Energy Biz - March/April 2008 - (Page 18) » FINaNCIal FRONT Entergy New orleans is Jazzed UTILITy recoverS from kaTrIna by pam radTke rUSSeLL New Orleans began receiving a 6.15 percent credit on their bills. The $3 a month credit, given by a utility decimated by Hurricane Katrina, is considered extraordinary by those who have watched, and helped, the utility rebuild. “I wouldn’t have said that was possible,” said Clint Vince, managing partner of Washington D.C.-based Sullivan & Worcester, who advises the New Orleans City Council on utility matters. The city regulates Entergy New Orleans. It was only through the combined efforts of the company, consumer advocates and city and state officials that the utility, which supplies electric and gas service to all but a sliver of the city, repaired the tremendous devastation while keeping rates affordable for the historically impoverished community, Vince and others have said. “They handled themselves exceptionally well,” said David Owens, executive vice president of the Edison Electric Institute. “They were facing significant challenges.” After Hurricane Katrina, Entergy New Orleans lost its 190,000 customers to a mandatory evacuation. The smallest subsidiary of Entergy Corp. had to repair 75 percent of its transmission lines and half of its substations. Sixty percent of the underground gas system was flooded with saltwater. Repairs were estimated at more than $600 million, while the company’s revenue in 2004 was just $313 million. Three other Entergy subsidiaries also took hits from Katrina and Rita, but none as concentrated as the damage of Entergy New Orleans, said Rod West, president and CEO of the New Orleans utility. As residents trickled back, Entergy New Orleans warned of rate hikes up to 140 percent. Just weeks after the storm, the company’s cash flow was so anemic it couldn’t pay for the equipment, materials and 1,800 workers needed to get the lights back on. Entergy New Orleans declared bankruptcy. Its parent company, Entergy, headquartered in NewsFlash New Orleans, became the company’s debtor in possestaJiKistan turMoiL sion and gave its subsidiary a Electricity outages $200-million line of credit. have hit many parts of The New Orleans City Tajikistan and power is Council allowed the utility to being rationed in the sell off its excess power and capital city of Dushanbe, according to a report in use money that had been set the Associated Press. aside for a customer benefit An important program to help pay for hydroelectric generating restoration. facility has been hit by a reduction in water “The more quickly we levels. Frozen rivers and established restoration,” Vince an unusually cold winter said, “the more quickly people have compounded came back.” problems. Electricity Entergy, Vince and City production is expected to improve when the Council members also unsucweather warms. cessfully lobbied Congress this yeAr, customers of entergy Workers repairing distribution lines in New Orleans after Hurricane Katrina PhOTO cOurTEsy OF EnTErgy nEW OrLEans for emergency funding. But the White House opposed giving federal dollars to the company. “I do fault Congress a lot for not helping bail out this utility,” said Karen Wimpleberg, board president of the Alliance for Affordable Energy, a consumer group often at odds with the utility that nonetheless worked closely with the city and the utility to help mitigate Entergy New Orleans’ financial damage. Wimpleberg also faults Entergy for not providing more assistance to its flailing subsidiary. Over the next several months, the company, the community and city leadership evaluated options for the utility. Entergy New Orleans even successfully pushed state legislation that would make it easier for the city of New Orleans to take it over. The company’s financial future brightened in October 2006, when the Louisiana Recovery Authority agreed to give Entergy New Orleans $200 million of federal money. Later that month, the New Orleans City Council approved an 8 percent gas and electric rate increase, and allowed the company to start collecting for a $75-million stormreserve fund. With those agreements in place, a bankruptcy judge approved Entergy’s plan of reorganization, and the utility emerged from bankruptcy in May. Today, West says, the electric system is essentially restored. Because of population shifts, the utility chose not to duplicate the system it had before the storm. Work on the gas system is still ongoing. Because of the saltwater intrusion, more than 800 miles of cast-iron and steel pipes must be replaced over the next 10 years at a cost of $350 million. Vince says that electric and gas rates will continue to decrease as the city regains its population base. Entergy New Orleans had predicted that 110,000 customers would return by July 2007. The company was able to give the 6.15 percent rate credit because 125,000 customers had returned. West believes the company, and the city, have a viable future. “Like the city, we are still rebuilding and assessing,” he said. “We like what we see as we look into the future.” 18 E n E rgyB i z March/April 2008 http://www.energycentral.com
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