Entergy regulatory staff have revealed their vision for cost allocation on future long-range transmission projects, with multiple clean energy groups deeming the proposal incompatible with building a grid that’s ready for the future.
The Entergy Regional State Committee (ERSC) Working Group debuted a preferred cost allocation for the upcoming long-range transmission plan (LRTP) portfolio of projects that will focus on MISO South. At a Feb. 9 teleconference, the ERSC said it prefers a 90% allocation based largely on adjusted production cost savings and avoided reliability projects, with the other 10% assigned to new generation in MISO South using a flow-based methodology.
The draft allocation proposal doesn’t include a postage stamp to load components. The ERSC said it wants costs allocated as specifically as possible based on cost causation and beneficiaries’ pay principles. It also said other benefit metrics should be “accurate, objective, measurable, quantifiable, nonduplicative, forward-looking and replicable.”
The ERSC also said LRTP projects that are proposed “solely to meet” state or local clean energy policies should be paid for in full by those jurisdictions.
Last year, MISO proposed using a blend of a 50% postage-stamp allocation to load and a 50% allocation to the local transmission zone for MISO South LRTP projects. The new allocation is meant for the third LRTP portfolio and will be used in place of the 100% postage stamp to load allocation MISO is using for the first two LRTP portfolios aimed at the Midwest.
The ERSC has said it won’t support any postage-stamp aspect in MISO’s LRTP allocation and therefore opposes the 50/50 allocation split. (See Entergy Regulators Mount Challenge to MISO South Cost Allocation.)
MISO Members Doubt Projects Under Allocation
Members of MISO’s environmental and consumer advocates sectors seemed skeptical the allocation would foster any meaningful transmission expansion in the South.
Sustainable FERC Project attorney Lauren Azar said MISO’s LRTP is “decidedly not” a local planning exercise and that regional projects deserve a regional allocation. She urged the ERSC Working Group to get advice from experts and involve state commissioners in allocation design decisions.
Azar said the MISO community should “beware of a wolf in sheep’s clothing,” referring to cost-allocation designs “under which no projects would actually qualify for funding” because they are too prescriptive and convoluted.
Yvonne Cappel-Vickery, the clean energy organizer for the Alliance for Affordable Energy, said she was especially concerned about the South’s provision that transmission furthering decarbonization be billed to states or cities with targets.
Cappel-Vickery said the ERSC’s draft allocation is hostile to known clean energy benefits. She cautioned the ERSC against pushing an allocation style that considers “too few benefits.”
“There is an ever-growing body of evidence pointing to the need for new transmission,” Cappel-Vickery said.
Attendees pointed to the U.S. Department of Energy’s National Transmission Needs Study, which found the Delta region requires more transfer capability, and a working paper released by the National Bureau of Economic Research that concluded that Entergy Arkansas and Entergy Louisiana brought in about $930 million in profit in 2022 because of transmission constraints in their territories.
Multiple attendees questioned how the ERSC envisions realistically handling the 10% allocation to new MISO South generation.
Southern Renewable Energy Association’s Andy Kowalczyk asked whether MISO South’s proposal will create a bifurcated generator interconnection queue, where MISO South generation projects receive different treatment to work in extra transmission costs.
Organization of MISO States Executive Director Marcus Hawkins asked if there was the potential for allocation “leakage” among the queue, where generation projects that aren’t located in the South benefit from the lines and are assigned costs for South LRTP lines.
Hawkins also asked how MISO South envisions handling “blended” transmission projects that further both reliability and decarbonization goals.
Sustainable FERC Project’s Natalie McIntire asked how it’s possible for the South to tease out when exactly an LRTP line is intended only for clean energy targets when, by design, LRTP lines are designed to deliver multiple benefits simultaneously.
The ERSC Working Group didn’t provide justifications for their proposal during the teleconference. ERSC Working Group representative and Public Utility Commission of Texas economist Werner Roth explained the proposal and said he collected stakeholders’ questions during the teleconference and will take them back to the Entergy Regional State Committee board so they can “make an informed decision on how to proceed.”
Southern Renewable Energy Association’s Simon Mahan said MISO South should be proffering a cost-allocation method that not only works for the third LRTP portfolio, but also the fourth LRTP portfolio, which will zero in on how MISO can expand the transfer capability between its Midwest and South regions. He said working out an allocation that could serve both would save MISO South time, energy and money.
Mahan said he didn’t think the ERSC’s proposed cost allocation would result in the projects that would best position the South to serve future energy needs.
“We’ve been experiencing constraints in MISO South currently and for quite some time,” Mahan said. He added his fear is that South region members advance a futile cost allocation that deters transmission projects.
Kowalczyk said there have been longstanding issues with energy delivery in MISO South that need to be addressed with regional transmission projects.
“Load pockets are not making this any better. There have been load pockets that have been persistent for decades,” he said, adding that MISO South needs to proactively become the grid of the future and not rely on interconnection customers to build out the grid in a “piecemeal” fashion.
Kowalczyk also questioned if it was fair to place more cost burdens on interconnection customers, pointing out that for the 2021 class of MISO South generation projects, developers already face network upgrade costs of about $100 million per project.
Entergy’s Matt Brown said there are “serious data errors” in DOE’s Transmission Needs Study that seriously undercount Entergy’s transmission work in the Delta region. Brown said combined Entergy transmission investment represented in its FERC Form 1 is six to 12 times higher than what was represented in DOE’s investment data. He said DOE used project data from MAPSearch, which missed about $700 million worth of Entergy projects in the Delta region.
Brown also said there will be “enormous complexity” in addressing MISO’s Midwest-South transfer constraint.
“It’s important to underscore that it’s not a simple issue,” Brown said, emphasizing that the constraint isn’t physical, but contractual and agreed upon more than 10 years ago by SPP, Southern Co., TVA and other parties.
Brown said MISO and the joint parties to the contract could renegotiate the contract to be able to flow more power because the system is capable of greater flows than currently allowed. The agreement with seven joint parties — including SPP — limits transfers between MISO Midwest and South to 3,000 MW southbound and 2,500 MW northbound.
Brown didn’t address MISO members’ other concerns with the cost allocation proposal.
MISO said it has reviewed ERSC’s draft proposal and listened to stakeholders’ opinions during the Feb. 9 teleconference. Spokesperson Brandon Morris said MISO could weigh in on the allocation plan during a Feb. 26 meeting of the ERSC board of directors.
MISO did not address RTO Insider’s other questions on whether it might consider eliminating the postage-stamp piece of its own allocation proposal, where its allocation proposal stands today or whether it believes it can cleanly isolate clean energy policy projects for allocation purposes.
Suspicion from Watchdog Organization
Daniel Tait, research and communications manager at the renewables watchdog organization Energy and Policy Institute, agreed the ERSC’s proposal won’t result in regional projects that can pass muster.
In an interview with RTO Insider, Tait said the ERSC’s allocation proposal seems counterintuitive because Entergy’s own service territory includes New Orleans, which has an ambitious 100% clean energy standard by 2035 and a goal for complete carbon neutrality by 2050.
Tait said there are “clear financial incentives” to Entergy continuing to advance “local, emergency projects that are basically exempt from any type of scrutiny except for state approval.”
“The results speak for themselves,” he said, noting the lack of regional South projects to prevail in MISO’s planning process.
Tait said Entergy sometimes can pull in “hundreds of millions of dollars” more in a gas plant’s return on equity than when compared to a new transmission line’s ROE.
“Whether they want to admit it or not, shareholders are forcing the C-suite to make these kinds of decisions every time. This isn’t pennies we’re talking about,” Tait said. “Somebody has to check that. I understand why they’re doing that, but where are the other parties that are supposed to rein this in?”
Tait said he would argue the existing system in MISO South was broken before the ERSC introduced the proposal. The MISO South grid is “severely debilitated” today, Tait said, and unable to host meaningful new generation, as evidenced by expensive network upgrade costs for developers wishing to interconnect in MISO South.
“So, by definition, nothing is ever going to get built unless Entergy goes to its regulators and says, ‘We need this,’” Tait said.
Tait likened the slim interconnection opportunity and sky-high network upgrade costs in the South to a neighborhood Walmart at full capacity with a line out the door. When a new shopper is allowed in, they’re charged something like $100 per tomato, he said.
“That’s a crazy assertion that we would never see in any other marketplace. Now, that messiness coupled with this plan ensures [Entergy] can continue to do whatever they want,” Tait said.
Tait said while the future MISO South grid is uncertain, if Entergy is allowed to have its way, MISO South won’t reach its full potential for solar installment. He predicted that when solar capacity is built, it will be owned and controlled by Entergy “because it, and only it, will have the ability to navigate all these roadblocks that it’s thrown up.”
Tait also said DOE’s Transmission Needs Study represents a snapshot in time and that it’s not incumbent on DOE to track down every utility’s recently approved transmission. He said DOE is correct that transmission planning in the Delta has been paltry, even accounting for the additional $700 million in projects that Entergy has planned from its “white castle” and has claimed the department omitted from the study.
Tait said the main takeaway from DOE’s study is that the Delta region’s transmission planning has been badly neglected in the past decade.
“Entergy and Southern Co. cannot deny that number is awful,” he said. “MISO South is going to get left behind, and what I mean by that most directly is that as an Entergy customer in MISO South, you’re losing access to a whole host of affordable clean energy. … That should be a big deal to customers right now.”
