Only three days after the Mississippi Public Service Commission unanimously rejected a proposal by Entergy Corp. to spin off its 15,400 miles of transmission lines to ITC Holdings, Entergy announced the two companies were ending pursuit of the deal.
Entergy didn’t mention the Mississippi regulator’s decision in its announcement.
The Federal Regulatory Commission approved the spinoff in June, but the proposed $1.8 billion deal also required Entergy to receive approval from each one of its state regulators.
Entergy and ITC, based in Novi, Mich., announced the proposed deal Dec. 5, 2011. Entergy had agreed to spin off its electric transmission business to a new entity and merge it with a subsidiary of ITC.
“While we strongly believe that the transaction would be in the best interest of our customers and all stakeholders, it is clear we don’t have the necessary regulatory support to close the transaction,” Leo Denault, Entergy’s chairman and chief executive officer, said in a statement.
The case had not come to a hearing before the Arkansas Public Service Commission. But the general staff of the Arkansas commission had determined that the transaction wasn’t in the public interest, said John Bethel, executive director of the general staff.
“We didn’t identify sufficient benefits relative to the costs associated with the transaction,” Bethel said. “We didn’t observe that Entergy would gain anything through this transaction that it didn’t already have as a member of [Midcontinent Independent System Operator].”
Midcontinent is a regional transmission operator that operates the electricity grid in 15 states and the Canadian province of Manitoba.
Entergy didn’t have many options when the deal was denied by the Mississippi regulator, said David Cruthirds, a Houston regulatory law-yer and publisher of energy newsletter “The Cruthirds Report.”
“If it were a close call or [the Mississippi regulator] needed some conditions, [Entergy] would have been in conversations [with the regulator],” Cruthirds said. “But [the Mississippi regulator] just basically rejected it all.”
Since 2010, the Department of Justice has been investigating Entergy Corp.’s competitive practices in Arkansas, Louisiana, Mississippi and Texas.
“The Department of Justice’s investigation continues to be the wild card,” Cruthirds said.
Cruthirds said the Department of Justice initially told Entergy that it had to join a regional transmission organization and sell its transmission system.
“So it’s not entirely up to Entergy what’s going to happen next,” Cruthirds said.
Entergy has about 15,400 miles of interconnected transmission lines at voltages of 69 kilovolts and above, as well as substations.
“We have operated our transmission system for 100 years, and we’re ready and excited about continuing to do so well into the future,” Denault said in the statement.
Entergy Arkansas has about 700,000 customers. Entergy Corp. supplies electricity to 2.8 million customers in Arkansas, Louisiana, Mississippi and Texas.
Business, Pages 29 on 12/14/2013