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Rita Could Cost Entergy Up to $550M, Cleco Around $50M

Entergy Corp. is estimating total restoration costs for the repair or replacement of its electric facilities damaged by Hurricane Rita will be in the range of $400-550 million, while Cleco Corp. last week estimated that Rita will cost the company approximately $50 million.

Entergy said the initial restoration estimates are subject to change as more information becomes available. The utility is already looking at a possible price tag of as much as $1.1 billion in costs tied to the damage wrought by Hurricane Katrina.

Entergy said restoration costs for the company's U.S. utility jurisdictions affected by Rita are as follows: Entergy Gulf States ($365-500 million); Entergy Louisiana ($30-40 million); other ($5-10 million).

The Louisiana and Texas service territories of Entergy Gulf States were hit hardest by Rita, the second-most destructive storm to strike Entergy's four-state utility system in the company's history.

The utility expects that the temporary power outages associated with Rita will cause revenues to be lower in the affected service territories during those outages. Unlike with Katrina, however, Entergy does not anticipate extended restoration for a significant portion of its customer base. Instead, Entergy expects to restore power within three weeks to 95% or more of the customers that lost power.

Entergy plans to pursue a broad range of initiatives to recover storm restoration costs. Initiatives include obtaining reimbursement of certain costs covered by insurance; expanding efforts for Entergy's U.S. utility business already under way to obtain assistance through federal legislation for Hurricane Rita as well as Hurricane Katrina; and pursuing recovery through existing or new rate mechanisms regulated by the Federal Energy Regulatory Commission and local regulatory bodies. "Entergy is unable to predict the degree of success it may have in these initiatives, the amount of restoration costs and incremental losses it may recover, or the timing of such recovery," the company said.

In related news, Curt Hebert, a top official with Entergy, on Thursday told federal lawmakers that immediate, direct federal assistance for utilities serving the Gulf Coast region, particularly Entergy New Orleans (ENO), must be put in place. Faced with the unprecedented damage to its system from Hurricane Katrina, ENO recently filed for bankruptcy protection.

Among other things, Hebert said federal relief could be provided through a waiver of the Stafford Act. The federal government has intervened with immediate financial assistance to utilities on the north shore of Lake Pontchartrain (electric cooperatives) that were impacted by Katrina, but has not and cannot do so for the privately-owned utilities on the south shore of the lake without Congressional intervention, Hebert noted. "Who can seriously claim that customers of utilities on the north shore deserve aid and protection against crippling rate effects, but those on the south shore -- many of whom have been commanded not to return to their homes for the last month due to flooding -- do not? In this time of need, such disparate treatment cannot be justified."

Unlike municipal utilities or cooperatives, investor-owned utilities are not eligible under the Stafford Act for emergency financial assistance to pay for restoration and rebuilding costs under existing federal law.

Meanwhile, Cleco at the end of the week estimated Rita will cost the company approximately $50 million. "Cleco's liquidity is adequate to fund the restoration costs of both Katrina and Rita," Cleco CEO Michael Madison said.

Cleco previously estimated that the damage from Hurricane Katrina will cost the company between $100 million and $125 million.

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