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May 2014: Energy Industry Victory

May 2014

In November 2013, Quinn Emanuel obtained a substantial victory for Entergy Corporation, resulting in the Missouri Public Service Commission withdrawing an order that would have prevented the successful reorganization of energy transmission facilities serving retail customers in several states.

For years, Entergy had sought approvals from various state public utility commissions and the Federal Energy Regulatory Commission to join a Regional Transmission Organization (“RTO”) known as the Midcontinent Independent System Operator, Inc. (“MISO”). RTOs manage large multi-state electrical grids so that maximum efficiency can be achieved; for example, the lowest-cost generating plant can ramp up first to meet demand, followed by higher-cost plants. RTO participation by owners of generating and transmission assets has been a federal policy priority for more than a decade. The benefits to ratepayers are substantial. Here, for example, Entergy projected that its transfer of transmission assets in five States (Arkansas, Louisiana, Mississippi, Missouri, and Texas) into MISO would yield $1.4 billion in benefits to its ratepaying customers over the next decade.

Although Entergy successfully obtained approvals for the transaction from FERC and the state regulatory bodies in the four states where Entergy has retail customers, the Missouri Commission issued an order on October 9, 2013, that imposed two onerous conditions on Entergy’s ability to transfer its Missouri transmission lines (which are used solely for interstate wholesale service because Entergy has no retail ratepaying customers in Missouri). Specifically, the order required that (1) Entergy compensate those Missouri ratepayers who purchase power from sources not in MISO and thus may face higher rates after the transaction; and (2) MISO and its neighboring RTOs enter into a new agreement governing electricity transfers between them. The former condition was unacceptable because it could trigger similar financial obligations in the other states in which Entergy operates, and the latter was unacceptable because MISO and its principal neighboring RTO are outside the control of Entergy.

The Missouri Commission’s order created an urgent situation because integration of Entergy’s transmission lines into MISO, which requires substantial planning and coordination, was scheduled to occur in December 2014. Quinn Emanuel rapidly prepared a federal complaint that asserted causes of action that the order is preempted under the Federal Power Act (because it interferes with interstate grid operations regulated by FERC under the Federal Power Act) and unconstitutional under the Dormant Commerce Clause (because it imposes undue burdens on interstate commerce). Quinn Emanuel also prepared a motion for a preliminary injunction against enforcement of the order, so that integration of the transmission lines into MISO could proceed as scheduled. Quinn Emanuel filed the complaint and motion on November 13, 2013 in the U.S. District Court for the Eastern District of Missouri. Several weeks later, on November 26, the Missouri Commission decided to withdraw its order along with the conditions it imposed. The withdrawal allowed Entergy to dismiss its complaint voluntarily, and to proceed to transfer its transmission lines into MISO in December.