This is the kind of stuff that is driving New Orleanians to the brink: The city is devastated, poor to start with, and the local utility co. is forced into bankruptcy, but the White House rejects a bailout. On the other hand, NYC is not totally devastated after 9/11, is a wealthy city [with a Republican mayor, incidentally], and Con Ed gets a $250 million check.
Where's the fairness in that?
PS: Can I show my recent utility bills? At least I can pay them. Not everyone can.
nola.com
Feds reject Entergy bailout
By Keith Darcé
Staff writer
Entergy Corp. investors, not taxpayers, should pay for the $350 million that the company's bankrupt New Orleans electricity and natural gas utility needs to rebound from Hurricane Katrina, a senior White House official wrote in a letter to an Entergy executive.
"The risk of a financial loss from a natural disaster is one that any investor in a private firm must face, and it would be wrong for the taxpayer to bail out those investors after the fact," wrote Allan Hubbard, chairman of the White House's Gulf Coast Recovery and Rebuilding Council.
President Bush's hurricane recovery accountant wants Entergy New Orleans to pursue one of two options: Tap the financial pockets of its parent, which earned $909 million in profits on $10 billion in revenue in 2004, or ask the utility's bondholders to write down the value of the subsidiary's debt.
"We believe that transferring federal tax dollars to the bondholders and shareholders of a private firm is inappropriate," Hubbard wrote.
The Nov. 18 letter from Hubbard was addressed to Curt Hebert Jr., Entergy's executive vice president and the company's chief advocate in Washington for federal hurricane relief funding. The Times-Picayune obtained a copy of the letter along with two other correspondences written by Hebert to Hubbard.
Entergy executives and city officials who regulate the local power supplier have pushed hard in Washington for federal aid, warning that electricity rates in New Orleans could jump more than 140 percent if utility customers are forced to foot the hurricane recovery bill. They said such a rate hike would significantly increase the cost of living in the city and stifle its recovery.
What's more, they've said, Entergy New Orleans should receive the same financial support given to New York's power utility, ConEdison Co. of New York, which received $250 million in federal aid after the Sept. 11, 2001, terrorist attacks on the World Trade Center towers. Like Entergy New Orleans, the New York utility is a subsidiary of a much larger utility holding company, Consolidated Edison Inc., which was not required to foot the recovery bill for its subsidiary.
But the letter from the White House makes it clear that Entergy's lobbying efforts have fallen short.
"It disappoints me greatly," New Orleans City Councilman Jay Batt said Monday after learning about the letter. "We have made it clear to the White House that Entergy needs federal relief. It shouldn't be on the backs of (Entergy) ratepayers to rebuild the (electricity) grid in New Orleans."
The White House letter also runs counter to the commitment made by the president when he addressed the nation on Sept. 15 in front of St. Louis Cathedral, promising the federal government would "do what it takes" to rebuild New Orleans, said Brian Richardson, spokesman for U.S. Sen. Mary Landrieu, D-New Orleans.
"We've yet to see him fulfill that promise. This is one more example," Richardson said.
The local utility suffered massive damage to its electrical and gas networks and filed to reorganize under bankruptcy protection shortly after the storm. With a greatly reduced customer base back in the city, the utility has few sources of revenue. For the time being, most of the company's cash is coming from loans from its parent, Entergy Corp., through a bankruptcy funding mechanism.
Hubbard penned his letter three weeks after the administration left Entergy out of a $17 billion hurricane recovery funding proposal sent to Congress.
At the time, a White House spokesman indicated a federal bailout might be reconsidered in early 2006 when the administration plans to request more hurricane recovery money from Congress.
Hubbard's letter, however, takes a firm position against a bailout. An administration official confirmed that view in recent days.
"Entergy, from our perspective, is asking taxpayers to bail out investors," said the official, who spoke on the condition of not being named. "As long as that is a condition of the discussion, I don't see how this can be worked out."
In the other letters, Hebert argued on Entergy's behalf that investors in the company's five regulated utilities, including Entergy New Orleans, base their investments on "long-standing risk/reward structures" that include the recovery of storm damage restoration costs, typically from customers.
"Under the law, every dollar of costs that a public utility prudently incurs to restore and maintain service after a natural disaster are customer and not shareholder costs. This is a fundamental precept," the Entergy executive wrote.
Hebert, through a company spokeswoman, declined to discus the matter on Monday.
U.S. Rep. Bobby Jindal, R-Kenner, said Monday that Bush's reluctance to fund Entergy New Orleans' storm recovery is rooted in feelings within the administration that taxpayer money was squandered on corporate bailouts after the Sept. 11, 2001, terrorist attacks, particularly those that went to airlines that later filed for bankruptcy.
But the congressman said Entergy New Orleans is facing much more dire conditions than any of the companies that received federal help after the terrorist attacks.
"The government could be very shortsighted here," Jindal said. "If the administration is going to help this region rebuild, it has to make sure people have jobs to come back to. And the only way to do that is to make sure we have affordable electricity."
Entergy still could get a federal handout if Landrieu and other friendly lawmakers in the Senate succeed in doubling Bush's most recent hurricane recovery appropriation request, Richardson said. Money for Entergy would come in the form of community development block grants that would be administered through the state, he said.
That's the same kind of funding that was given by Congress to Consolidated Edison, the New York utility that sustained damage in the Sept. 11, 2001 terrorist attacks.
Richardson is hoping that White House officials will stay out of that debate. "They haven't lobbied against it yet, and I don't imagine they will."
Keith Darcé can be reached at kdarce@timespicayune.com or (504) 826-3491. |
