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Sunday, October 5, 2008

Morally Indefensible

Posted By on Sun, Oct 5, 2008 at 8:07 PM

To hear City Councilwoman Shelley Midura tell it, residents of New Orleans are about to get screwed — again — by Entergy. She makes a compelling case.


The council regulates utilities in New Orleans, and Midura chairs the council’s Utilities Committee. Her ire thus is no small matter.


Over the years, the council has taken Entergy New Orleans and its predecessors to court (or to the Federal Energy Regulatory Commission) many times, and often won. Still, the utility never seems to tire of trying to put the screws to its customers.


The latest example of Entergy’s disregard for local ratepayers, however, is one for the ages. Entergy New Orleans (ENO) is effectively sitting on its hands while two of its sister companies — Entergy Mississippi Inc. (EMI) and Entergy Arkansas Inc. (EAI) — move to pull out of a “system agreement” under which six Entergy subsidiaries agreed to share the costs and benefits of generating and transmitting electricity.


All six Entergy subsidiaries are wholly owned by Entergy Corp. Critics of Entergy and its subsidiaries believe the utilities and their sole stockholder manipulate the cost of electricity to reap huge profits. At a minimum, no one at Entergy can claim with a straight face that the operating subsidiaries are actually independent companies. Their corporate officers all report to the same corporate parent, which owns 100 percent of their stock, and they routinely put the interests of the parent company and its stockholders ahead of the interests of their customers.


The attempt by Arkansas and Mississippi to pull out of the system agreement is a case in point. In 2001, the City Council and the Louisiana Public Service Commission convinced the Federal Energy Regulatory Commission (FERC) that Arkansas and Mississippi had gotten off cheap under the agreement, at the expense of Entergy customers in Louisiana. The federal regulators agreed. FERC called the agreement’s cost allocations “unjust” and “discriminatory” and ordered the Arkansas utility to pay $250 million last year to Entergy Louisiana — and another $6.5 million to ENO. FERC also ordered future payments totaling more than $1 billion.


Arkansas generates low-cost electricity at its coal- and nuclear-powered plants, whereas Louisiana’s gas-fired plants produce higher-cost electricity. Arkansas not only wants out of the system agreement, but it also wants to take its plants with it. Midura says that should not happen because ALL Entergy customers — including those in New Orleans — helped pay for ALL Entergy power plants, and Entergy promised state and federal regulators that all of its customers would share the benefits of those plants.


Last week, Midura fired off a letter to ENO, chastising the company for doing nothing while its sister companies prepare to leave ENO customers holding the bag.


“ENO should be doing everything in its power to oppose these withdrawals — not facilitate them,” Midura wrote, adding later:            “It appears that ENO is allowing a conflict of interest to override its duties to itself and to the people of New Orleans. ENO is, after all, wholly owned and operated by Entergy, which also wholly owns and operates EAI and EMI.”


ENO president Rod West replied to Midura’s letter the next day, saying that ENO plans to seek “successor agreements that preserve for ENO and its customers the benefit of the economies of scale and fuel diversity that could be achieved through a successor arrangement.”


In other words, ENO has no plans to fight Arkansas or Mississippi’s withdrawal. Instead, ENO will acquiesce in a plan to skirt FERC’s “equalization” order by dissolving the system agreement and starting over. You don’t have to be Nostradamus to anticipate what that “successor arrangement” will look like.


“ENO is going along with everything,” Midura says. “This is outrageous.”


Indeed, if ENO does nothing while two of its sister companies walk away from an agreement — and a direct order from FERC — that calls for equalization of costs among all Entergy ratepayers, the company’s position is morally indefensible. Citizens all over Louisiana should rail against it.


It’s not so difficult to see how West and his colleagues at ENO could take such action — or inaction. They all work for the same boss, the same sole stockholder: Entergy Corp. The Arkansas and Mississippi power plays merely confirm what Entergy’s critics have said all along — that the subsidiaries exist solely to feed the mother ship, not to prudently provide power at reasonable costs to their customers.


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