on the table. With the analysis that’s been done, MISO is the proper choice for our customers," McDonald added.

Entergy is hoping for quick action after this week’s hearings from the commissioners on the regulatory panel. As soon as the PSC issues guidance, McDonald said Entergy anticipated filing a "change of control" order, which will lay out more details and seek final approval for Entergy to transfer its assets to the MISO system.

COMMISSION CONCERNS
Today’s hearing was the first time the public and parties in the case have heard at length from any of the PSC commissioners, the three-person panel that must eventually sign off on Entergy Arkansas’ move.

New commissioner Elana Wills and PSC chair Colette Honorable both delivered lines of questioning related to Entergy Arkansas’ corporate independence and quizzed company officials on who will have decision-making authority for generation decisions if the MISO deal is allowed.

"Could EAI (Entergy Arkansas, Inc.) ratepayers be paying for transmission costs outside of the transmission zone? Is that possible?" asked Wills.

McDonald said he recognized it was "an issue."

"The company has thought about this and is willing to consider a single pricing zone; however, we’re not sure that FERC (Federal Energy Regulatory Commission) would support a single pricing zone, number one. Number two, we feel that the decision to go to MISO in itself helps mitigate that entanglement as well," McDonald said.

Honorable was pointed with her questions about Entergy Arkansas’ independence in decision-making and strongly hinted this was a top PSC concern.

"I sense hesitancy that EAI would push to be a separate pricing zone. You said you’re not sure FERC would support that. What would be the harm in asking FERC for relief? Wouldn’t you agree that being a separate load-serving entity, a separate pricing zone would decrease your risk of future litigation and give more separation from other Entergy op cos (operating companies)?," she asked.

"It would further mitigate that risk, yes," McDonald said.