Energy Legal Blog

Duke Energy Asks FERC to Approve MISO as ICT for Duke Facilities; Entergy and SPP Come to Terms on ICT Agreement

In a partial concession to FERC's insistence that transmission-owning utilities surrender operational control of their transmission systems to independent operators, on July 22, 2005, North Carolina-based Duke Energy asked FERC to approve amendments to its open-access transmission tariff ("OATT") that would allow the Midwest Independent Transmission System Operator ("MISO") to act as an Independent Coordinator of Transmission ("ICT") for Duke's transmission facilities.  Under Duke's proposal, MISO would oversee and administer – but not operate –Duke's transmission grid.  MISO would not have the authority to control the physical operation of Duke's transmission facilities, but would be responsible for evaluating and approving all of Duke's transmission service requests; administering its OATT; operating and administering its open-access same-time information system ("OASIS"); calculating its available transmission capacity; and coordinating transmission planning for Duke.  Duke selected Potomac Economics to act as the Independent Monitor of its transmission facilities.  As an autonomous transmission monitor, Potomac would be responsible for examining how Duke is dispatching its system, evaluating how it is using its transfer capability, and investigating potentially anticompetitive behavior. 

Transmission owners reluctant to surrender full operational control to an independent operator, including Duke, have been monitoring the progress of a similar plan being pursued by Entergy Services to have an ICT take responsibility for many of its transmission functions.  Duke's recent filing signals its apparent decision that the time was right to file its own plan with FERC, given FERC's conditional approval of the Entergy plan in March 2005 (see UPDATE Mar. 31, 2005) and Duke's own recently announced merger with Cinergy Services.  While Cinergy is a full-fledged member of MISO, Duke has made it clear that it has no intention of joining the MISO or participating in MISO's Day 2 energy markets.  Its ICT proposal, however, seeks to obtain some of the benefits of joining a regional organization without incurring some of the perceived costs.  [FERC Docket No. ER05-1236] [NEW MATTER]  

Entergy's proposal has also recently taken a giant step forward.  FERC had conditionally approved Entergy's plan in March 2005, although the agency withheld final approval pending Entergy's provision of more details.  Following FERC's decision, Entergy has been negotiating a deal with the Southwest Power Pool ("SPP"), pursuant to which SPP would act as Entergy's ICT.    On August 1, 2005, SPP's board of directors gave its ok to the deal, authorizing SPP to negotiate a contract with Entergy pursuant to which it would oversee the utility's transmission system.  Early indications are that the contract would last for two years and that Entergy would pay SPP $12 million per year.  SPP in turn would develop a separate department to carry out its ICT functions.  It proposes to oversee Entergy's transmission system, develop a new process for assigning cost responsibility for transmission upgrades, and implement a new weekly procurement process.  Even though the final contract is not expected to be worked out until Entergy's proposal receives final approval from FERC, expected in early 2006, Entergy and SPP will sign an interim agreement in the meantime, with preliminary work scheduled to begin as early as this month.  [Entergy Services, Inc., 110 FERC ¶ 61,295 2005)] [UPDATE]