Opinion ID: 6936498
Heading Depth: 2
Heading Rank: 2

Heading: The Spin-Off

Text: In 1990, AP & L, one of Entergy’s utility companies, sold a substantial interest in two generating plants to Entergy Power, Inc. (“EPI”), a newly-created subsidiary of Entergy. AP & L had more generating capacity than required to meet its immediate needs, and no other company in the Entergy System wished to purchase the excess capacity. Thus, in order to avoid generating more energy than could be used by the System, Entergy sought permission from FERC, the Securities and Exchange Commission (“SEC”), and the Arkansas Public Service Commission (“APSC”), which governs rate regulation in Arkansas, to spin-off AP & L’s two excess generating plants and transfer them to the new subsidiary for eventual sale to unaffiliated purchasers. Although the two generators were producing excess capacity in the 1980s and early 1990s, and thus burdening the System, there is evidence to suggest that the System eventually will need that extra power. If and when that time comes, presumably in the next century, the System will have to purchase additional capacity to replace the power originally generated by the two spun-off facilities. These costs, central to the instant dispute, are referred to as “replacement capacity costs.” The APSC and the SEC approved the sale, and the transfer to EPI took place in August, 1990. However, in 1992, this court remanded the matter to the SEC for reconsideration in City of New Orleans v. SEC, 969 F.2d 1163 (D.C.Cir.1992). The SEC has not yet issued any new determination on the validity of the spin-off.