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UPDATE 1-Entergy relinquishes control of grid after years of talk

Thursday, 19 Dec 2013 | 1:12 PM ET

Dec 19 (Reuters) - U.S. power company Entergy Corp on Thursday completed the integration of its Gulf Coast service area into the power grid that operates the Midwest power system, relinquishing control after a decade-long struggle with regulators and independent power companies.

Entergy said the move into the Midcontinent Independent System Operator (MISO) grid is projected to save its consumers $1.4 billion in the first decade.

"While this event marks the finish line for hundreds of team members who've been involved in the integration, it's really just the starting gun in our journey to capture savings and benefits for our customers," said Tom Reagan, Entergy's vice president for the MISO integration.

The move may also help Entergy resolve a U.S. Justice Department inquiry into alleged anti-competitive behavior by Entergy that independent power companies said hindered their ability to move electricity to customers for years.

"We want to take functional control of these assets out of Entergy's hands, so that gives an arm's length transaction about how transmission is built and operated," said Brandon Presley, a member of the Mississippi Public Service Commission and a long-time critic of Entergy's grid operation.

"We approved this because we are penny-pinchers," Presley said. "We want to save customers money."

Observers are hopeful that third-party control of Entergy's four-state grid will revive wholesale power trading in Arkansas, Louisiana, Mississippi and southeast Texas as the region prepares for an industrial renaissance.

Financial players will likely want to see a year or so of price history and will wait for trading to consolidate to one of the three new hubs in the region, known as MISO South.

Entergy's integration into MISO comes on the heels of a decision last week to cancel the sale of its transmission system to ITC Holdings Corp due to opposition from state regulators.

MISO now operates the power grid in 15 states in the central part of the United States from Canada to the Gulf of Mexico, and in the province of Manitoba in Canada.

Along with Entergy's five utility units, the integration included other transmission owners, six local balancing authorities and 33 new market participants in the region, MISO said.

Others include Cleco Corp ; Lafayette Utilities System; Louisiana Energy and Power Authority; Louisiana Generating, a unit of NRG Energy ; South Mississippi Electric Power Association and East Texas Electric Cooperative.

"Being part of a much larger system should provide better access to lower-cost market energy and greater efficiencies for SME-owned generation resources than if we continued to operate as a smaller, stand-alone utility," said Sara Peterson of the South Mississippi Electric Power Association.

Facing increased congestion on Entergy's grid, the East Texas Electric Cooperative began acquiring generation several years ago and coop officials see additional MISO advantages, said Chris Dawson of GDS Associates, a consultant working with ETEC.

Congestion problems "will be more readily addressed with the MISO stakeholder process," Dawson said.

"The best outcome would be that we get some desperately needed transmission upgrades in the region as a whole," said Marvin Carraway, who ran the Clarksdale, Mississippi utility for three decades before retiring in 2004.

"Whether we believe the great savings Entergy has forecast remains to be seen," said Carraway, who has been consulting with Clarksdale and another municipal utility as they joined MISO.

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