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FERC Filings

EPSA's Motion For Leave to Intervene and Comment on Entergy Services Inc.

Comments

A. Independence
Many of the proposed ICT enhancements address items EPSA protested in its June 30, 2004 comments on the initial proposed OATT changes to establish the ICT. EPSA appreciates Entergy’s response to stakeholder input. The recent enhancements address instances where Entergy retained control of operational responsibilities that undermined the independence of the ICT. Those enhancements include:

• The ICT can grant or deny transmission service for both new network resources and for short-term point-to-point customers;
• The ICT will calculate Available Transfer Capacity (ATC);
• The ICT will maintain the Entergy OASIS site;
• The ICT will integrate Entergy’s base plan for transmission planning with other regional transmission entities.

While EPSA applauds these proposed changes, there remains concern that the ICT if not FERC jurisdictional but under contract with Entergy, will not be sufficiently independent from Entergy, thus undermining the ability of the ICT to carry out these enhancements. Hence, despite these changes, the potential for discrimination still exists.

From the outset, the ICT selection and contracting processes have been problematic. Entergy submits that the ICT need not be FERC jurisdictional based on the contractual relationship between Entergy and the ICT. However, this contractual relationship allows Entergy to hire and pay the ICT, an arrangement that gives market participants little confidence that the ICT will be independent either in perception or reality. Stakeholder input and FERC approval are not a part of the initial selection process; they may only comment after Entergy has selected the ICT and filed the contract. Therefore it would appear that Entergy will define and apply its own criteria narrowing the choices to those candidates willing to accept the Entergy contract as designed by the company. Consequently, Commission review comes too late in the selection process.

Entergy dismisses interveners’ protests in Docket No. ER04-699-000 and likens those complaints to arguments opposing the selection of the SeTrans Independent System Administrator (ISA) that the Commission rejected. However, an independent stakeholder advisory committee was able to comment on the SeTrans ISA selection process before the ISA was chosen by the SeTrans’ sponsors. Entergy does not have a similar process in place for the selection of the ICT. Entergy will make a selection and design the ICT contract without any stakeholder input, providing stakeholders with little confidence in the independence of the ICT arising out of that process.

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 nor the impact that would be conveyed under FPA Section 205 or 206. Such authority is critical to the success of an ICT. A mere report on tariff issues would not provide stakeholders the opportunity to comment, as they would have under Section 205. 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.

The problem with not treating the ICT as a public utility is that only Entergy will be able to exert control over the ICT’s oversight activities by virtue of its contract with the ICT. However, Entergy’s interest is a limited one. Rather that being interested in ensuring that the ICT actually exercises its oversight responsibilities, Entergy’s true interest is in ensuring that the ICT maintain the appearance of exerting such oversight. By contrast the Commission, as the agency responsible for safeguarding the public interest, has an institutional interest in ensuring that the ICT actually does its job properly. Moreover, only the Commission can exert direct control over the ICT by issuing orders and imposing penalties under the FPA. Consequently, the Commission needs the ICT to be a public utility that is thereby FERC jurisdictional.

B. Transmission Planning and Pricing
The Entergy petition largely restates the ICT transmission planning and pricing proposal as set out in the initial March 31, 2004 ICT filing; therefore, many of the concerns EPSA expressed in its June 30, 2004 comments are unchanged. However, Entergy lists three enhancements to its transmission planning function: (1) the ICT will examine Entergy’s base transmission plan, “using local, regional and NERC criteria” and validate whether the criteria have been applied correctly; (2) the ICT will integrate Entergy’s base plan with the other transmission entities in the region; and (3) while the ICT cannot order the construction of new facilities, it can report discrepancies to Entergy’s regulators.

The petition’s transmission planning enhancements contain little that will improve the process. First, if FERC does not have jurisdiction over the ICT, the Commission can have little confidence that the ICT will appropriately carry out enhancement 1 to the Commission’s satisfaction. Second, how the ICT integrates Entergy’s base plan regionally will “depend” on whom Entergy selects as the ICT. The process by which the ICT will determine upgrades is not included in the proposal. While this process is important to stakeholders, they will not be given the opportunity to review or comment on it, and will hence have little confidence that the integration process will be non-discriminatory. Lastly, enhancement 3 purports that new transmission facility construction will be ensured due to ICT reports of reliability violations to regulators, a process Entergy likens to an RTO’s use of its authority to get facilities built. However, while a FERC jurisdictional entity like an RTO must meet its regulatory obligation, the proposed non-jurisdictional ICT may only raise the issue with FERC and state regulators. While the Commission ensures and monitors an RTO’s compliance, the ICT can only submit a complaint against Entergy, its employer. Stakeholders cannot be confident that the ICT will bring a complaint against its benefactor.

Under the proposal, the ICT has decisional authority over cost allocation for any new transmission facilities identified as necessary to grant new transmission or interconnection service requests, based on Entergy’s planning standards. These planning standards substantially determine pricing; hence Entergy is again in the position of largely dictating price outcomes. The ICT needs the authority to create its own transmission planning and cost allocation standards in order to render decisions that are fair and market participants have confidence.

In its proposal, 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 the avoided Base Plan upgrade will be recovered through Entergy’s transmission revenue requirement and the remainder of the proposed upgrade will be treated as supplemental.

The petition proposes a pricing process that implements the principles of “higher of” pricing put forth in Order No. 2003-A for transmission upgrades. All transmission system upgrades would be designated as either part of the Base Plan or supplemental upgrades. After transmission customers put in their transmission service requests, Entergy (under the oversight of the ICT) will determine if upgrades are needed. The Base Plan is designed to assure that sufficient transmission capacity exists to honor all long-term-firm, point-to-point and network transmission service commitments. The ICT will then decide whether the upgrade can be included in the Base Plan or will be a supplement upgrade. This process is too highly susceptible to manipulation by Entergy to qualify as independent, as required by Order 2003-B.

Entergy contends in the petition that the pricing proposal does not constitute “and” pricing and that the Commission has long held that the prohibition on “and” pricing does not preclude a transmission provider from charging an embedded cost rate for existing service and an incremental rate for new service requested by the same customer. Entergy’s reasoning is largely based on the Commission’s decision in the PJM case. The decision in PJM was premised on the independence of the entity implementing the pricing plan. As asserted above, a non-jurisdictional ICT will not be sufficiently independent, and therefore will not be able to independently implement Entergy’s pricing policy. Moreover, the proposed ICT’s implementation of Entergy’s pricing proposal to PJM is not comparable to the PJM model. The PJM decision relied on a working congestion management system. The Entergy system does not have a congestion management system at all, much less equitable to that in PJM, and its ability to implement a comparable congestion management system is not imminent.