Saturday, December 10, 2005

Entergy appeal for New Orleans aid rejected

Entergy appeal for New Orleans aid rejected

By Richard Cowan and Chris Baltimore

WASHINGTON (Reuters) - The Bush administration has denied requests from Entergy Corp. for $350 million in federal aid to help rebuild the company's electric generating facilities in storm-ravaged New Orleans, according to documents obtained by Reuters on Friday.

"We believe that transferring federal tax dollars to the bondholders and shareholders of a private firm is inappropriate," said Allan Hubbard, President George W. Bush's top economic adviser who also chairs a White House council on rebuilding the Gulf Coast following Hurricane Katrina.

Hubbard conveyed the message in a November 18 letter to Entergy Corp. Executive Vice President Curt Hebert, who is a former chairman of the Federal Energy Regulatory Commission.

The letter was part of a bitter exchange between the White House and Entergy last month. Entergy has warned of more than $1 billion in damages, and its New Orleans unit was forced into bankruptcy.

An Entergy spokeswoman noted that the U.S. has "made money available to ConEd (the New York utility) after (the attacks of September 11, 2001), the airlines and other private business."

An administration official, who asked not to be identified, also warned that any attempt by lawmakers to aid Entergy by inserting federal dollars into must-do spending bills speeding through Congress next week would raise a red flag.

"There are administration officials who are keeping their eye out very closely for this kind of thing and I think it's very safe to anticipate strong opposition should someone (in Congress) suggest it," the official said.

The tension between the White House and Entergy comes as Gulf Coast lawmakers have been clamoring for more aggressive federal aid to clean up and rebuild the region. About $62 billion in emergency aid has been appropriated, with much of that unspent.

Since the late-August destruction from Hurricane Katrina, New Orleans-based Entergy has been waging an aggressive lobbying campaign for federal aid. It is the primary supplier of electricity to the New Orleans area, where large parts of the city are still without power.

A November 16 letter to the White House from Entergy warned that its board of directors was poised to "consider whether to continue to finance Entergy New Orleans."

The administration official told Reuters that Entergy has alluded to the possibility the city of New Orleans might have to take over the utility's operations.

In September, the company, a large U.S. utility operating in Arkansas, Louisiana, Mississippi and Texas, approached the White House seeking $500 million in aid to help the company rebuild power plants and power lines destroyed by Hurricane Katrina, according to the administration official.

Hebert delivered a revised request for aid, this time for $350 million, at a November 15, meeting with Hubbard and Don Powell, who oversees federal efforts to rebuild the Gulf Coast.

In rejecting that request, Hubbard noted Entergy Corp.'s 2004 revenues of $10 billion and $29 billion in assets. Saying the Bush administration respects "the right of your board to decide how to allocate financial resources, such as last year's $909 million in earnings," Hubbard added that it was "inappropriate to transfer taxpayer resources to those investors after the fact for a risk they chose to take."

In a seven-page, single-spaced response dated November 28, Hebert said, "We are very disappointed by your response. Without immediate federal assistance, it is unlikely that Entergy New Orleans can continue as a viable commercial entity."

In a footnote, Hebert says the utility was "somewhat disappointed" by Hubbard's references to Entergy's revenues. "We fail to understand how this is relevant to this policy debate," Hebert said.

Hebert told Hubbard that utility rates are set by state commissions, and that state commissions provide ways to recover storm-related costs.

Hebert also mentioned that "the failure of a federally designed and built levee system" is partially to blame for Entergy's current predicament.

But the administration official countered that Entergy has "certain contractual obligations" to the city of New Orleans.

"Any company that has a contract needs to live up to their responsibilities to their customers," the official said.