By Chris O’Malley and Rich Heidorn Jr.

Under questioning from MISO board members, senior RTO officials last week defended their support for Entergy’s controversial requests to spend $200 million on out-of-cycle transmission projects.

General Counsel Steve Kozey and Clair Moeller, executive vice president of transmission and technology, told the Board of Directors System Planning Committee on March 17 that MISO planners had followed the RTO’s rules in recommending approval of the projects, the largest of which is a $187 million transmission upgrade near Lake Charles, La.

Committee Chairman Michael Evans did not ask the committee to endorse the projects to the full board, despite a request to do so from Phillip May, CEO of Entergy Louisiana and Energy Gulf States Louisiana. Evans said the goal of last week’s 90-minute meeting was to “ventilate the subject fully.”

Evans said the committee will invite the full board to take part in additional discussions in a conference call before their next face-to-face meetings beginning April 21.

At the Planning Advisory Committee meeting last month, the Transmission Developer and Independent Power Producer sectors voted against MISO staff’s conclusion that the Lake Charles project qualified as an out-of-cycle reliability project. As a result, MISO officials said, the full board will conduct a “full review” of the request. (See MISO Board to Review Entergy Lake Charles Project Following Stakeholder Pushback.)

In previous meetings and in letters to the board, critics have challenged Entergy’s load forecasts as speculative and say the project’s scale suggests benefits beyond that of a baseline reliability project, the only type of project permitted under MISO’s out-of-cycle procedure. They questioned why Entergy didn’t see large industrial growth coming early enough to include it in the MISO Transmission Expansion Plan (MTEP), instead of asking for out-of-cycle approval that deprives transmission developers an opportunity to compete.

The critics also said MISO failed to conduct a thorough review of the Lake Charles project as required under the RTO’s rules. The IPP sector said that the business practice manual for transmission planning (BPM-20) provides for up to six months of study for an out-of-cycle review and that it implies multiple Technical Study Task Force meetings are possible during the review. MISO conducted just one task force meeting before endorsing the proposal at the PAC meeting, the IPP sector said.

Jeffrey Webb, senior director of expansion planning, countered that the BPM does not require an “extended series of meetings.” Webb also said MISO had no authority to reject a transmission owner’s load forecasts.

Need Questioned

Kip Fox, representing the Competitive Transmission Developer sector, listed a series of industrial projects that have been shelved or delayed — evidence, he said, that much of the growth expected at Lake Charles is speculative.

“It is not speculative,” responded Charles Long, director of transmission planning for Entergy. “Certainly with any forecast there’s uncertainty. But I can tell you there’s enough need coming to Lake Charles to necessitate this project.” Entergy says more than 500 MW of new load is under contract with another 300 MW “probable” this year.

MISO presented an analysis showing the increased load would cause voltage problems and thermal overloads as high as 146% of line ratings. (See map.)

Board Chairman Judy Walsh expressed support for staff, saying she was “sort of skeptical that [MISO’s review was] not robust enough.”

She also voiced reservations over whether MISO should “become the validators of load” projections.

But she also expressed concern that while Entergy might save eight months by winning approval as an out-of-cycle project rather than submitting it for inclusion in the MTEP process, “you could lose that [time] in a dispute at FERC.”

Moeller said those skeptical of Entergy’s forecasts can challenge the company when it seeks approval from the Louisiana Public Service Commission. He also noted that Entergy was taking on financial risk. “It’s not in their interest to spend almost $200 million to serve load that isn’t there,” he said.

Attorney Noel Darce, representing the PSC, said the commission’s staff wants the MISO board to approve the requests without delay. He said the PSC “retains full authority to approve the certification and to review the prudence of the expenses incurred on this project.”

Scope Challenged

Director Evans asked staff to verify that MISO had met its obligations to follow its BPM and other procedures, wondering aloud: “How can you get a 700-MW load that’s a surprise?”

He also pressed staff on their conclusion that Lake Charles is a baseline reliability project, saying “it would appear from the letters [to the board] that there’s not universal agreement.”

In a March 12 letter, ITC Holdings Vice President Kristine Schmidt noted that Entergy’s request states that, in addition to addressing reliability concerns, the project “will also facilitate future economic development in the area.”

“Facilitation of future economic development is the definition of a market efficiency project, not that of a baseline reliability project. While there may be components of the [Lake Charles] project which are needed for reliability, the entire project possesses a much broader scope than what would be required to meet those reliability needs,” Schmidt said.

NRG Energy said MISO should determine whether the Lake Charles project includes upgrades that should be directly assigned to Entergy’s end users and not socialized across all users of the system. It noted that when one of NRG’s cooperative customers sought to bring new load onto the system, the costs of the “cut-in” for the load were directly assigned to the co-op.

NRG also noted Entergy’s plans to construct a large combined-cycle generator “in and around the same location as where the proposed upgrades are to be done.”

“Under FERC precedent, a new power plant must bear its own development costs and cannot be allowed to benefit from a deliberately timed, self-serving ‘reliability’ transmission project,” NRG said.

In his own letter on March 16, Entergy’s May said that the project is “the optimal and most efficient solution to the identified need.” Construction of smaller, incremental upgrades would be inefficient and difficult to manage and would threaten Entergy’s ability to meet its required June 2018 in-service date, he said.

May said if the Lake Charles project were designated as a market efficiency project, and underwent the full competitive bidding process — “not to mention any litigation that may flow from the process” — it’s likely the in-service date of upgrades would be pushed out to at least 2020.

Moeller noted that often a customer will reveal the need for load at the last minute “and then you can’t move fast enough to meet their needs.”

Moeller said the Lake Charles dispute — the first out-of-cycle project to face any stakeholder opposition, he said — is an example of friction between the traditional monopoly business model and the emerging, competitive developer segment resulting from the Federal Energy Regulatory Commission’s Order 1000. “It’s those two business models that are colliding in many of these comments,” he said.

On this, finally, there was consensus.

“This is an entirely different world,” agreed George Dawe, vice president of Duke-American Transmission Co. The old world was “transmission owners nodding their heads at each other’s transmission owner projects.”