“Had this deal been approved, Louisiana ratepayers would have been burdened with over $1 billion in new transmission charges over the next 10 years.” Eric Skrmetta, Louisiana Public Service Commission chairman
Entergy Corp. and ITC Holdings Corp. announced Friday they would stop pursuing their $1.8 billion merger of the New Orleans utility’s transmission system.
The companies formally terminated the merger agreement and filed pleadings to withdraw the remaining transaction approval applications with regulators in Louisiana, Mississippi, Arkansas and Texas.
The Mississippi Public Service Commission rejected the proposal Tuesday. The deal required approval of the regulators in all the states where Entergy sells its electricity on a retail level. Turning the transmission duties over to ITC would have removed the states from regulatory oversight of those functions and given it to the federal government.
“Effectively when the Mississippi Public Service Commission said ‘no’ that changed the nature of this deal and withdrawal of that request was the right thing to do,” said Phillip R. May, president and chief executive officer of Entergy Louisiana LLC and Entergy Gulf States L.L.C., two subsidiaries that sell electricity to about 1 million retail customers in this state.
“That’s a tough thing to ask regulators to do, to give up control. It was one of those things where the benefits were uncertain but loss of control was certain,” May said, adding that the company would not refile the proposal.
“Had this deal been approved, Louisiana ratepayers would have been burdened with over $1 billion in new transmission charges over the next 10 years,” Louisiana Public Service Commission Chairman Eric Skrmetta said Friday in a statement.
“From every analysis, I could not see how this attempted transaction was in the public’s best interest. I am proud of my colleagues who joined me in holding firm against this merger.”
Leo Denault, Entergy’s chairman and chief executive officer, said in a prepared statement: “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.”
In 2011, Entergy Corp. began the process for transferring its 15,400-mile network of interconnected, high voltage transmission lines and technology into a new company owned by Entergy and ITC.
ITC, of Michigan, would have issued Entergy shareholders enough stock to give them a majority of ITC shares worth more than $2 billion. ITC would have assumed $1.78 billion in debt.
The new ITC company would have separately charged customers for moving electricity, costs that are now part of the rates Entergy charges on monthly electric bills. Generally, transmission lines move large amounts of electricity from the generating plant to substations where the volume of power is reduced to the point that it can be distributed locally to the consumer.
“We are focusing on going forward as an integrated utility with transmission. Our plan is to invest considerable dollars in transmission as part of the overall growth effort,” May said. Entergy has plans to spend $1.7 billion on the transmission system between 2014 and 2016, he said.
Entergy will continue with its plan to transfer functional control of its transmission systems to the Midcontinent Independent System Operator, Inc. at 11:01 p.m. Thursday. MISO would decide how to route the electricity on transmission lines and sell any leftover power.
May said the MISO move would save Entergy’s customers an estimated $1.4 billion over the next decade.