LITTLE ROCK — By ordering an inquiry into Entergy Arkansas’ possibly becoming a standalone utility, the Arkansas Public Service Commission fired “a shot across the bow” at the electricity provider, an energy analyst said Friday.
The commission’s order, issued Thursday, “sends a strong signal” to Entergy Arkansas to act only in its best interest and those of its ratepayers and not those of other states, said David Cruthirds, a Houston regulatory lawyer and publisher of an energy newsletter.
“The tone is unmistakable that the commission is frustrated,” Cruthirds said. “[The order] ratchets up the pressure on Entergy to adopt reforms in the way it operates its system.”
Entergy Arkansas has been part of a system agreement with Entergy Corp.’s utility subsidiaries in four states since 1982. The agreement requires that all six Entergy subsidiaries have relatively equal costs for electricity.
But the agreement has cost Arkansas consumers more than $4.5 billion since 1985, when Arkansas was forced to subsidize the Grand Gulf nuclear power plant in Port Gibson, Miss.
In recent years, Arkansas ratepayers have subsidized Entergy’s Louisiana subsidiaries. Entergy Louisiana relies heavily on natural gas to generate electricity, which is more costly than the nuclear-fired and coal-fired generation in Arkansas. Federal regulators ordered Entergy Arkansas’ customers to pay hundreds of millions of dollars to balance roughly the electricity costs between the two states.
Entergy Arkansas’ customers need to be assured that they won’t have to face billions of dollars more in subsidy payments for the next 20 years, the commission said.
“Enough is enough,” the commission said in its order on Thursday.
Entergy Arkansas gave notice in December 2005 that it would withdraw from the system agreement by December 2013, but Entergy executives are considering developing a successor agreement. Federal regulators affirmed in December that Entergy Arkansas could withdraw from the system agreement.
Dan Daugherty, a spokes-man for Entergy Arkansas, said: “We don’t view this as a shot across the bow. We need to remember that it is the objective of both Entergy Arkansas and the commission to get Arkansans out from under the system agreement.
“We view this order as an opportunity to work with the commission to resolve some very complex issues in a way that will benefit our customers.”
A spokesman for the Arkansas attorney general’s office said staff members are still studying the order and had “no substantive comment” on it.
By becoming a stand-alone utility, Entergy Arkansas would operate its electricity generation and transmission separate from the other Entergy Corp.’s utilities but would remain a subsidiary of Entergy Corp. The Arkansas utility does not have its own board of directors.
In Thursday’s order, the commission said the General Assembly authorized it in 2007 to require Entergy Arkansas to withdraw from “centralized systemwide resource planning.”
The commission also questioned whether the fact that Entergy Arkansas is not a member of the Southwest Power Pool transmission grid is “consistent with this state’sinterests.” Southwest Power Pool is a Little Rock firm that oversees the electric grid in eight states.
Southwest operates Entergy Arkansas’ electric grid, but it is not coordinated with the grid of the other utilities in the region.
Entergy’s transmission system “has been the source of major controversy, investigation and litigation for decades at the state and federal level,” Cruthirds said.
Entergy Arkansas and Southwest failed to complete a study, which the commission had ordered, by the end of last year on a “seams agreement,” which addressed planning and managing of the electric grid.
“There are still issues on which we have not reached agreement,” said Heather Starnes, manager of regulatory policy at Southwest.
So the commission told Southwest and Entergy Arkansas to file an agreement by March 1 on all the positions on which the two agree, Starnes said.
Cruthirds joked that Entergy may consider filing a motion urging commission Chairman Paul Suskie to reconsider his recent decision not to run for Congress.
“I have no doubt that Entergy would rather see Suskie move on to Washington D.C. rather than continue his efforts to improve conditions on Entergy’s troubled system,” Cruthirds wrote Friday in his industry newsletter.
Front Section, Pages 1 on 02/13/2010