NEW YORK (TheStreet) -- Mississippi utility regulators on Tuesday rejected Entergy's (ETR) $1.78 billion plan to spin off its transmission assets to ITC Holdings Corp. (ITC). The move could very likely kill the transaction, which was announced December 2011.
Entergy executives said in a statement that they were "disappointed" the Mississippi Public Service Commission rejected the transaction. Entergy also said they "will evaluate the Mississippi commission's 99-page order and work with ITC to determine next steps."
The state regulators said the deal would likely lead to higher electric rates for Mississippi consumers. "We respect Entergy's desire to improve its organizational effectiveness, but the commission was not persuaded the transfer of ownership would be in the best interest of Entergy Mississippi's customers," Lynn Posey, chairman of the three-member Mississippi Public Service Commission, said in her statement.
Another commissioner, Brandon Presley, said, "The evidence in the case did not show any identifiable savings to customers."According to the New Orleans Times-Picayune, Mississippi officials predicted the deal could have led to a $300 million rate increase for Mississippi customers over 30 years. In a statement ITC said, "We strongly disagree with the commission's decision and its stated rationale for denying our application" and that the commission's action "would deny Mississippi customers the near-term and longer-term economic and reliability benefits resulting from ITC's independent ownership with a singular focus on transmission." The company added that "ITC and Entergy have demonstrated that the transaction is in the public interest based on the significant benefits that would result from ITC's ownership of the transmission system, which is clearly in need of investment to improve reliability and facilitate the competitive electricity market. ITC said the companies made commitments to hold customers harmless from negative impacts and "we do not believe that jurisdictional concerns should stand in the way of customers realizing the benefits of this transaction." As for the fate of the deal, ITC said, "We will review the commission's full order and determine next steps." Analysts at GimmeCredit said Mississippi's action "has thrown a major monkey wrench" into the spinoff plan. GimmeCredit noted Entergy could carve Mississippi out of the transaction and seek approval from only other states in the transmission unit's footprint, but winning approval from the remaining states that must approval the deal was not guaranteed. "The refusal by Mississippi may be the first domino to tip," the firm wrote.
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