Entergy wants to nix La. plant conversion plan

By ALAN SAYRE

posted: 29 DAYS AGO

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NEW ORLEANS -Entergy Louisiana's 669,000 customers could face a bill of $208.9 million if state utility regulators agree with the company's plan to scuttle the Little Gypsy power plant conversion in southeastern Louisiana.

Touted only two years ago by the utility and regulators as a major cost-saver for electricity customers, the combination of much-lower natural gas prices — and the uncertainty of future carbon legislation — led to the project's three-year suspension by the Public Service Commission in April.

The plan to convert a generator at the Montz plant from natural gas to petroleum coke was approved by the PSC in November 2007. At that time, gas prices were roughly three times higher than now. Petroleum coke is a plentiful byproduct of the refining process.

Although petroleum coke is a cheaper generating fuel, the projected savings for customers had been reduced by falling gas prices. Because of rapidly rising construction costs, the projected price tag of the conversion also had been driven from $1 billion to $1.6 billion.

In a filing Wednesday with the PSC, a unit of New Orleans-based Entergy Corp., asked for permission to cancel the plan entirely, saying current conditions would prevent the conversion from delivering planned cost savings.

"After very careful evaluation, we believe that canceling the Little Gypsy project is in the best interest of our customers," said Entergy Louisiana CEO Renae Conley.

Entergy Louisiana said if the PSC adopts it cost-recovery program, residential customers will pay about $2.75 extra per month for each 1,000 kilowatt hours for five years. The utility said it had cut a previous project cost estimate from $300 million to $208.9 million by salvaging and selling materials for the plant and negotiating lower costs with contractors and vendors.

The PSC will conduct a review of the costs to determine whether they were properly incurred. Regulators can reduce the amount passed on to Entergy Louisiana customers.

As part of the regulatory system giving exclusive service territories to power companies utility, customers burden the costs of generating projects — including those that are canceled — unless regulators find the costs were not in the best interest of ratepayers.

The case will not affect ratepayers of Entergy's other Louisiana units, Entergy Gulf States Louisiana and Entergy New Orleans.

2009-10-28 16:56:21