Marlyville / Fontainebleau / Broadmoor Preservation
post-Katrina and beyond...









press clipping
January 30, 2006
Entergy Fights to Recover From Hurricanes
Filed at 1:07 p.m. ET

NEW ORLEANS (AP) -- Faced with staggering damages from the worst natural disaster in U.S. history, Entergy Corp. is maneuvering through a maze of challenges, including the loss of much of its New Orleans power market.

The question of federal aid for the utility holding company is up in the air. Its Entergy New Orleans unit has sought bankruptcy protection. To increase customer bills -- one way to pay for $1.5 billion in damage to its transmission systems from hurricanes Katrina and Rita in Louisiana, Mississippi and Texas -- it must go through often-skeptical utility regulators.

Entergy is hoping for federal help, similar to the $250 million ConEdison Co. received following the 2001 terrorist attacks in New York. It hasn't placed a dollar amount on how much help it would like, or expects, but the company has warned that without assistance, customers in New Orleans could face rate increases of up to 140 percent -- a charge that economic developers say would stymie, if not kill, the city's recovery.

Entergy has predicted it will report Tuesday lower fourth-quarter 2005 earnings -- 42 cents per share versus 68 cents per share for the final quarter of 2004-- pegging much of the decrease to hurricane-related customer outages.

The double punch of Katrina and Rita downed power lines, flattened utility poles and knocked out transmission systems all over Entergy's Louisiana and Mississippi service territories. Entergy officials have said Katrina was so destructive that at least $80 million in damage -- the cost of a new power plant -- was left behind by the storm's pass over southeastern Louisiana, even before massive flooding hit the New Orleans area.

Only a fraction of Entergy's pre-Katrina power customer base of 190,000 in New Orleans is expected to return in the foreseeable future.

''I worry that if we make energy more expensive, it will be just one more reason for people not to come back,'' said U.S. Rep. Bobby Jindal, a Republican who represents New Orleans' suburbs.

Analyst Timothy Winter, who follows Entergy for A.G. Edwards and Sons Inc., said one possible fix for Entergy would be for utility regulators to combine all three of its Louisiana service areas -- Entergy New Orleans, Entergy Louisiana and Entergy Gulf States Louisiana -- and ask the whole state to bear the burden.

Such a combination would require the city to forfeit its regulatory authority over Entergy New Orleans. The other two units are regulated by the Louisiana Public Service Commission.

PSC member Jimmy Field predicted such a plan would be greeted coolly.

''I think it would have such adverse impacts on Gulf States and Entergy Louisiana that I wouldn't be in favor of it at this time,'' Field said.

In the meantime, Entergy has asked the PSC to add a $2.37 per month surcharge to Entergy Louisiana customers for each 1,000 kilowatt hours and $1.63 for Entergy Gulf States Louisiana customers -- for the next 10 years -- to raise $496 million.

The proposal got a rocky reception after a remark by Entergy chief executive J. Wayne Leonard at an investors' conference in November which appeared to hint he had three votes in the PSC. At a Jan. 17 meeting, he told the five-member commission his comments were misinterpreted.

PSC member Foster Campbell called the rate increases ''outrageous, unacceptable.'' He opposed giving Entergy anything until it tallies up insurance payments and gives the federal government a chance to kick in.

Entergy is working on its insurance claim and won't speculate how much it might receive, but industry analysts have said it's impossible to carry enough insurance to pay for all the damage.

Another PSC member, Jay Blossman, has ordered a study to determine whether Entergy might face higher interest costs for borrowed money if a surcharge is not approved. Blossman said the key is whether consumers could potentially pay more than the surcharge if Entergy's bond rating is lowered by Wall Street.

''That's the magic question,'' Blossman said.

Consumers already are footing the bill for hurricane damage in Florida.

Florida Power & Light, that state's largest electric company, has tacked on a surcharge of about $1.65 on average to each customer's monthly bill to pay for fixes for the three hurricanes that hit in 2004. It's only recently calculated that last year's Hurricane Wilma cost the company $800 million. FP&L is trying to soften the blow of that storm with a plan to issue bonds to cover that cost, which would mean a small surcharge over about 12 years.

The state's second largest utility, Progress Energy Florida, is also passing on hurricane costs to consumers through a monthly surcharge to make up for 2004 hurricane costs.

Jindal said he hopes Entergy will get a portion of the $6.2 billion in federal hurricane recovery aid Louisiana will distribute itself. Along with that, Congress has agreed to allow Entergy to offset storm damages on its tax returns faster than normal. Another bill in the House would allow the Federal Emergency Management Agency to provide Entergy with direct aid, Jindal said.

''No one of them is enough, but together they can help,'' he said.

In the meantime, a major question remains for New Orleans: Will Entergy's headquarters stay or go?

Entergy, Louisiana's only Fortune 500 company, is considering a move of at least part of its corporate headquarters. It has taken up temporary residence in Clinton, Miss., the former home of now-defunct WorldCom Inc.

''There's no way you could spin that into good news,'' said retired Louisiana State University economist Loren Scott.

The city can ill-afford to lose Entergy's well-paid, white-collar positions, and neither can the state, which had been desperately trying to attract new business before the storms, he said.

''There's just a reputational factor involved,'' Scott said. ''It sends a message to other Fortune 500s about being careful before you consider coming here.''

Entergy spokesman Morgan Stewart said no decision had been made.

Winter, the analyst, suggested New Orleans might need Entergy more than Entergy needs New Orleans. Entergy New Orleans typically contributed only 10 cents to 15 cents per share on the company's earnings, he said.

''I don't think it would have a material impact,'' Winter said.

Started as an electric generator that turned on the lights in two Arkansas towns in 1914, Entergy evolved into a multistate company and a major player in the nuclear power industry, owning, operating and decommissioning nuclear stations in the South and Northeast.

Ranked No. 221 in the Fortune 500 last year, Entergy posted revenue of $10.1 billion in 2004. Its stock has traded in a 52-week range of $66.70 to $79.22 per share.

Add to the mix another hurricane season that begins June 1 in a city whose flood control system remains under repair.

''You could put all the lines under the ground, but that costs five times more,'' Winter said. ''The customer would have to pay for that. I don't think there's much you can do for a hurricane or an ice storm or another act of nature. You can blame the utility, but I don't think there's much the utility can do.''


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AP reporter Melinda Deslatte in Baton Rouge contributed to this report.