FERC cites Entergy for alleged electric grid violations

HOUSTON Tue Nov 27, 2012 6:48pm EST

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HOUSTON (Reuters) - A unit of Entergy Corp violated more than a dozen standards in the operation of its four-state electric transmission system, said a preliminary report by the Federal Energy Regulatory Commission's enforcement staff.

FERC staff cited 33 alleged violations of 16 standards in which New Orleans-based Entergy failed "to adequately perform critical functions required for reliable operation of its transmission system," FERC said in a notice posted Tuesday on its website.

FERC staff said many of the violations at Entergy Services Inc have been ongoing for several years. They range from worker training and certification issues to system modeling to failure to maintain backup power at vital communication sites needed in times of emergency.

"These findings highlight the problems within the Entergy system and are not surprising given our investigation into Entergy's business practices," said Jim Hood, Mississippi attorney general whose suit against Entergy for anti-competitive behavior has been pending in federal court for four years.

"The rate payers of Mississippi deserve better from their electric provider, especially given the amount of money they pay each month to keep the lights on," Hood said in an email.

FERC's notice comes as Entergy is working to join the Midwest Independent System Operator and spin off its 15,000-mile transmission system to ITC Holdings Corp in a $1.78 billion transaction next year.

An Entergy spokesman said the company "strongly disagrees" with the staff's preliminary findings but is cooperating with the investigation. Entergy spokesman Michael Burns also said the FERC action "will have no impact" on the transaction with ITC Holdings.

Industry sources said the violations, if proven, may result in fines being levied against Entergy.

Entergy supplies power to 2.8 million customers in Louisiana, Arkansas, Mississippi and Texas.

Entergy's effort to divest its transmission business emerged after state and federal regulators joined forces to review a decade of complaints filed by independent power producers in its four-state service territory.

FERC is the second federal agency investigating Entergy. The Department of Justice opened a broad civil investigation of Entergy's competitive practices, the company disclosed in 2010.

The DOJ's antitrust division said earlier this month that its investigation was looking into "whether Entergy has harmed consumers by exercising its control over its transmission system and dominant fleet of gas-fired power plants to exclude rival operators of low-cost combined-cycle gas turbine power plants from competing to sell long-term power.

ITC spokeswoman Louise Beller said the company is focused on gaining needed state and federal approval of its acquisition of Entergy's system, noting ITC is not involved in FERC's investigation.

"Moving the Entergy transmission businesses into ITC's independent and singularly focused model supports FERC's vision of an efficient, inter-regional and high-performance grid—one that delivers reliable, diverse and competitively priced supplies of electricity," Beller said.

(Editing by Bob Burgdorfer)

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