State utility regulators are deciding Wednesday whether Entergy’s customers or its shareholders are on the hook for an estimated million-dollar mistake caused by the Louisiana Press Association.
The error involves the failure to correctly publicize Entergy’s effort to sell bonds.
Entergy had hoped to start selling, in July, $206 million in bonds to repay expenses for a power generating plant that was canceled. Entergy now must wait until at least September before it can sell the bonds.
The delay prolongs daily interest costs and increases other expenses by almost $1 million total, said Eve Kahao Gonzalez, secretary for the Public Service Commission, which called a special meeting Wednesday to address the issue.
Exactly how much additional the delay will cost depends on many variables including a volatile market and when the bonds are actually sold, Gonzalez said Tuesday.
The five elected utility regulators will decide who pays the additional costs — Entergy’s customers or its shareholders, said PSC Chairman Jimmy Field. Commissioners also must vote to reauthorize the bond, essentially restarting the legal clock that would allow the bonds to be sold.
Entergy’s Baton Rouge area customers were not involved in the bond and likely would not be charged for the delay, but that decision still must be made on a majority vote by the PSC.
“As far as I’m concerned the ratepayers are not at fault,” Field said Tuesday. “I’m of the opinion that it be absorbed by the shareholders.”
Field said whether Entergy then tries to collect from the Louisiana Press Association is a decision that doesn’t involve the PSC or the utility company’s customers.
Bill Mohl, president and chief executive officer for Entergy Louisiana LLC and Entergy Gulf States Louisiana LLC said the utility company is trying to sort out the issues.
“There’s a number of looping parts here, in terms of who would pay for it, and it is very difficult to say,” Mohl said Tuesday. “We’re working to minimize any impacts to the customers.”
“It was deeply regretful.” said Pamela Mitchell, executive director for the Louisiana Press Association, called LPA.
“It’s been corrected,” Mitchell said Tuesday.
The newspaper and publication trade association with about 125 members provided the utility company with the wrong list. The state Constitution requires publication in an “official journal” to alert the public of a rate increase.
Mitchell said the error occurred because parish governments frequently change the official journal status of the qualified publications within their borders. Changes were made but the list provided Entergy was not updated, causing the company to advertise the rate increase in four or five wrong publications, she said.
The error happened in a way that didn’t occur to them until too late, Mitchell said. The procedures that led to the mistake have been changed.
The Advocate’s executive editor, Carl Redman, has lobbied on behalf of the LPA in the past. Mitchell said, the newspaper’s former executive editor, Linda Lightfoot, is a part-time consultant for the organization, and The Advocate’s publisher, David Manship, is a past president of the LPA board.
In this case, the rate increase Entergy was announcing would have applied to about 665,000 customers of Entergy Louisiana LLC, which covers 46 parishes. They were to pay a surcharge — a dollar or two per month for the typical residential customer — to guarantee the $206 million loan.
The bond money would reimburse what Entergy spent towards converting a natural gas generator at the Little Gypsy plant near LaPlace to use petroleum coke.
The PSC approved the $1 billion project in November 2007, at a time when natural gas prices were high. The price of natural gas then dropped dramatically and the project was suspended in 2009.
Under law, Entergy’s customers are required to pay the company’s costs of generating and distributing electricity. The PSC ruled that customers would have to pay for Entergy’s costs on the abandoned Little Gypsy project.
The sale of the $206 million bond was a way to allow Entergy to recoup its costs. Because a bond is cheaper than a loan, the utility’s customers would pay less to reimburse Entergy.
The roughly 380,000 customers in the 18 parishes serviced by Entergy Gulf States Louisiana LLC, including much of the Baton Rouge area, were not included in the so called “senior secured investment recovery bonds” when approved by the PSC in June.