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California-Based Sempra Energy Plan Blocked By Objections From New Orleans-Based Entergy Corp.

Posted on: Monday, 11 July 2005, 03:01 CDT

If a California company wanted to invest $650 million in an economically depressed area of eastern New Orleans, why would anyone object?

That was the question many were asking last week after the board of the New Orleans Regional Business Park tabled a resolution to endorse San Diego-based Sempra Energy plans to build a 1,250- megawatt power plant in the park and sell energy to New Orleans- based Entergy Corp.

Our board voted to defer the matter without a particular date in mind as to when to raise the issue again, said NORBP President Eugene Green. I don't want it to be characterized as the board saying no. There was a suggestion by some of the board members that more information needed to be available before we went with it.

The NORBP resolution mirrored a similar one passed May 28 by the Port of New Orleans commissioners. The Port's resolution endorsed Sempra's plan and encouraged Entergy to consider agreeing to the project.

Earlier this year, the Port agreed to let Sempra lease land the Port owns along the Mississippi River Gulf Outlet for the plant.

Sempra claims Entergy's customers would save money if Entergy phased out the 50-year-old Michoud generating plant the company owns and bought power from Sempra.

The proposed project, Sempra officials say, would be the largest capital investment in New Orleans since the construction of the Superdome. It could bring more than 300 construction jobs as well as 35 full-time jobs, they say.

Crescent City Power would generate an increase in business activity of approximately $375 million during the life of the project, said Jennifer Andrews, spokeswoman for Sempra Energy. In addition, the project would pay about $220 million in taxes over the life of the project.

Entergy officials, however, say Entergy New Orleans customers would ultimately pay for the proposed plant through higher bills.

We understand the need of organizations who want to support economic development, said Tracie Boutte, vice president of regulatory affairs for Entergy Corp. This project doesn't spell an economic boost when the burden is going to be borne by customers who are already struggling to pay their bills.

Before Sempra can build the plant, the company wants Entergy to sign a long-term agreement to purchase power from the facility. Entergy officials say that's not the way they do business.

When we acquire resources, all bidders are required to submit proposals and we plan to continue to use that process, said Bill Mohl, vice president of commercial operations for Entergy Services. Anyone who wants to do a transaction in Louisiana is going to have to go through that process.

Entergy had discussions with Sempra in 2004 about purchasing power from the proposed facility as the result of a request for proposals, Mohl said, but the companies didn't come to an agreement. In the meantime, new transmission upgrades made it more financially attractive to import power from existing facilities, he said.

Mohl said Entergy has had informal discussions with Sempra since then but has never contracted with the company.

Sempra officials point to a Louisiana Public Service Commission study on the benefits of replacing aging power plants, which concluded Louisiana utility customers would save $59 million annually if Entergy replaced 1,300 megawatts of older generating capacity with a new, more efficient power plant. Entergy's Michoud facility has a capacity of 825 megawatts.

Entergy officials say the PSC study did not include $43 million to $69 million in fixed operating costs, which plant operators would still need to recover. When those costs are included, they say, customer bills could actually increase.

The bottom line, Entergy officials say, is 19,000 megawatts of generating capacity are available from other Louisiana power producers if the company needs to buy power outside its own system. Entergy Corp. has a peak load of 22,000 megawatts and a generating capacity of 23,000 megawatts.

If Sempra wants to build a project, we welcome that, but it has to be the best opportunity for our customers, said Phillip May, vice president of regulatory services for Entergy Services. However, the only way they can get a contract with us is to beat the folks who are already on the ground. There are already other players out there who will be competing with a facility that hasn't even started construction yet.

(Copyright 2005 Dolan Media Newswires)

Source: New Orleans CityBusiness

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