N.O. council wary that new Entergy deal could mean higher rates

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wwltv.com

Posted on September 27, 2012 at 10:18 PM

Updated Tuesday, Oct 2 at 12:06 PM

David Hammer / Eyewitness News
Email: dhammer@wwltv.com | Twitter: @davidhammerWWL

NEW ORLEANS -- For the past year, Entergy has planned to spin off its transmission businesses into a new company run by Michigan-based transmission line owner ITC.

That plan hasn’t garnered as much attention as its response to Hurricane Isaac and its effort to raise rates in October.

But emails obtained by Channel 4 through a public records request suggest that Entergy customers in New Orleans should take note.

The City Council's paid regulatory advisers, Clint Vince and Joe Vumbaco, sent an email Aug. 28 warning the council members that Entergy's plans to merge its transmission businesses with ITC and join a Midwest transmission operator group would probably cause the council to lose control over some energy rates.

“The advisers are concerned and I’m concerned,” said Councilwoman Cynthia Hedge-Morrell, the chairwoman of the Utility Committee that regulates Entergy New Orleans.

"I don't want to frighten anyone. I don't think we're going to see it immediately going in. I think there's going to be that honeymoon period. But I think beyond that, we will be part of this huge system that's almost the whole center of North America and some parts of Canada and we will be just one cog in the wheel, and there might be costs passed on to our ratepayers."

Vumbaco, who works for the council and is based in Denver, said federal regulators let utility companies claim a return on equity that’s almost 2 percent higher than Entergy is allowed right now. That means almost certainly higher transmission charges on customers’ bills.

He told the council that he has a "dramatic concern" about the ITC deal.

Hedge-Morrell said Entergy enjoyed $30 million in profit last year, and the improved business has allowed rates to go down for four years in a row.

But Council Vice President Jackie Clarkson wants to see more money put into infrastructure improvements before rates go up again.

"Especially in light of the poor restoration that we just lived through,” Clarkson said. “Not only are we not looking to see any increase but I'm looking to see a report from the head of the major corporation as to how much investment has gone into infrastructure vs. profit."

Entergy and ITC say the deal will be good for customers because it hands the transmission lines to a company that's singularly focused on electric transmission. Entergy spokesman Philip Allison said the deal:

"...improves reliability, increases capacity for investment in the grid, and yields two highly focused companies, each specializing in critical aspects of electricity generation, delivery and customer service."

Entergy has two separate requests in to the City Council. First they want to merge with ITC. Then, they want to join a Midwest transmission operators group called MISO, which acts as a sort-of air traffic controller for transmission companies. Entergy says that joining MISO will make the system more efficient and therefore save customers $46 million over 10 years.

But Arkansas regulators aren't sold on the MISO membership. They recently deferred a decision on Entergy's request to join that group in their state, saying Entergy had not met various conditions to get their approval.

Vumbaco said Entergy hasn’t provided specifics on how the ITC merger would yield savings. But the benefit to the companies and their shareholders is clear. ITC would more than double the size of its transmission network across 11 states. Entergy Corporation would get $1.78 Billion in cash. And Entergy shareholders would get a 50.1 percent ownership stake in the newly merged company.

 

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