Texas Staff Recommend Entergy Texas, Inc. Leave Entergy System Agreement

Approval of Entergy Texas, Inc.'s (ETI) application to join the Midwest ISO should be conditioned on exiting the Entergy System Agreement (ESA), Staff of the Public Utility Commission of Texas said in portions of testimony that have now been made public after initially being redacted (40346).

The Entergy System Agreement includes, among other things, central planning and operation among the Entergy operating companies, and allocates various costs, including those related to generation and capacity, among the Entergy operating companies. Entergy Arkansas and Entergy Mississippi are in the process of withdrawing from the agreement.

"[T]he ESA would seriously erode any benefits, accrued by ETI, of Entergy joining MISO," Staff said.

Accordingly, Staff recommended ETI may join MISO only after ETI provides written notice, pursuant to the ESA, that it will terminate its participation in the ESA, and that ETI take no measures to rescind this notification without the express consent of the Commission.

Furthermore, Staff recommended that the Commission order that ETI be required to use its "best efforts" to shorten the 96-month notice period for withdrawal from the ESA, such that ETI could leave the ESA coincident with joining an RTO (in this case, the sought December 2013 start date for MISO membership).

Staff noted that ETI's application to join MISO contemplates ETI remaining subject to centralized planning under the ESA, even after it joins an RTO.

"This prevents ETI from capturing the full benefits of participating in the planning process of a larger RTO and having more direct decision-making authority regarding its transmission needs or allowing the market to meet its generation needs," Staff said.

"Further, the ESA could bias incentives for uneconomic transmission build for some of the EOCs [Entergy operating companies] because the burden is shared among other EOCs, even if the market could provide resources more efficiently," Staff said.

Staff also suggested reporting requirements related to the recommended ESA exit.

"Milestones should include, among others, plans for post-ESA generation planning on an ETI-only basis, including resource procurement; status reports on all planned and existing transmission projects in ETI's footprint (including estimated and actual budgets and in-service dates); status reports on any necessary compliance and legal agreements; developing and implementing any necessary IT applications (including budget); detailing future businesses processes; and the identification of any of high level organizational needs (including hiring plans and budget)," Staff said.

As previously reported, Staff has proposed a series of additional conditions for any approval of ETI's application to join MISO.