PSC OKs plan to pay Entergy recovery costs

• By MARK BALLARD
• Advocate Capitol News Bureau
• Published: Apr 17, 2008 - Page: 14A - UPDATED: 12:05 a.m.

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The Public Service Commission approved an order Wednesday that the regulators hope will answer the concerns about a $1 billion plan to pay for the recovery costs from the 2005 hurricanes.

The state Bond Commission is scheduled today to take the final vote on the plan that promoters say would save Entergy Corp.’s 1 million Louisiana customers a small amount on their monthly electric bills.

Entergy wants to create a quasi-government agency to handle the $1 billion in bonds. The arrangement would allow Entergy to avoid paying about $281 million in taxes on the bond proceeds, provided that the Internal Revenue Service agrees.

State Treasurer John Kennedy and Gov. Bobby Jindal’s two top aides have opposed the unique financial arrangement, saying the complex transaction has too many unknowns and could end up eventually costing the state’s taxpayers, not just Entergy’s customers.

For instance, Kennedy has said that should the IRS not approve the structure of the transaction, the federal government would look to Louisiana taxpayers to pay.

The PSC order, which is about 2-inches thick, included language in which Entergy officials promised to pay “any federal tax liability.” The order and a stipulated agreement was approved Wednesday.

“We put in the language we think should answer their concerns,” PSC Chairman Jay Blossman of Mandeville said. He referred to Kennedy, Timmy Teepell, Jindal’s chief of staff, and Angèle Davis, Jindal’s commissioner of administration.

“If there’s a risk, it’s very minimal,” Blossman said.

T. Michael Twomey of Jefferson, Entergy’s vice president in charge of regulatory affairs in Louisiana, said the company wrote Kennedy a letter that specifically said the state would be neither at risk for repaying the storm restoration bonds nor liable for any federal income tax.

A parade of lawyers representing some of Entergy’s largest industrial customers, who initially had raised questions about the unique financial transaction, took the microphone at a Wednesday hearing to support the plan.

Kennedy did not return a call seeking comment Wednesday.

Entergy’s Louisiana customers are required by law to repay the $842 million the company paid to replace broken utility poles, restring fallen wire and otherwise get the lights back on after hurricanes Katrina and Rita.

The $1 billion bond would repay Entergy and set aside money to help defray expenses caused by the next hurricane. Entergy’s customers would repay the loan through a surcharge added to electric bills each month for 10 years.