By Amanda Durish Cook

An Entergy subsidiary will purchase a financially struggling natural gas plant to satiate a need for additional capacity in MISO’s Mississippi territory.

Entergy Mississippi gained FERC approval on Thursday to purchase the 810-MW Choctaw Generating Station near French Camp, Miss., for $314 million from NRG Wholesale Generation (EC19-63).

FERC said the transaction was unlikely to adversely impact rates or competition and would not create a regulatory gap or raise cross-subsidization issues.

The plant, located on the border of the Entergy Mississippi and Tennessee Valley Authority transmission systems, will move from the TVA balancing authority into MISO’s.

The plant will also cease to be operated as merchant generation under Entergy’s ownership. Entergy said it will spend $401.4 million to purchase and upgrade the plant. The company said the amount was “significantly less than the cost to build a comparable facility and eliminates construction time and risks associated with building a new plant, providing more immediate benefits and savings for customers.”

Choctaw was developed as a merchant generating facility, but Entergy and NRG said the plant has been in financial straits since being placed in-service in 2003. The plant was mothballed for about three years from 2004 to 2007, and one of its three combustion turbines was quieted for seven years from 2010 to 2017.

“Choctaw has been and continues to be uneconomic as a merchant facility, and will continue to be uneconomic as a merchant facility for the foreseeable future,” FERC wrote.

Entergy said it has long identified a need for new capacity in MISO’s Local Resource Zone 10. The acquisition will eliminate the utility’s need to build a new combined cycle gas turbine facility to replace retiring generation to meet MISO planning reserve requirements. The subsidiary has been planning since 2016 to build a new plant by 2027, but it bumped up the construction target to 2023 last year. The utility reported that it has recently retired about 700 MW in older generation.

Simplifying matters is the fact that Choctaw is already interconnected with both TVA’s French Camp Substation and Entergy’s Wolf Creek substation in MISO.

The commission also said that if Entergy wants to recover the cost of the transaction in its rates, it must make a separate filing.

Entergy expects the transaction to close by the end of 2019.

The case also revived questions as to whether FERC should examine the entire MISO footprint or simply the MISO South region as the relevant geographic market in acquisitions. While FERC considered the entire MISO footprint for the Choctaw impact analysis, FERC examined just MISO South as the relevant market when approving Cleco’s $1 billion acquisition of eight NRG Energy generation assets there last year. (See FERC Clears Cleco to Buy NRG Generation in South.) Entergy asked about the discrepancy in an additional filing to the Cleco transaction, which FERC also clarified Thursday (EC18-63).

Since the Cleco transaction, MISO South is no longer a submarket onto itself, FERC said, and cited “new evidence based on changing circumstances.”

MISO’s North-South transmission transfer limit is binding less frequently than it used to, the commission explained, adding that in 2018, the constraint only bound in 2% of day-ahead hours and 1.5% of real-time hours. FERC also said the trend of fewer binding hours will continue as new generation is brought online in MISO South.

The “commission will continue this practice of evaluating the definition of a relevant geographic market on a case-by-case basis,” FERC said.