The Louisiana Recovery Authority endorses $200 million in relief for Entergy New Orleans

Two months ago in this forum, I took note of an attempt by Entergy New Orleans to secure ratepayer-financed relief for losses that this utility comany sustained in Hurricane Katrina. In an October 12 resolution, the Louisiana Recovery Authority has just given the utility a significant victory:

[T]he LRA board endorsed a resolution to allocate $200 million in Community Development Block Grant (CDBG) funds to Entergy New Orleans (ENO) to defray gas and electric utility system repair costs in an effort to provide rate relief for ENO customers. * * *

Hurricane Katrina caused unprecedented damage to the electric and gas system infrastructure in the city of New Orleans. As a result, ENO lost electric service to 100% of its customers immediately following the storm.

In early 2006, ENO requested CDBG funds from the LRA to cover electric and gas utility costs, gas system infrastructure rebuilding costs and un-recovered fixed costs through the end of 2007 that are expected due to the loss of customers in New Orleans. By the end of 2006, ENO will have incurred nearly $200 million of the estimated $640 million in total restoration and rebuilding costs related to repairs necessitated by Hurricane Katrina damage.

Now the proposal will be developed as an action plan amendment and published for public comment. Once public input is reviewed and considered, the final plan will come before the LRA board, Governor Blanco and the Louisiana Legislature for approval before moving to HUD.

The LRA's resolution includes the following conditions:

• No CDBG funds may be used to profit ENO’s parent, Entergy Corporation.
• ENO must agree that all restoration, reconstruction, and rebuilding costs claimed for CDBG funding must be certified as reasonable and necessary through an independent process approved by the LRA.
• ENO must not claim in any forum capital assets paid for with CDBG funds as additions to the rate base for ratemaking purposes or for the valuation of ENO’s assets in connection with the city’s perpetual option to purchase set forth in the applicable 1922 Ordinances, as amended.
• Any CDBG funds awarded to ENO should be exempt from existing or future liens held by any of ENO’s bondholders and, except to the extent necessary to reimburse audited expenditures for restoration, reconstruction, and rebuilding, the Entergy Corporation debtor-in-possession loan to ENO.

I shall say this much in passing: $200 million is a lot of money, and New Orleans and Louisiana have many, many pressing needs. I wouldn't have put Entergy New Orleans shareholders this high on my list of deserving beneficiaries, but then again I neither serve on the LRA nor have any obligation to engage Louisiana politics.