Entergy Corp. and ITC Holdings Corp. continued their multi-state and federal regulatory process seeking approval for Entergy's utility operating companies to spin off and merge their electric transmission businesses into a subsidiary of ITC. Taking the next step in the process are Entergy New Orleans, Inc. and Entergy Louisiana, LLC, which, in conjunction with ITC and ITC Midsouth LLC, filed a joint application with the New Orleans City Council.
Entergy and ITC initiated the regulatory process with a joint application filing with the Louisiana Public Service Commission on Sept. 5.
Entergy is seeking approval to transfer approximately 15,800 miles of interconnected transmission lines at voltages of 69kV and above and the associated substations to ITC. ITC will then be one of the largest electric transmission companies in the U.S., with more than 30,000 miles of transmission lines spanning from the Great Lakes to the Gulf Coast. Meanwhile, Entergy's operating companies will continue to own and operate their respective distribution and generation businesses and will provide customer service, billing, outage reporting and restoration services to homes and businesses in the region.
Charles Rice, president and chief executive officer of Entergy New Orleans, characterized the transaction as the strategic groundwork for the energy future of the city and the region. "In a post-Katrina and post-Isaac world, few would argue with the benefits of reliable infrastructure – whether that's roads and bridges, levees or the electric grid," Rice said. "This transaction is a key element of our strategy for providing financial strength for the investments that will be necessary in the future to build and maintain a reliable, cost-efficient electric system."
Joseph L. Welch, ITC chairman, president and chief executive officer agreed. "While ITC transmits electricity across numerous states, we also appreciate that transmission is a local issue to the communities we serve. Transmission is critical for communities to advance economic development, electric reliability, and the ability for all customers to realize the benefits of a robust wholesale market." Welch further noted, "ITC works hard to be a good neighbor and a positive part of the communities where our assets are located, and we will bring this philosophy to our operations in New Orleans."
Infrastructure investment is among the many challenges that the U.S. electric industry is facing. The electric industry – and Entergy's operating companies – face growing demands to keep pace with the capital investment requirements necessary to maintain and upgrade infrastructure, meet environmental regulations and serve an energy-intensive economy. The transaction addresses these challenges head-on, providing separate, strong balance sheets that afford greater capability to finance infrastructure requirements, with ITC focused on transmission and Entergy's operating companies on generation and distribution.
Moreover, this transaction places transmission in the hands of a singularly focused, independent company with industry-leading performance in the areas of operations and maintenance of transmission assets, as well as application of broad regional planning for transmission investment designed to facilitate the delivery of low cost energy.
Additional Transaction Facts and Next Steps
In addition to the miles of transmission lines and acres of substations involved in the transaction, approximately 750 Entergy employees, including key leadership personnel from Entergy's transmission business, will become employees of ITC. ITC will establish and maintain a regional headquarters in Jackson, Miss., where the headquarters of Entergy's transmission business currently is located. ITC also will have offices and warehouses throughout the service territory to ensure a local presence and timely response to stakeholder and system needs. Details regarding the transaction are provided in the New Orleans City Council filing.
Key ITC personnel were onsite at Entergy's system command center in Jackson during Hurricane Isaac to observe storm response operations. Integration efforts to ensure storm readiness and response are among the key operational matters being addressed by the two companies.
The remaining regulatory filings for the transaction will be completed in the fall. Subsequent filings are planned for Arkansas, Mississippi, Missouri and Texas as well as with the Federal Energy Regulatory Commission. The companies target a transaction close in 2013 pending receipt of all required regulatory approvals and satisfaction of other closing conditions.