Entergy says review its fuel policy is favorable

Published 1:17 am Friday, February 13, 2009

Entergy Corp. says an independent review of a state policy shows the company’s fuel adjustment practices are fair even though customers in Mississippi were forced to pay nearly $40 million too much for electricity in 2007.

Outside utility expert Walter Drabinski, president of Cudjoe Key, Fla.-based Vantage Consulting Inc., reviewed the policy, which allows electric utilities to predict the price of the fuel they need to make electricity before actually buying it.

The policy came under scrutiny last year when Entergy Mississippi raised the adjustment 28 percent from July to September based on the projected price of natural gas.

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The state Public Service Commission called for a probe and audit of the increase as well as Entergy’s fuel purchase practices. Customers eventually get any overpayment back, but the commission has argued they never should have had to pay it in the first place.

“Overall, we’re encouraged by the findings (of the review),” said Dorman Davis, manager of regulatory affairs for Entergy, in a statement.

“The way we project fuel costs and true up fuel cost recoveries, provide the commission with sufficient fuel filing data and plan for Mississippi’s future energy needs were all noted as practices that serve our customers well,” Davis said.

Public Service Commissioners Brandon Presley and Leonard Bentz, however, have different views of the report, which has not been publicly released.

“While I can understand Entergy officials wanting to brag about anything they feel is generically complimentary to them, unfortunately they have given ratepayers only half the truth about this audit’s findings,” Presley said.

Bentz said the report made recommendations on improving the state fuel adjustment policy and was not favorable or negative for Entergy.

“I think there is room for improvement and I don’t think you will find any rebuttal from the utility companies either,” Bentz said.

Added Presley: “Still at issue are the specific contracts that have been let by Entergy, which Vantage explicitly noted in their report that they did not examine.”

Mississippi Attorney General Jim Hood has pointed to a specific fuel contract in his lawsuit against Entergy and its subsidiaries that claims they illegally manipulated the purchase and sale of electricity to maximize profits.

Entergy initially said no power under the Evangeline gas contract was sold to Mississippi, then revised that claim by saying a small amount of power was sold between 2005 and 2008 under a renegotiated Evangeline contract following a 2000 refund in Louisiana.

The company now says it may have sold power to Mississippi earlier than it originally thought under the contract, which led to a refund of $72 million to Louisiana customers.

Presley said Vantage has recommended additional audits of Entergy in several areas, including off-system purchases and the company’s transmission system, and the commission’s inquiry into the matter is ongoing.

Entergy spokeswoman Mara Hartmann said Vantage’s recommendations are not alarming.

“There are few things in there that they say we could be doing better. So we will look closely at those too, but overall we’re very encouraged by the findings,” she said.

Hood agrees with the PSC.

“The report itself states that Vantage Consulting did not review any procurement decisions and did not make any judgment as to the prudence of any purchase,” Hood said in the news release. “In fact, the audit recommended additional audits because they found Entergy’s accounting was ’likely to be inaccurate.”’