Calling Out Entergy

Melissa Webster

AARP and the Mississippi Sierra Club say Entergy Mississippi is not being completely honest in describing the reasons for the company's decision to increase customers' rates.

"(Entergy) is looking out more for its stockholders than Mississippi customers," said Mississippi Sierra Club Executive Director Louie Miller.

The Sierra Club and AARP called for an external audit of the company at a Mississippi Public Service Commission hearing last week. The meeting occurred as a result of Entergy's announcement that its customers' electric bills will jump 28 percent between July and September as a result of a fuel-cost adjustment. Entergy spokeswoman Mara Hartmann said a sharp increase in the price of natural gas is forcing the company to transfer costs to customers.

"About 55 percent of the electricity we produce comes from natural gas, and because that has risen so dramatically, it's impacting the customers' bill," Hartmann said.

The company purchases natural gas from plants in Jackson and Vicksburg, as well as from sister companies in Louisiana, Alabama and Texas.

Entergy bases its cost increases on projections, which means customers are either over-billed or under-billed as a result.

The company reimburses customers during over-projection months by crediting their bills, and reassesses customers' bills to account for under-projections.

Company officials told commissioners last week that the over-projection accounts generate interest that is not paid to the customer. Hartmann said the company makes no profit from that interest, however.

"What happens in the end is not only do we pay it back, but there are handling and carrying charges that are associated with it. It's almost a wash," Hartmann said. "We actually lose a little money on it after all that."

The company charges a 12 percent handling fee for the transaction, and has an agreement with the state not to make a profit from the venture. Still, AARP spokesman Walter Howell said he believes the company's overall profit appears to be considerable.

"Entergy buys back some of its own stock to make the un-bought stock more expensive. In 2006, Entergy bought back some of its stock in the amount of $1.6 billion. They're projecting in 2008 to buy back $2.5 billion," Howell said. "Everything they get is from the rate payer. They obviously have that money to spare, so you can't say very easily that they're not making a surplus."

Entergy's 2007 10k reveals the company plans to spin off six northeastern nuclear plants into a separate company, and predicts the proceeds of that transaction to be around $4 billion.

Entergy intends to invest $2.5 billion of that $4 billion into stock buy-backs for 2008.

The company is also not short of cash, according to its executive's salaries. Entergy's Securities and Exchange Commission filing last year revealed that CEO J. Wayne Leonard received $14.8 million in total compensation in 2006. That was the same year the company suffered the bankruptcy of its New Orleans subsidiary following Hurricane Katrina, despite Entergy New Orleans receiving $200 million in federal hurricane recovery aid.

Entergy's SEC filing also showed that four other top executives received a total of $12.6 million in compensation in 2006.

Miller said he wanted the commission to freeze Entergy's fuel-adjustment increase until a full PSC audit of the company could be performed. Mississippi Public Service Commissioner Brandon Presley told the Jackson Free Press he was surprised to hear from PSC Virden Jones, Director of Electric, Gas and Communications, that the PSC had been accepting Entergy's numbers without question for at least 10 years.

"We've got to scrutinize this process a little more," Presley said. "Rate payers expect us to be as cynical as possible and that we should question everything. We're not paid to trust. We're paid to verify, and we've got to make sure we are not just taking things on face value."

Hartmann said that if the PSC did opt to freeze the rate increase, it would likely ensue after the audit was complete if the rate increase is found to be warranted.

Rather than hiking customers' electric bills, many of whom are fixed-income seniors, Howell recommended the company shift its priorities away from raising stock prices and into modernizing wasteful, outdated power plants.

"The hearings have brought out that Entergy has very inefficient plants. One plant, the Rex Brown unit, is 57 years old," Howell said. "Based on testimony by Entergy people and the PSC staff, Entergy is not practicing sound business principals. They're taking their surplus revenue and buying back stock instead of reinvesting in their own infrastructure."

Presley said he did not yet know when the hearings would reconvene on Thursday.


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