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Tuesday, December 20, 2005 

Entergy Ruling Loads Cost On Arkansans

Entergy rates on the rise? The Truth has posted several stories about Entergy and the Attorney General of Arkansas, Mike Beebe...it seems that Mike likes to accept money from utility companies that he regulates.

Mike Beebe has accepted at least $4,000 from Entergy and/or individuals associated with Entergy:
Paul Means, Entergy Lobbyist -- $500.00
Jim Kennedy, Relative of Tom Kennedy, Vice President of Entergy -- $1,000.00
Kristi Kennedy, Wife of Tom Kennedy, Vice President of Entergy -- $1,000.00
Michael Mauldin, Director of Government Relations, Entergy -- $500.00
Cecil Alexander, Former Director of Government Relations, Entergy -- $1,000.00

I Wonder Why Entergy Is Able To Raise Rates?

Entergy ruling loads cost on Arkansans
Federal regulators Monday affirmed a ruling expected to cost Entergy Arkansas Inc. customers hundreds of millions of dollars a year starting in 2007.

As a result, Entergy Arkansas officials told the Arkansas Democrat-Gazette they will exit the “system agreement” that led to the predicament, leaving the other four Entergy Corp. subsidiaries behind.

Formed in 1982, the pact lets Entergy Corp. utilities in four states share production costs and generation capacity.

But it also has sparked legal battles that have sent billions of Entergy Arkansas ratepayers’ dollars to other states.

Barring a successful appeal of the ruling, leaving the agreement won’t protect Arkansans from likely paying $143 million to $210 million annually for seven years to subsidize plant costs in Louisiana — estimates based on natural-gas prices at the end of October, Entergy Arkansas President Hugh Mc-Donald said. That’s because it could take until late 2013 — eight years at most — to withdraw completely, he said.

Meantime, Entergy Arkansas plans to petition the U.S. Court of Appeals in Washington, D.C., within 60 days, said Mary Cochran, general counsel for the Arkansas Public Service Commission.

“The recent run-up in natural gas prices, combined with this order, erodes our continued participation in the system agreement,” McDonald said. “There’s been a long history of significant litigation with this agreement that hopefully will end once we come out of it.”

The move came hours after the Federal Energy Regulatory Commission said it stands by its June 1 ruling that production costs between Entergy plants in Arkansas and Louisiana are not fairly distributed and that Arkansans must make up the difference.

Initiated by Louisiana regulators in 2001, the dispute stems from the fact that Entergy’s Louisiana plants rely mostly on natural gas to generate electricity, while most of its Arkansas plants rely on coal and nuclear power.

In recent years soaring natural-gas costs have made Louisiana plants more expensive to operate under a system that requires Entergy to fairly distribute operating costs in Arkansas, Louisiana, Mississippi and Texas.

During the mid-1980 s, a similar cost-sharing decision by the federal commission resulted in Entergy Arkansas customers paying more than $3 billion toward the Grand Gulf nuclear power plant in Port Gibson, Miss.

Arkansas contends that production costs are roughly equal. At the same time, the Arkansas commission is pleased that the federal commission clarified an effective date of 2007 — rather than 2006 — for cost adjustments to be made if Louisiana plants fail to operate within 11 percent above average costs for Entergy’s fourstate system, she said.

Louisiana’s generation plants operated at an average of 33.6 percent above the entire Entergy system between 2000 and 2002 at a time when natural gas prices were far less than they are now.

The federal body also stood by its decision to reverse an earlier finding that a hydroelectric plant near Vidalia, La., was a systemwide resource and that the costly facility was built to benefit only Louisiana.

“We now know with certainty — beyond any argument — that no money is going to Louisiana in 2006,” Cochran said. “Of course, the appeals process is going to take longer than a year, so it may not begin at the start of 2007.”

Yet attorneys arguing Louisiana’s case took heart in the ruling as well, noting that the federal commission threw out part of its rationale for expanding the 11 percent threshold from a 5percent to 7.5 percent margin established in 2004.

“We feel we have a good chance to improve our position on appeal,” said Michael Fontham of New Orleans-based Stone Pigman Walther Wittmann LLC. “FERC withdrew the main part of their reason for establishing the 11 percent band width, but gave no substitute. They ruled against Vidalia, but didn’t say why.

They went with 2007 out of discretion, but gave no reason. We think it’s a weak order in the things that go against Louisiana.” Fontham said it did not surprise him that Entergy Arkansas plans to leave the system agreement, but he warned that it may prove difficult. “I doubt it will be without an exit fee,” he said. “You can’t leave unless you guarantee cost equalization. I believe FERC may have something to say about that.”

A departure from the system agreement does not mean that Entergy Arkansas’ role with its parent company will change in any other way, vice president of regulatory affairs Steve Strickland said.

“The only difference is a contract that spells out how we share power. It is only generation. It does not speak to transmission,” he said. McDonald added, “And it doesn’t mean we may not reach a future agreement concerning generation. Right now we’re looking at all options.”

In February 2004, the Arkansas commission asked Entergy Arkansas to study the feasibility of leaving the system agreement. No action has been taken on the matter, but in April 2005

Entergy Corp. President J. Wayne Leonard said that the agreement has served Entergy well and that to turn back the clock was not practical. “No state would be able to do anything without another one vetoing it,” Leonard said. “There’s no real accountability. And it’s bad public policy.”

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