Unfortunate timing for extra Entergy charge

Published 12:00 am Tuesday, September 23, 2008


Editor and Publisher

LAPLACE – Hurricane Gustav came blasting through Southeastern Louisiana on September 1.

So you can imagine the reaction to one Entergy customer when she got her electric bill in the mail on Sept. 2, and immediately noticed several dollars being charged to her on a line item that read “LURC Hurricane Charge.”

That has been the reaction of many Entergy customers throughout the month of September as new bills have been arriving in the mail each day, now with a “LURC Hurricane Charge” that most everyone is attributing to covering the repair costs for Gustav and Hurricane Ike—almost as quickly as the repairs were finished.

But Mike Twomey, vice president of regulatory affairs in Louisiana, said it isn’t so.

Unfortunately for Entergy’s public relations effort, the “LURC Hurricane Charge” is actually a Public Service Commission (PSC) approved amount that is finally paying Entergy back the $545 million they spent to repair over 1 million customers who lost power from Hurricane Katrina and Hurricane Rita.

“We know people are seeing this charge, just like the little lady who thought that the day after Gustav hit, she was already being charged for it,” Twomey told L’Observateur. “But this new charge is just coincidentally hitting right at the time when Gustav and Ike hit. You can check with the PSC, and see it was approved long ago.”

Even though customers will see the LURC Hurricane Charge for the next 10 years, to pay off the bonds Entergy sold to recover their repair costs for Katrina and Rita, Twomey pointed out that for most people, the charge is minimal.

And even though he may have trouble convincing folks of this next statement, Twomey said that many people are actually seeing a slight reduction in their electricity bill since part of their “Energy Charge” has suddenly been reduced.

That is because Entergy had gotten approval in the early 2000s to begin adding a charge to that part of the bill to help build $20 million a month for any kind of storm reserves. That storm reserve fund can no longer be built by a monthly energy charge, so there is a slight reduction in rates on that part of all bills.

Then even the LURC Hurricane Charge is slightly offset by a “Hurricane Offset Charge” that is noted on all bills. That was Congress’s tax credits for the electric companies, to help them cover the hurricane repair bills.

“Overall, many people will actually have a reduction in their bills when you consider that we aren’t charging for a storm reserve fund anymore,” Twomey said.

However the Entergy official did admit that his company “will be forced” to try and recover whatever the repair bill will be for the new Gustav and Ike problems.

While Katrina cost over $500 million, the early estimates on Gustav and Ike put the bill at between $230 million and $270 million just for Entergy Louisiana.

“We still don’t know what way the bill will be paid for. That will be up to the PSC,” Twomey explained. “But I believe that after Katrina and Rita, the PSC and the electric companies did a great job making sure the effect was minimal on customers to pay for the repairs. I know everyone will work together to make sure the same thing happens again.”

While some consumers believe the electric company can charge anything they want, and use these times to make huge profits, Twomey said that it is not true.

“We are not like Wal-Mart, who can buy something for $100 and sell it for $150 if the consumer will buy it,” he said. “We are governed by the PSC and right now have a profit margin of about 10 percent, that’s all.”

Twomey went on to explain that on the Entergy bills, customers will see two main charges. The first is their “Energy Charge,” which is the cost of producing the power, then the “Fuel Adjustment,” which is the fluctuating cost for the fuel to make the power.

“Even on that, we are not allowed to make a profit,” he noted.

So for now, consumers are just beginning to see the bill come in to pay for Katrina and Rita, and will see it for the next 10 years. The bill for Gustav and Ike will come somewhere down the road after the PSC decides how to best allow the electric companies pay for their costs to repair all the damage from the most recent storms.