Entergy Corp. pact faces dissolution

It is possible that when Entergy Arkansas withdraws from Entergy Corp.’s system agreement in December it will be the beginning of the end for the pact that binds the parent company’s six utility subsidiaries.

Entergy Arkansas informed Entergy Corp. in December 2005 that in December 2013 it would no longer be part of the system agreement, which allows the firm’s utility subsidiaries to share power production costs and grid capacity.

Entergy Arkansas was contractually required to give Entergy Corp. eight years’ notice to exit the agreement, which has cost Entergy Arkansas’ ratepayers more than $4.5 billion since 1985 in federally mandated charges involving utility costs in Mississippi and Louisiana.

Entergy Mississippi will withdraw from the system agreement in 2015 and Entergy Texas has indicated it will announce by October that it’s leaving the agreement, said Leo Denault, Entergy Corp.’s chairman and chief executive officer. Denault spoke in an interview after presiding over the firm’s annual meeting Friday at Little Rock’s Marriott hotel, formerly the Peabody Little Rock hotel.

Research is being done to see if Texas can leave the agreement sooner than the required eight years, Denault said.

“The [three] Louisiana companies are doing evaluations about what happens when Texas leaves the system agreement,” Denault said. “So there appears to be some momentum to look at who does and doesn’t want to stay in the system agreement.”

The companies still will be linked in some ways, David Cruthirds, a Houston regulatory lawyer and publisher of energy newsletter The Cruthirds Report, said in a telephone interview.

“They’ll be more responsible for their own [power] generation,” Cruthirds said.

Should the system agreement evaporate, there is still nothing to prevent Entergy Corp. from reaching future agreements with its subsidiaries, even if not in the same form, Cruthirds said.

“I think they’ll need some form of intracompany agreements because they’ll still deal with each other,” Cruthirds said.

In December, Entergy Corp. and all of its utilities will join the Midwest Independent Transmission System Operator, a regional transmission organization that routes electricity throughout its 13-state area. The move is expected to save Entergy Arkansas customers as much as $260 million over 10 years and the corporation up to $1.4 billion.

“[Midwest] is the most efficient [regional transmission organization] that we could find and is more beneficial to customers,” Denault said.

On other topics, Denault said:

Entergy Corp. expects the spinoff of its transmission system of 15,800 miles of high-voltage transmission lines to ITC Holdings Inc. of Novi, Mich., to be completed this year.

It is too early to say what plans Entergy Corp. has for two older coal plants in Arkansas. Entergy Arkansas operates the plants - White Bluff in Jefferson County, which started in 1980, and a plant in Independence County, which began production in 1983.

“There are environmental regulations that can impact the programs at those plants,” Denault said. “As soon as that gets cleared up, that will help us know what is expected of us and how much it will cost.”

If scrubbers are added to help clean emissions from the plants, the company would have until 2019 to do so, said Hugh McDonald, Entergy Arkansas’ chief executive officer.

Entergy Arkansas is the state’s largest power provider with about 700,000 customers.

Entergy Corp., which is celebrating its 100th year in business, held its annual meeting in Little Rock because the predecessor to the company was founded in Arkansas in November 1913.

Business, Pages 27 on 05/04/2013

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