La. to consider Entergy's storm damage

La. to consider Entergy's storm damage

	Published : Tue, 31 Jul 2007 23:52 By : Agencies Print this Story

NEW ORLEANS (AP) - In perhaps the final chapter of Entergy Corp.'s financial cleanup from 2005 hurricane damage in Louisiana, utility regulators could decide Wednesday how much power customers of two Entergy units will pay for repairs and to fund reserves against future storms.

On July 25, an administrative law judge for the Louisiana Public Service Commission recommended that damage amounts of $545 million for Entergy Louisiana and $187 million for Entergy Gulf States-Louisiana be funded through storm recovery securities, which would be sold on bond markets by the units and paid for by their customers.

The recommendation also calls for bonds to be used to establish future storm recovery accounts of $152 million for Entergy Louisiana, which has 650,000 customers, and $87 million for Entergy Gulf States-Louisiana, which has 355,000 customers.

The judge's recommendation will be up before the PSC in Baton Rouge.

How much extra consumers will be paying will be based upon how the PSC decides to split the cost between Entergy's industrial, commercial and residential customers.

But Michael Twomey, Entergy's vice president in charge of Louisiana regulatory affairs estimated that Entergy-Louisiana residential customers will see increases ranging from $1.75 to $2.50 per thousand kilowatt hours of usage, while Entergy Gulf States-Louisiana customers can expect a hike of $1.50 to $2.00 per thousand kilowatt hours.

The extra payment will last 10 years.

The units have been receiving an interim recovery surcharge for repairs and reserve funds since early 2006. That hike will end when the new plan goes into effect.

By selling bonds, the two Entergy units will get money for repairs and the storm reserves upfront, rather than having to accumulate it over 10 years. At the same time, Twomey said, interest that customers pay on the bonds probably will range from 5.5 percent to 6 percent, instead of the normal 11 percent figure through the traditional rate-based system of passing on costs.

Increased power costs for repairing storm damage to utility systems has been a major concern in Louisiana as the state attempts to recover from hurricanes Katrina and Rita and tries to attract new industry to the state. Power costs were one of the reasons cited for this year's decision by German steelmaker ThyssenKrupp AG to build a $3.8 billion plant in Alabama rather than in Louisiana.

Entergy's other operating unit, New Orleans-only Entergy New Orleans, received $200 million in federal funds to help rebuild its power and natural gas systems in the city, while mitigating rate increases that customers are obligated legally to pay for storm damage after insurance proceeds are deducted.

The New Orleans City Council also approved a 7.5 percent rate hike for electricity and gas through April 2009. That plan includes an assessment to build a $75 million reserve against future disasters.

Entergy Corp. was unsuccessful in obtaining federal storm recovery funds for Entergy Louisiana and Entergy Gulf States-Louisiana.