Entergy will divest its transmission business into a newly-formed entity, Mid South TransCo, which will then be merged with ITC Holdings to form the nation’s largest independent transmission company, the companies announced today.
Though the last few decades have seen mergers among power utilities that do everything from generation and transmissions to disaster repair and customer service as they seek operating scale, today’s deal underlines a countervailing trend toward specialization as companies seek investment capital and clearer regulatory signals.
“We believe ITC’s independent transmission company structure is the best model to drive economic efficiency, achieve an open and robust market, and provide access for low-cost generation and efficient transmission use and expansion in the country,” said Entergy Chairman and CEO Wayne Leonard in a statement.
Entergy currently operates 15,700 miles of transmission. When ITC takes over those wires, it will be managing over 30,000 miles of transmission from the Great lakes to the Gulf Coast.
ITC has been doing well in the last few years. It reported profits of almost $43 million for the second quarter of 2011 at the end of July, up from $36.3 million in the same period last year, and the $85 million in profit reported in the first half of 2011 was strikingly higher than the $70.5 million profits booked in the first six months of 2010.
ITC also invested $271.6 million in capital projects in the first six months of 2011, and increased its capital investment spending guidance to a range of $600-645 million for the year, leaving it more than $300 million to spend in the second half of 2011 for expenses like the Entergy merger.
The transmission company has been vocal in supporting transmission developments that optimize power from renewables, particularly wind, which is typically located far from city center where electricity demand is greatest.
Earlier this year, ITC VP of Grid Development Terry Harvill lauded Texas for defining Competitive Renewable Energy Zones (CREZ), which he told Breaking Energy is a model for other states.
“In renewables we’ve always had the chicken and the egg issue,” Harvill said. “You can’t put in the power till there is transmission and you can’t build transmission till you have the power.”
One of ITC’s goals has been to build a system that can pull cheap wind power when its being generated into the grid and provide consumers with cheaper power when possible while maintaining grid reliability by keeping a healthy mix of generation flowing through its wires.
“The independent transmission model provides singular focus on transmissions system performance, planning and operations,” the companies wrote in a joint statement. “This model also aligns with national policy objectives to facilitate investment in regional and inter-regional transmission, advances open access initiatives and promotes access to competitive energy markets.”
Photo Caption: Entergy Corporation worker Michael ‘Flash’ Gordon fixes a transmission line damaged by Hurricane Katrina in the Algiers District September 28, 2005 in New Orleans, Louisiana.
