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Four states discuss Entergy’s power purchasing practices

At the E-RSC’s second conference, regulators from Mississippi, Arkansas, Louisiana and Texas discussed Entergy’s power purchasing practices and transmissions system. More than 50 people attended the meeting, a number of whom represented Entergy. Others included Cleco Power, NGR Energy, Suez, Southwest Power Pool, Federal Energy Regulatory Commission (FERC), Entegra Power Group, Cottonwood Energy and consultants.

The bipartisan E-RSC comprises Democrats Brandon Presley, chair of the Mississippi Public Service Commission; Paul Suskie, chair of the Arkansas Public Service Commission; and a representative for the City of New Orleans; as well as Republicans James Field, a Louisiana Public Service Commissioner; and Kenneth Anderson Jr., a commissioner for the Public Utility Commission of Texas.
While Entergy supports the E-RSC, saying that looking at the Entergy transmissions system regionally will result in the best system for all states, some regulators, including Mississippi’s Presley have a different view.

“The real reason for this committee is transparency,” Presley said. What is at stake is millions of dollars for rate payers, and Entergy should be held accountable, he said.

Public utilities such as Entergy are monopolies regulated by state public service commissions and are obligated to provide electricity at the lowest possible rates to customers. IPPs own plants throughout the southeast and purchase the use of transmissions lines from utilities such as Entergy to distribute their power to various states on the open market. IPPs are not limited to a specific service area. Utilities such as Entergy also sell to the wholesale market and therefore compete with the IPPs. IPPs physically located in Mississippi include KGEN, LS Power, Reliant and Magnolia Energy, LP.

In some instances IPPs, which often have newer facilities, can produce electricity more efficiently and thus likely more cheaply than a large, investor-owned utility power plants.

Typically, IPPs can only distribute their electricity if transmission lines can accommodate their energy at a given time. State Attorney General Jim Hood and others believe Entergy has neglected its transmissions system and intentionally kept IPPs from using its infrastructure to ship its power, which is sometimes cheaper for rate payers.

Regulators also question whether Entergy is running its older power plants, or legacy units, when the company should be buying power from smaller, more efficient IPPs.

Entergy’s View
Charles Long, manager of transmissions planning for Entergy in Mississippi and Arkansas, said Entergy is also concerned about costs to rate payers, who will end up paying for infrastructure improvements with their electricity bills. The “rift” between Entergy and regulators is over determining who should pay what share of the transmissions improvements, Long said.

“If we build, build, build a relatively poor group of people will be paying for those upgrades on their electric bills, Long said. “We have to make sure when we build it’s good for the people who pay to build it.”
Long said transmissions improvements could benefit out-of-state sales, because IPPs are not bound to sell energy within state lines.

The cost of capital for these infrastructure improvements is high, Long said. Although IPPs pay transmission fees to use Entergy infrastructure, they benefit by not having to front the high cost of capital for the improvements, he said.

Many of the issues are not black and white, Long said, and he doesn’t foresee the discussions getting any easier.

John Hurstell, Entergy’s vice president of energy management, said one of Entergy’s goals is to educate regulators about legacy plants. Yes, IPPs have better heat rates and are more efficient, but a power-purchasing decision can’t always be made based on heat rate, he said.

Hurstell used the example of a Toyota Prius versus a Honda Civic. If you own a Civic, why don’t you buy a Prius since it gets even better gas mileage? Hurstell asked. Because the Prius costs more money, and you look at the total cost. You can’t just make decisions based on gas mileage or, in the case of a utility, heat rate, he said.

“No one has ever told us we have to shut down (legacy) plants,” Hurstell said.

The Discussion Continues
After its working group has done more research, the E-RSC will reconvene in May.

The E-RSC recently hired former Bush-appointed FERC commissioner, Nora Brownell, as its consultant. Brownell is a founding partner of Virginia-based ESPY Energy Solutions LLC.

Brownell said state regulators are being responsible by participating in the E-RSC.

“This is about economic development… in one of the poorest regions of the country,” Brownell said. “The question is, Are you running your assets in the best interest of the people paying the bills? The answer is no. And no one at Entergy can explain why… This is a publicly held company funded by rate payers who are held captive.”

Regarding the strengthening of transmissions lines, Brownell said, “There is community responsibility involved in being a monopoly.”

Entergy’s transmission system comprises 15,500 miles of high-voltage transmission wires and has a total capacity is 23,000 megawatts.

The company as a whole delivers power to 2.7 million people in the four Southern states. Entergy Mississippi provides electricity to more than 433,000 customers in 45 Mississippi counties.

The Mississippi Business Journal was the only media outlet represented at the E-RSC meeting.


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