Entergy users still paying costs of decade-old storms

LITTLE ROCK — Entergy Arkansas Inc. customers will still be paying off the costs the utility incurred from storm damage in 2000-01 and 2009 when they finally get the bill for the Christmas Day snow and ice storm that knocked out power to nearly 200,000 customers.

Officials at the state’s largest utility remain undecided on how they will pursue recouping the cost of the recovery from the latest storm.

Although the utility won’t have a preliminary estimate on the amount of damage until the end of this month, spokesman Julie Munsell said, the damage likely will be less than $126.3 million from the 2009 storm.

But one thing is virtually certain: All of the storm costs, or a large chunk of them, will be absorbed by the 687,000 customers Entergy has in 63 of the state’s 75 counties.

Bills sent to business and residential customers already have a monthly line item to pay off storm-related costs from the January 2009 ice storm that disrupted power to about 100,000 customers and caused more than $125 million in damage.

For most residential customers, that amounts to 92 cents per month. That cost began showing up on both residential and business ratepayers’ bills as an “Ice Storm Recovery Charge” in October 2010. It will remain on bills until December 2020, Munsell said.

It will be even longer before some costs of the back to-back ice storms in late 2000 and early 2001 will be paid off. Those storms caused power failures to 226,000 Entergy customers in the first storm and 212,000 in the second and caused nearly $200 million in damages.

All but about $7 million of that damage was covered by a special fund set aside to pay for transition costs associated with proposed deregulation of the electrical utility industry in the late 1990s. The deregulation effort was repealed by the Legislature early in the last decade.

Entergy proposed that the money be used to cover the earlier storm-damage costs, a move the Public Service Commission approved.

The remaining $7 million that the fund couldn’t cover was amortized in the base rates customers will be paying over 30 years, said Diana Brenske, the director of the Public Service Commission’s electric utilities division.

“It’s not broken out, so it’s hard to see,” she said. “But it’s in there.”

The January 2009 storm costs could have been higher, but a 2009 state law allowed the utility to issue tax-free bonds to pay for those costs. The utility figured the law will save customers $32 million in recovery of costs associated with that storm.

Act 729 of 2009 created the option of selling bonds to recover storm costs and then paying back investors over a term of years, which is less expensive for the utility than borrowing the money on its own.

Entergy wound up selling $124.1 million in “storm cost recovery bonds” at an interest rate of 2.3 percent. It marked the first time an Arkansas utility company had issued bonds to cover storm-damage costs, although Entergy companies in other states had used the tool to pay for hurricane damage.

Brenske said the amount customers must pay can vary, depending on how much money the utility receives from payments. The amount is reviewed every six months, she said.

But that method has its limitations, said state Rep. Darrin Williams, D-Little Rock, the lead sponsor of Act 729. “It has to be a really sizable amount [of damage] for it to work.”

The other option is to use the conventional method of cost recovery, which would finance the repairs like any other company cost and then include that cost in the utility’s base rates.

Another 2009 law created a Storm Cost Recovery Reserve Account in which the company sets aside $15 million annually to pay for any storm-related costs, Munsell said. The account is used as part of the process to establish the base rate, according to Brenske.

At the moment, the reserve account is “in a debit balance which means more money has been spent than has been put into the account,” Munsell said.

The three-member Public Service Commission will have the final decision on how Entergy will recover the costs and how much it will recover if the utility chooses to pursue recovering the storm costs through the traditional method.

“We will audit the costs to see if the expenses they want to collect are appropriate,” Brenske said. “We would decide what time period is appropriate. We would [review] the amount of the cost ... then we would determine how [the cost] would be recovered.”

In 2008, the commission authorized a monthly surcharge throughout 2009 that would increase residential bills by about $1.60 per 1,000 kilowatts of electricity used to recover $26 million in storm-damage costs from nine “significant storms” in 2008. But the commission rejected about $4 million of that request, citing unspent storm-cost reserves that the utility had in 2007.