This being an election year in which all the members of the state’s Public Service Commission will be in front of the voters, Monday’s announcement that Entergy will seek to join the Midwest Independent Transmission System Operator (MISO) has some political implications – despite the fact that the implications of the news might be in the weeds for most people.
MISO is essentially a giant power grid serving 13 states and the Canadian province of Manitoba. If Entergy joins, its reach will stretch from Winnipeg to the Gulf of Mexico. It’s what’s known as a “regional transmission organization,” or RTO. Its members all contribute electric power into a large pool, and then draw power from that pool to distribute to their customers.
Entergy estimates that joining MISO will save some $1 billion in production costs for the 10 years after it begins its participation in 2013. That’s due to the deal giving it access to a lot more diversity; MISO members’ supply comes largely from coal-fired power plants (about 50 percent), but natural gas accounts for 22% of its power. Seven percent comes from nuclear generation and five percent from wind.
Entergy will file with state regulators next month, which will include the Public Service Commission and the New Orleans City Council here in Louisiana. The City Council regulates Entergy New Orleans according to statute.
The switch to an RTO isn’t the only decision Entergy is making here. The company is also choosing MISO over another organization, the Southwest Power Pool, which does something similar. SPP, based in Little Rock, Arkansas, already has a relationship with Entergy – namely, that though the company isn’t actually a member it does use SPP to oversee its transmission grid.
But with moving to MISO, Entergy is getting access to some 56,000 miles of power infrastructure, and MISO already has built something called a “Day 2 market” for its members, which is essentially an arrangement allowing multiple utilities and power producers to jointly operate and dispatch their electricity a day in advance. SPP doesn’t have a Day 2 market. It says it will have one up and running by 2014, and it’s spending, it says, $100 million to put one together. But the Day 2 market consideration appears to be a big deciding factor for Entergy, and SPP’s having to play catch-up there clearly made for a problem.
“We are pleased and humbled that Entergy has chosen to join MISO,” said MISO President and Chief Executive Officer John R. Bear. “We look forward to working with Entergy, their regulators and others in the region to deliver the same value that our current members and their customers enjoy.”
“Entergy’s decision is largely based on the success of MISO’s existing markets which will bring clear, measurable benefits to the combined region,” Bear said.
The move caught a positive review from one member of the PSC…
Meanwhile, Jimmy Field, chairman of the Louisiana Public Service Commission, which regulates Entergy Louisiana and Entergy Gulf States Louisiana, described the fate of the proposal is one of the biggest decisions that the board will take up in the coming months, saying that it “sets the future course for transmission, generation and power for many years.”
“I think overall it’s positive,” Field said about the proposal. “I feel much better about an RTO than I did 10 or 12 years ago, when they were just getting started.”
SPP hasn’t commented yet, though one can imagine they’re a little unhappy about losing Entergy as a prospective member. But Cynthia Hedge-Morrell, the New Orleans City Councilwoman who chairs the council’s utility committee, did grouse about it a little. Hedge-Morrell said she was “disappointed” in the timing of the announcement. The City Council had a hearing April 13 in which MISO and SPP both made presentations about Entergy New Orleans coming on board with their networks, and at that hearing the city officials had requested more information from both.
“We had the hearing and we’re still waiting for that information from them, so if they didn’t have the information to be able to tell us which was more beneficial, I think they’re a little premature in making their announcement,” Hedge-Morrell told the Times-Picayune.
She also said she had to huddle with other city council members on the recommendation.
“I’m sure they’re just as bewildered as I am as to why there’s such a rush to make this decision when it’s going to have such long-term impact on all of us.”
But Entergy New Orleans president and CEO Charles Rice said in the company’s press release this decision wasn’t a rush job.
“The recommendation to join MISO is the result of careful and thorough analysis,” said Rice. “We expect that joining MISO will result in benefits for our customers and we believe that MISO is the best option to maintain reliable service at reasonable cost. We will work closely with our regulators at the New Orleans City Council as it reviews our transmission plans for the future.”
Entergy currently has a system-wide power agreement which leveled costs among its subsidiary companies – which include Entergy operations in Texas, Arkansas, Mississippi and Louisiana (including Entergy Louisiana and Entergy Gulf States Louisiana) and the New Orleans subsidiary. But that agreement is coming to an end due to the fact that Entergy Arkansas announced several months ago that they’ll be pulling out in December 2013. The Arkansas affiliate generates its power mostly with low-cost coal and it wasn’t interested in essentially subsidizing other areas, including New Orleans, anymore. There has been speculation that rates in New Orleans might go up as a result – though with the exploding availability of natural gas, that isn’t necessarily true either. The lower overall production costs with MISO should benefit Entergy New Orleans customers, making the overall rate structure a potential wash or even a better deal for the city; it’s too early to tell for sure.
Either way, Entergy feels signing on with a large grid like MISO will stabilize rates and lead to better service. The question is whether the regulators – in an election year – will agree.