Entergy wants rate increase

Published 5:09 pm Tuesday, October 9, 2007

NEW ORLEANS (AP) — Although two units of power provider Entergy Corp. are not ready to sell bonds to fund repairs for damage from hurricanes Katrina and Rita, the utilities are asking Louisiana regulators to let them start charging higher rates to cover the securities.

The early start is opposed by the AARP, the advocacy group for senior citizens, which says Entergy should stick with a previously approved plan to raise rates only after the bonds are sold.

A top Entergy official said Tuesday that he doubts the state Public Service Commission will approve the plan at its meeting on Wednesday because the PSC staff opposes the proposal.

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The PSC staff says it hasn’t been shown that ratepayers would benefit as Entergy contends.

On Aug. 1, the PSC approved a plan under which Entergy Louisiana customers would pay $545 million over 10 years while customers of Entergy Gulf States-Louisiana would pay $187 million over the same period.

The Entergy units want to use revenue bonds to obtain storm recovery money up front. The bonds would be backed by money raised from the rate increase. The PSC staff estimated that by going to bond markets, customers could save up to $300 million in interest costs while paying for storm damage.

Customers of the two units also are scheduled to fund an account to cover possible damage from future storms: $152 million for Entergy Louisiana, which has 650,000 customers and $87 million for Entergy Gulf States-Louisiana, which has 355,000 customers.

On Sept. 21, the two Entergy units said in a PSC filing that by starting the plan in November, Entergy Louisiana residential customers would pay $1.77 more per thousand kilowatt-hours and Entergy Gulf States-Louisiana customers would pay $1.57 more.

Under the PSC’s order, the rates and recovery fund payments would go into effect after the bonds are sold.

But in the filing with the PSC, the Entergy units said they were still pursuing an alternative plan for selling bonds through a quasi-government corporation set up by the Legislature earlier this year for that purpose. Entergy officials contend that could produce substantial savings to customers over the companies going straight to the bond market. The increased rates would still be used to back the bonds.

The two units now want the new charges to start in November, saying Entergy-Louisiana customers will save about $900,000 per month and Entergy Gulf States-Louisiana customers will save about $40,000 per month in money that has to be set aside for possible tax implications.

AARP attorney Michael Twomey said his group can find no real benefit for power customers by allowing higher rates before the bonds are issued — whether by the units directly or through the quasi-government corporation.

‘‘All it does is increase the cash flow of the company for four, five or six months, however long it takes before the securitization takes place,’’ Twomey said.

Twomey said that although the units are ‘‘clearly entitled’’ to recover storm damage expenses from customers, ‘‘consumers should be held harmless in this situation.’’

Michael Twomey, Entergy’s vice president in charge of Louisiana regulatory affairs and no relation to the AARP attorney, said the utilities believe there will be small cost savings to customers if the early rate increase is adopted. But he said he doubted it would be.

‘‘At the end of the day, we understand the reasons for the objections by the staff and the parties. Given the staff’s objection, I’m not expecting the commission to approve it,’’ he said.

Paying for utility storm damage has been a bedeviling problem in southern Louisiana since Katrina and Rita. Before the storms, power rates in Louisiana had been criticized by industrial and consumer groups as noncompetitive with other states. Higher power costs were cited by a German steelmaker in its May decision to build a $3.7 billion plant in Alabama instead of Louisiana.

Unlike customers of Entergy New Orleans, which serves only Orleans Parish, Entergy Louisiana and Entergy Gulf States-Louisiana customers are stuck with paying the full tab for uninsured storm damage under laws used to regulate territorial power monopolies. ENO, which underwent bankruptcy reorganization after Katrina, received $200 million in federal community development block grant funds that reduced rate hikes in the city.

The parent company, Entergy Corp., has issued a 2007 profit outlook of $5.40 to $5.70 per share. In 2006, the company reported net earnings of $5.36 per share.

In Tuesday trading, Entergy shares were up $1.37 at $115.12. The shares have traded in a 52-week range of $80.07 to $120.47.