FERC Filings
Motion of EPSA for Leave to Intervene and Comment on an Entergy Independent Coordinator of Transmission
III. COMMENTS
A. The SPP RTO is Superior to Entergy’s ICT
With the options for configuring a Southeast RTO having become more limited by the abandonment of the SeTrans proposal, the Commission needs to insist that Entergy join the only RTO to which it is interconnected, SPP. The demise of SeTrans precludes a Southern Company and Entergy RTO for the time being. Concurrently, Entergy’s proposals to form a stand-alone transmission-owning entity have received support from only one of its state regulatory entities.
Entergy has proposed four different structures for its transmission system, each attempting to accommodate Entergy’s desire to retain both ownership and control of its transmission assets through a Transco. Entergy’s state regulators have repeatedly voiced their opposition to an Entergy-only transmission organization. Despite this opposition, Entergy has continued to put forth proposals that lack the functional independence necessary to ensure non discriminatory open access to its portion of the transmission grid.
Entergy once wanted to be part of SPP and its reasons for that interest are still relevant. Initially, the Commission rejected Entergy’s proposal to be a Transco within SPP in a binary RTO structure, citing concerns about the lack of scope. However, the Commission has since changed its Order No. 2000 scope requirements, and should now reconsider the reasons Entergy gave in its original filing to become part of SPP: increased regional scope, increased independence, and elimination of pancaked rates. Integrating SPP and Entergy will establish a more liquid RTO market that covers 400,000 square miles across eight states.
While EPSA has some concerns about SPP’s evolving RTO framework, SPP is working with stakeholders and FERC to comply with Order No. 2000. With several steps still to go, SPP is in the best position to reach a well-functioning competitive wholesale market for the mid-south region of the country. In contrast, Entergy generated this ICT proposal very quickly and without a stakeholder process, with no indication that it intends to convene an ICT stakeholder process in the future. Therefore, the ICT represents a unilateral Entergy proposal that has no basis for widespread support and the potential to unnecessarily waste stakeholder resources.
The bottom line is that Entergy’s ICT does not aspire to become compliant with Order No. 2000, while the SPP RTO does. Entergy, not the ICT, will retain operational authority and functional control over the transmission system and will continue to operate its own tariff. Additionally, Entergy will control short-term reliability and retain authority over all interchange schedules and redispatch. Furthermore, the ICT will have no responsibility to manage parallel path flow, ancillary services or OASIS. Conversely, the SPP RTO is responsible for all these Order No. 2000 functions.
Additionally, Entergy’s ICT proposal does not address seams issues. While Entergy has begun seams negotiations with SPP, these negotiations have been acknowledged subsequent to the ICT filing and the voluminous stakeholder opposition to the ICT proposal, as demonstrated in the Arkansas ICT investigation docket. SPP, on the other hand, has been pursuing a seams agreement with MISO with the specific intent to form a joint and common market with MISO and PJM in compliance with the Commission Order. If Entergy becomes part of SPP, discussion of the seams between Entergy and several SPP members would be more effective. A seams agreement negotiated with Entergy as part of SPP would also have the benefit of using SPP’s stakeholder processes: an open collaborative process that considers the regions overall interests, rather than negotiations between entities with less likelihood of success.
Finally, having Entergy and SPP RTO transition to fully functioning competitive wholesale markets together will allow more efficient and timely progress and bring measurable consumer benefits to the region. Integrating Entergy and SPP will promote a single RTO development effort, at lowest cost, allowing parties to work toward a common goal and a common market structure. Entergy’s transition to SPP will work best if the Commission enforces the recommendations made by the Joint Respondents and refers to EPSA’s Essential Elements of Competitive Wholesale Markets.
B. ICT Proposal Consideration
Having Entergy join SPP is a natural fit that will best further the Commission’s agenda of promoting regional competition wholesale markets. However, should the Commission decide to consider Entergy’s proposed tariff changes, EPSA finds three critical areas of the proposal that are flawed: the ICT lacks independence, the transmission planning and pricing proposals are inconsistent with Order 2003-A and Entergy’s market power remains unresolved and unmitigated. It is also noteworthy that these flaws are all being addressed or have been addressed by SPP.
1. Independence
The ICT’s independence is in title only, and the entity will rarely if ever exercise
the independence envisioned by the Commission in Order No. 2000. Many of the proposed tariff changes take away from, or fail to give, the grid responsibilities that the ICT needs for true independence from market participants.10
Entergy proposes that the ICT have two types of authority: Oversight Authority and Decisional Authority. The distinction between the two is the ICT’s ability to require compliance of market participants with its decisions. For matters within its Decisional Authority, the ICT can require compliance pending resolution of any conflict. For matters within Oversight Authority, Entergy’s position controls pending dispute resolution.11 The ICT’s independent decision-making authority is further handicapped since “…Entergy generally will not be obligated to follow the ICT’s recommendations[.]”12
A significant number of the responsibilities of the ICT fall under “Oversight Authority” rather than “Decisional Authority,” thereby giving the ICT little actual responsibility. In Attachment S - § 2.2(a), Entergy asserts that the “ICT’s decision making process will be independent of control by any Market Participant including the Transmission Provider.” Despite that claim throughout the tariff, however, Entergy does not cede any meaningful decisions to the ICT. Even when the ICT can make a decision, Entergy typically retains the ability to influence or override the outcome.
Entergy states that the ICT’s independence is demonstrated by its “authority to collect and analyze data relevant to its responsibilities, and submit periodic and ad-hoc reports directly to Interested Government Agencies.” Though the ICT reports can include recommendations, these reports will have neither the authority or the impact that the ICT needs and would have under FPA Section 205 or 206. A report on a tariff issue is not as authoritative and would not provide stakeholders the opportunity to comment that a Section 205 filing would. Furthermore, there is no requirement to even file these reports, and it is unclear what weight these reports would hold, especially since Entergy’s position prevails during resolution of disputes. Consequently, the ICT’s reports will not provide meaningful independent analysis or recommendations.
2. Transmission Planning and Cost Allocation
Under Attachment S, the ICT has decisional authority over cost allocation for any new transmission facilities identified as necessary to grant new transmission or interconnection service requests, but must use Entergy’s planning standards. These standards substantially determine pricing and therefore use Entergy’s standards to make decisions. The ICT needs to be able to create its own transmission planning and cost allocation standards to be able to render decisions that market participants will have confidence in.
Attachment T, “Recovery of New Facilities Costs,” states “… the ICT will independently determine whether an upgrade should be included in the Base Plan.” However, the Base Plan is developed by Entergy and the ICT is required to follow Entergy’s direction. If the ICT is to be independent and to make decisions about which facilities are Base Funded and therefore rolled in, it must develop the rules for making such determinations, and not be bound by Entergy’s rules.
Attachment T clearly is inconsistent with Order No. 2003-A and the Commission’s Transmission Pricing Policy, and is not consistent with or superior to the pro-forma OATT. Therefore it should be rejected by the Commission. Entergy’s division of upgrades into “Base Plan Upgrades” and “Supplemental Upgrades” determines whether or not the cost will be rolled in or the interconnecting party will be charged an incremental rate. However, this division does not arise from the issue raised by the Commission in Order No. 2003-A:
Where rolling in the costs of network upgrades incurred for an interconnection would have the effect of raising the average embedded cost paid by existing customers, the Transmission Provider may elect to charge an incremental cost rate to the interconnection customer and thereby fully insulate existing customers from the costs of any necessary upgrades.
The process by which projects are placed in the Base Plan or supplemental categories is too susceptible to manipulation by Entergy to qualify as “independent” as is required by Order 2003-A. Entergy, not the ICT, develops the Base Plan, which does not include upgrades, associated with qualifying generating resources. Entergy, not the ICT, determines what upgrades are necessary and estimates costs. If the ICT determines a proposed upgrade will decrease costs of (or eliminate need for) base plan upgrades, it will deem that the cost of avoided Base Plan upgrade shall be recovered through Entergy’s transmission revenue requirement and the remainder of the proposed upgrade will be treated as supplemental.
3. Market Power
Entergy’s ICT proposal does not adequately address either generation or transmission market power. As the Commission deliberates new market power screens and considers input from experts, it would not be prudent to allow an entity that the Commission has found to have market power to be able to perpetuate that market power. In this case, this is particularly true because the proposed structure is not independent and does not propose any market power mitigation.
Entergy’s proposal to allocate interconnection costs will only serve to enhance Entergy’s market power in its control area. New generation entrants intending to serve loads within Entergy’s control area will find it difficult to surmount the entry barrier presented by the ICT’s proposed pricing protocol. These entrants will have difficulty funding the substantial network transmission additions that they may need to qualify alternative suppliers as new network resources. This in turn will reduce the universe of suppliers in the energy and ancillary services markets, exacerbating market power concerns in the Entergy region.