Entergy Intends to Join MISO

Notwithstanding the limited physical interconnection between the two areas, Entergy Corporation announced this morning that, "it has concluded that joining the Midwest Independent System Operator (MISO) will provide meaningful long-term benefits for the customers of the Entergy operating companies."

Entergy said that the detailed analysis supporting this conclusion will be provided to retail regulators in May, and that it anticipates submitting formal proposals to those regulators later this year, with a target implementation date for joining MISO of December 2013.

Entergy said that, "[o]ne of the advantages of joining MISO is becoming a part of its already established 'Day 2' market, or a centralized market-driven dispatch process." Although a Day 2 market is contemplated in the Southwest Power Pool, the only other operating RTO alternative considered by Entergy, its start date is not certain.

Despite what were previously estimated to be millions in net benefits from Entergy Texas disconnecting from the rest of the Entergy system, and joining ERCOT (with the other companies pursuing another RTO or revised ICT), that option was not even explored by Entergy, despite the fact such a scenario would achieve Entergy's goal of joining a currently operating Day 2 market, with the added customer benefits of having no capacity market, and removing Entergy Texas customers from FERC jurisdiction.

Entergy said that joining MISO, "could save customers more than $1 billion in power production costs for the 2013 to 2022 timeframe."

In a news release, Entergy did not describe how much of these benefits would be on a net basis; e.g., Entergy did not list costs of MISO membership (such as transmission cost socialization and capacity). In a powerpoint presentation, Entergy did report higher administrative and allocated transmission costs under SPP versus MISO, resulting in greater net benefits under MISO, but did not provide an actual figure for these benefits.

Were Entergy's proposal to be accepted, it would likely lead to customers at the operating companies, including Entergy Texas, being subject to a centralized capacity auction with a three-to-five year forward obligation imposed on load serving entities and their customers. While MISO currently uses a bilateral capacity mechanism, with a so-called "voluntary" auction, MISO has informed FERC that it will likely, at FERC's behest, file to implement a centralized, mandatory capacity auction similar to the Reliability Pricing Model in PJM (see 12/9). Again, Entergy's news release did not discuss any additional costs from MISO membership such as capacity costs, which have exceeded $1 billion in constrained areas of PJM alone.