Is Entergy New Orleans Out of Power?New Orleans
3/23/2006 Home : State
By Christopher Tidmore
A source close to the Board of Directors of Entergy reveals to Bayoubuzz.com that the power utility may just walk away from its New Orleans subsidiary if a large federal grant does not bail that company out. Entergy New Orleans has determined that it needs $718 million in federal help to pay the costs of rebuilding electricity and natural gas systems, as well as adjust for the long-term prospect of fewer customers that could otherwise result in drastic rate increases.
The senior source, who asked not to be named, told this website that discussions are underway to turn back the utility infrastructure to the City of New Orleans and absolve the parent company of any electric responsibilities in the Crescent City. "We´ve lost money in New Orleans for years...As long as the other parts of the company were doing well, we could afford a money losing subsidiary like New Orleans. Now, the bill is just too high."
As a consequence, Entergy might also move its corporate headquarters out of New Orleans, perhaps out of the state.
Legally, the insider revealed, the parent company is responsible only to Entergy New Orleans´ bond holders and stock holders, not to the citizens of the city. Those, he indicated, would be made hole with either cash or parent company stocks or bonds. "But," he continued, "you can´t force a company to do business."
Under the unique regulatory relationship that the state constitution provides, the Public Service Commission is responsible for the entire state except Orleans Parish. By quirk of history, the City Council of New Orleans is the prime regulator of utilities in the parish. That means, there is no recourse that the PSC could take to retaliate legally against Entergy.
In any of the more than 22 parishes that constitute Entergy Louisiana, refusal to repair damage in one parish could allow the PSC to threaten to yank the lucrative contract from all. However, the separate regulatory relationship of Orleans Parish does not provide the PSC with that power. Even if state regulators desired to undertake such an action, Entergy Louisiana could argue that it has continued to fulfill its repair and power responsibilities in full. Entergy New Orleans is a separate company. There are no grounds on which the PSC could hold Entergy Louisiana responsible.
The move could affect the status of New Orleans´ only Fortune 500 headquarters. "We can´t stay in a city in which we don´t operate," the source told Bayoubuzz.com. Discussions have ranged from moving to Jefferson Parish to taking a lease in Downtown Baton Rouge. But, there is also a move afoot, according to the source, to stay in the company’s temporary perch of Jackson, Mississippi.
Less than two weeks after Katrina, Entergy took over the former WorldCom building, thanks to the intersession of Mississippi Gov. Haley Barbour. Entergy Gulf States provides most of Mississippi´s power.
Literally, just days after the storm, Barbour used his influence to gain Entergy access to the WorldCom building. The company reportedly paid premium rates, but the staff had a new headquarters to call home without major displacement. Some reportedly argue that another move could be detrimental to the overall morale of Entergy‘s headquarters staff.
While not pushing the issue, the Governor of Mississippi has reportedly indicated in a polite manner that he would like Entergy to stay in Jackson permanently--and would do anything that he could to make that happen.
As the Associated Press has reported, Entergy New Orleans currently operates on $90 million in loans provided by its parent company with another $20 million on the way. The unit is in federal bankruptcy protection. Before Katrina, its customer base had 190,000 electricity and 145,000 gas consumers. According to a Census Bureau report released last week, New Orleans had 454,863 people just before Katrina hit on Aug. 29. Current state estimates put the tally at around 189,000 residents.
Entergy New Orleans tallied the damage to its power system at $271 million. The gas system, which sustained flooding by 4 million gallons of corrosive saltwater, will have to be largely replaced at a cost of $355 million, the unit said.
Entergy New Orleans also is asking for $320 million to cover its lost revenue base through 2007, along with $22 million for other Katrina-related expenses. The unit is subtracting an estimated $250 million in insurance proceeds that it said will be dedicated to rebuilding the gas system. As the AP noted, Entergy New Orleans said that Katrina-related damage -- without aid -- totals about $8,943 for each of its remaining customers -- 33 times higher than the cost-per-customer rate incurred for four hurricanes that hit Florida in 2004.
http://www.bayoubuzz.com/articles.aspx?aid=6576
Entergy New Orleans has determined that it needs $718 million in federal help to pay the costs of rebuilding electricity and natural gas systems, as well as adjust for the long-term prospect of fewer customers that could otherwise result in drastic rate increases.