ITC Holdings Corp.'s proposed transaction with Entergy Corp. won the approval of the Federal Energy Regulatory Commission (FERC). FERC approved the companies' joint application for the transaction, under which Entergy will spin off its electric transmission business and merge it into an ITC unit.
In addition, FERC also approved new rate constructs for the transmission assets under ITC ownership. This approval follows the FERC approval received in May by ITC and Entergy authorizing utility operating company financings associated with the transaction.
FERC's order effectively accepted the companies' positions on the effects of the transaction on competition, rates and regulation, with FERC noting the benefits that stem from the independent ownership of transmission assets, over and above benefits that will result from Entergy's integration into MISO.
FERC also largely approved the associated rate filings, including the requested allowed return on equity, authorized capital structures and the use of forward looking test years, while certain other elements were set for hearing.
The transaction also requires approval from Entergy's state and local jurisdictions. Proceedings are underway before the Arkansas Public Service Commission, Louisiana Public Service Commission, New Orleans City Council, Mississippi Public Service Commission, Missouri Public Service Commission and the Public Utility Commission of Texas. ITC and Entergy target a transaction closing this year pending receipt of all required regulatory approvals and satisfaction of other closing conditions.
Through several related orders, FERC would allow the transfer of approximately 15,400 circuit miles of interconnected transmission lines at voltages of 69kV and above and the associated substations in Arkansas, Louisiana, Mississippi, Missouri and Texas from Entergy to ITC. Meanwhile, Entergy's utility operating companies would continue to own and operate their respective distribution and generation businesses and provide customer service, billing, outage reporting and restoration services to homes and businesses throughout the region.
In addition to transmission facilities, about 750 Entergy employees, including key leadership personnel from Entergy's transmission business, would become employees of ITC as a result of the transaction. Upon closing of the transaction, ITC would establish and maintain a regional headquarters in Jackson, Miss., where the headquarters of Entergy's transmission business currently is located.