Entergy 2012 Annual Report Download - page 42

Entergy Corporation and Subsidiaries 2012
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS continued
(Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri,
Montana, North Dakota, South Dakota, and Wisconsin) and also
in Canada. Each of the Utility operating companies filed an applica-
tion with its retail regulator concerning the proposal to join MISO
and transfer control of each company’s transmission assets to MISO.
The applications to join MISO sought a finding that membership in
MISO is in the public interest. Becoming a member of MISO will not
affect the ownership by the Utility operating companies of their trans-
mission facilities or the responsibility for maintaining those facilities.
Once the Utility operating companies are fully integrated as mem-
bers, however, MISO will assume control of transmission planning
and congestion management and, through its Day 2 market, MISO
will provide schedules and pricing for the commitment and dispatch
of generation that is offered into MISO’s markets, as well as pricing
for load that bids into the market.
The LPSC voted to grant Entergy Gulf States Louisiana’s and
Entergy Louisiana’s application for transfer of control to MISO, sub-
ject to conditions, in May 2012 and issued its order in June 2012.
On October 26, 2012, the APSC authorized Entergy Arkansas
to sign the MISO Transmission Owners Agreement, which Entergy
Arkansas has now done, and move forward with the MISO integra-
tion process. The APSC stated in its order that it would give condi-
tional approval of Entergy Arkansas’s application upon MISO’s filing
with the APSC proof of approval by the appropriate MISO entities
of certain governance enhancements. On October 31, 2012, MISO
filed with the APSC proof of approval of the governance enhance-
ments and requested a finding of compliance and approval of Entergy
Arkansas’s application. On November 21, 2012, the APSC issued
an order requiring that MISO file a “higher level of proof” that the
MISO Transmission Owners have “officially approved and adopted”
one of the proposed governance enhancements in the form of sworn
compliance testimony, or a sworn affidavit, from the chairman of
the MISO Transmission Owners Committee. On January 7, 2013,
MISO filed its Motion for Finding of Compliance with the APSC’s
order, with supporting testimony, including a copy of the testimony
of the Chairman of the MISO Transmission Owners Committee in
support of a filing at the FERC made January 4, 2013, on behalf of
MISO and a majority of its transmission owners, jointly submitting
changes to Appendix K of the MISO Transmission Owner Agreement
to implement the governance enhancements. MISO stated that the
evidence submitted to the APSC showed that a majority of the MISO
Transmission Owners have adopted and approved the MISO gov-
ernance enhancements and the joint filing submitted to FERC on
January 4, 2013, and asked that the APSC find MISO in compliance
with the conditions of the APSC’s October 26, 2012 order, and that
the APSC expeditiously enter an order approving Entergy Arkansas’s
application to join MISO.
On January 23, 2013, Entergy Arkansas filed a Motion to
Discontinue Activities Necessary to Operate as a True Stand-Alone
Electric Utility, with supporting testimony, in which Entergy Arkansas
requested an order from the APSC authorizing it to drop the stand-
alone option by March 1, 2013. Consistent with the conditions enu-
merated in a previous APSC order, Entergy Arkansas’s testimony
stated that there is a low risk that MISO’s integration of Entergy
Arkansas will not be successfully completed on time.
In September 2012, Entergy Mississippi and the Mississippi Public
Utilities Staff filed a joint stipulation indicating that they agree that
Entergy Mississippi’s proposed transfer of functional control of its
transmission facilities to MISO is in the public interest, subject to certain
contingencies and conditions. In November 2012 the MPSC issued an
order approving a joint stipulation filed by Entergy Mississippi and the
Mississippi Public Utilities Staff, concluding that Entergy Mississippi’s
proposed transfer of functional control of its transmission facilities is
in the public interest, subject to certain conditions.
In November 2012 the City Council issued a resolution concern-
ing the application of Entergy New Orleans. In its resolution, the
City Council approved a settlement agreement agreed to by Entergy
New Orleans, Entergy Louisiana, MISO, and the advisors to the City
Council related to joining MISO and found that it is in the public
interest for Entergy New Orleans and Entergy Louisiana to join
MISO, subject to certain conditions.
Entergy Texas submitted its change of control filing in April 2012.
In August 2012 parties in the PUCT proceeding, with the exception
of Southwest Power Pool, filed a non-unanimous settlement. The sub-
stance of the settlement is that it is in the public interest for Entergy
Texas to transfer operational control of its transmission facilities to
MISO under certain conditions. In October 2012 the PUCT issued
an order approving the transfer as in the public interest, subject to
the terms and conditions in the settlement, with several additional
terms and conditions requested by the PUCT and agreed to by the set-
tling parties. In particular, the settlement and the PUCT order require
Entergy Texas, unless otherwise directed by the PUCT, to provide by
October 31, 2013 its notice to exit the System Agreement, subject
to certain conditions. In addition, the PUCT order requires Entergy
Texas, as well as Entergy Corporation and Entergy Services, Inc., to
exercise reasonable best efforts to engage the Utility operating com-
panies and their retail regulators in searching for a consensual means,
subject to FERC approval, of allowing Entergy Texas to exit the System
Agreement prior to the end of the mandatory 96-month notice period.
With these actions on the applications, the Utility operating com-
panies have obtained from all of the retail regulators the public inter-
est findings sought by the Utility operating companies in order to
move forward with their plan to join MISO. Each of the retail regu-
lators’ orders includes conditions, some of which entail compliance
prospectively.
In December 2012 the PUCT Staff filed a memo in the proceeding
established by the PUCT to track compliance with its October 2012
order. In the memo, the PUCT Staff expressed concerns about the
effect of Entergy Texas’s exit from the System Agreement on power
purchase agreements for gas and oil-fired generation units owned by
Entergy Texas and Entergy Gulf States Louisiana that were entered
into upon the December 2007 jurisdictional separation of Entergy
Gulf States, Inc. and, further, expressed concerns about the implica-
tions of these issues as they relate to the continuing validity of the
PUCT’s October 2012 order regarding MISO. Entergy Texas subse-
quently filed a position statement relating that Entergy Texas’s exit
from the System Agreement would trigger the termination of the
power purchase agreements of concern to the PUCT Staff. Entergy
Texas expressed its continuing commitment to work collaboratively
with the PUCT Staff and other parties to address ongoing issues and
challenges in implementing the PUCT order including any poten-
tial impact from termination of the power purchase agreements. In
January 2013, Entergy Texas filed an updated analysis of the effect
of termination of the power purchase agreements indicating that
termination would have little or no effect on Entergy Texas’s costs.
An independent consultant has been retained to assist the PUCT Staff
in its assessment of the analysis.
The FERC filings related to the terms and conditions of integrat-
ing the Utility operating companies into MISO are planned to be
made by mid-2013. The target implementation date for joining MISO
is December 2013. Entergy believes that the decision to join MISO
should be evaluated separately from and independent of the decision
regarding the proposed transaction with ITC, and Entergy plans to
continue to pursue the MISO proposal and the planned spin-off or
split-off exchange offer and merger of Entergy’s Transmission Business
with ITC on parallel regulatory paths.
In addition to the FERC filings planned to be made by mid-2013,
there are a number of proceedings pending at FERC related to the
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