UPDATED: Entergy Customers May See Rate Hike After FERC Ruling

by Gwen Moritz and Lance Turner  on Thursday, Jun. 2, 2005 3:33 pm  

The Federal Energy Regulatory Commission on Wednesday agreed that Entergy Corp.'s customers in Arkansas could be required to subsidize the cost of electric generation in Louisiana beginning in 2007.

The order requires Entergy, which provides electricity to 2.6 million customers in Arkansas, Louisiana, Mississippi and Texas, to more evenly distribute costs for providing service in those states.

The case specifically deals with Entergy's Arkansas and Louisiana operations. In Arkansas, Entergy uses coal to produce power, which is now cheaper than the natural gas it uses for customers in Louisiana.

Regulators in Louisiana argued that because Entergy is one company doing business in several states, costs should be more evenly distributed.

Sandra Hochstetter, chairman of the Arkansas Public Service Commission, said the FERC ruling was "about a 75 percent victory" for Arkansas ratepayers because it softened significantly the impact on Arkansas ordered by the administrative law judge that originally heard the case. Specifically, FERC said Arkansans would not have to share in the cost of buying power from an aging hydroelectric facility at Vidalia, La., and would not have to retroactively reimburse Louisiana ratepayers for past inequities.

FERC also increased the "bandwidth" of acceptable variation in rates to 11 percent above or below the average cost of production.

But Louisiana interests also declared victory.

The Greater Baton Rouge Business Journal and the Baton Rouge Advocate both reported that the ruling would save Entergy's Louisiana customers $192 million a year starting in 2007, with Arkansas ratepayers picking up that much additional cost.

Entergy spokesman Dan Daugherty said the company could not confirm the $192 million figure because the rate change will be based on actual production costs in 2006. He said Entergy will spend the interim trying to reduce the disparity between Louisiana and Arkansas production costs and might be able to get them within the acceptable bandwidth.

Daughtery said if that can be done, there will be no increase in the cost of electricity to Arkansas ratepayers. But much depends on the cost of natural gas. If it rises, the cost of production in Louisiana will rise as well, and the FERC ruling means Arkansas ratepayers will share in that additional cost.

The Arkansas PSC had appealed the administrative law judge's original ruling in February.

"Though the Arkansas commission will continue to pursue its appeal rights in this case, the commission's litigation efforts have already substantially improved the position of [Entergy Arkansas'] ratepayers," Hochstetter said in a news release.

More on the FERC Order
Click here to read a PDF version of the FERC order. Click here to read the news release accompanying the order.



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