According to reports, Entergy Corp’s transfer of its high-voltage power lines to ITC-Holdings, which was announced back in 2011, was recently rejected by Mississippi regulators. However, the merger request is still under consideration by regulators in several other states, including the state of Louisiana.

If the merger is approved, under the terms of the agreement, ITC-Holdings is expected to absorb the nearly $1.8 billion in debt, but provide Entergy shareholders a stake in ITC by giving stock valued at over two billion dollars. However, in rejecting the merger, Mississippi Public Service Commission noted that over the next 30 years, the transaction would cost customers $300 million in rate increases.

In fact, the New Orleans City Council, which has not yet approved the transaction, also noted that the merger will likely inflate cost for its residents. A councilwoman noted that city is likely to hold off on reviewing the merger until such issues with larger state regulators are resolved. Furthermore, by halting review of the merger, the city is expected to save on administrative costs. New Orleans City Council is closely watching what is happening with the Entergy ITC-Holdings transactions in other states and, in the meantime, is looking into two issues which could harm the City’s customer base.

Specifically, the New Orleans City Council is looking into why Entergy New Orleans decreased the amount of advance notice mandated for its subsidiaries to back out of a power-sharing agreement. Even though New Orleans customers benefitted from this provision, it seems that other regional subsidiaries are removing themselves from the deal.

Furthermore, the New Orleans City Council is looking into the plan to include Entergy into Louisiana’s statewide pricing, which would spread the cost of building power line infrastructure across the state. The Council is only interested in paying for upgrades that are likely to benefit the city.

Clearly, the regulatory issues surrounding such transactions and merger are complex, perplexing and require long negotiations with various entities. During such merger negotiations, it is important to seek the advice of those familiar with such business law transactions.

Source: The Times-Picayune, “New Orleans City Council in waiting as Entergy , ITC Holding merger hangs in balance,” Jennifer Larino, Dec. 11, 2013