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PUCT Staff Says Entergy Deferred Accounting for MISO Costs Dependent on Proof Transition Needed to Qualify Power Region
October 6, 2011
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The PUCT has authority to pre-approve deferred accounting sought by Entergy Texas, Inc. in relation to its proposed integration into the Midwest ISO only if Entergy Texas, "proves that such pre-approval is necessary in order for ETI to join an RTO so that the ETI service area can move towards a more robust competitive wholesale [] market and ultimately the Commission can certify the power region in which ETI is located," PUCT Staff said in a brief on threshold issues (39741).
Entergy Texas has sought to defer certain expenses related to its sought transition to MISO. The instant docket is solely addressing the request for deferred accounting, and not authority to join MISO.
Staff argued that prior provisions of PURA under which the Commission has allowed deferred accounting do not apply in this instance. However, Staff said that deferred accounting is authorized if such treatment is necessary to carry out the provisions of PURA.
PURA Sec. 31.002(c) states that the development of a competitive wholesale electric market is in the public interest. PURA 39.001(b)(1) states that it is in the public interest to implement a competitive retail market that allows each retail customer to choose the customer's provider of electricity.
Under PURA 39.104, the Commission delayed customer choice at Entergy Texas because, "institutions were not in place or were inadequate to ensure a viable competitive market in the [Entergy Texas] service area."
Later, the legislature enacted PURA 39.453 stating that the Commission may not authorize customer choice until the Commission certifies the applicable power region as a qualifying power region under PURA.
One of the requirements for a qualifying power region is, "a sufficient number of interconnected utilities in the power region fall under the operational control of an independent organization as described by Section 39.151." Section 39.151 provides that a power region outside of ERCOT qualifies as an independent organization if FERC has approved an RTO for the region, and found that the RTO meets these additional requirements:
(1) Ensures access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms;
(2) Ensures the reliability and adequacy of the regional electrical network;
(3) Ensures that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information; and
(4) Ensures that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers in the region.
"Therefore, a precondition to certifying a power region outside of ERCOT is that the utility join a FERC-approved RTO that FERC found meets the requirements of PURA 39.151(a). The legal standard that should apply to determine whether to approve ETI's application in this docket is whether granting ETI's application is necessary in order for ETI to join such an RTO so that the ETI service area can move towards a more robust competitive wholesale [] market and ultimately the Commission can certify the power region in which ETI is located," Staff said.
PURA 31.002(12) defines power region as a, "contiguous geographical area which is a distinct region of the North American Electric Reliability Council."
Staff said that, "[i]t is important to note that ETI is currently in the Southeastern Reliability Council (SERC) and only a small portion of SERC appears to overlap with any FERC-approved RTO. Therefore, in the current docket, ETI must prove that joining MISO would facilitate the Commission's certification, pursuant to PURA 39.152, of the power region in which ETI is or will be located. In addition, as indicated in the immediately preceding paragraph, ETI must prove that FERC has determined that MISO meets the requirements [of] PURA 39.151(a)," Staff said.
Matters finds this position interesting in that it essentially forces Entergy Texas, in order to receive deferred accounting, to prove that the MISO meets the certification of a "qualifying power region" under PURA (though Staff does state that Entergy Texas must only prove that MISO membership "would facilitate" such a finding). In any event, it seems the only way Entergy Texas could prove such a finding is through a Commission determination making such a finding, essentially advancing an issue which otherwise would have been determined in Entergy Texas' coming application for authority to join MISO, and not simply a request for deferred accounting.
This implicates a range of issues including whether alternative power regions could be qualified, whether Entergy's limited connection with MISO creates a workable power region for retail suppliers, and whether MISO, which is subject to FERC jurisdiction with FERC having shown hostility to retail market issues (see the Seams Elimination Charge Adjustment among other things), can support the Texas model of retail choice.
Texas Industrial Energy Consumers, however, said that in the absence of the authorization for deferred accounting to maintain financial integrity, all prior grants of deferred accounting were approved due to a regulatory requirement or law with which the parties seeking deferrals had to comply.
"Those facts do not exist here," TIEC said.
"[T]he Commission [has] allowed deferred accounting for expenses that resulted from a regulatory mandate, rather than voluntary expense such as the expense related to ETI's MISO transition costs," TIEC added.
TIEC further noted that, for more than a decade, "ETI has incurred ongoing internal and third party legal, regulatory, and consulting costs related to investigating RTOs, transitioning to competition, separating Entergy Gulf States, Inc. (EGSI) into two business units, litigating System Agreement proceedings, and establishing an Independent Coordinator of Transmission (ICT). In the last five years, ETI has had two full rate proceedings in which its entire test year cost-of-service was examined. TIEC is unable at this time to quantify precisely how much of ETI's RTO-related transition costs are already recovered through the rates set in ETI's last rate case. However, the kinds of costs for which ETI seeks recovery (e.g., legal, regulatory, consulting and software) were certainly included in the rates resulting from ETI's last rate case. Further, it appears that RTO-related costs were part of ETI's test year cost-of-service in ETI's last rate case, Docket No. 37744, as well as costs for other competition-related activities," TIEC added.
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