Entergy Sees Up to $600M in Damage from Gustav

Entergy Corp., parent of utility companies that serve a four-state area walloped by hurricanes Gustav and Ike, said it expects damage from Gustav alone to be up to $600 million.

Just how much more Ike tacked on to the bill isn’t known yet. The company had been engaged in repairing transmission lines and restoring outages caused by Gustav for less than two weeks when Ike struck many of the same areas.

New Orleans-based Entergy said it expects lower third-quarter utility revenue because of outages that left about 1.7 million customers without power in the four-state area.

Entergy said it believes it has liquidity sufficient to meet its obligations, but noted each of its subsidiaries is responsible for paying restoration and recovery costs.

The early system-wide damage estimate from Gustav is close to the near-wipeout of Entergy’s New Orleans power system by Hurricane Katrina in August 2005. Katrina flooded 80 percent of the city, destroying infrastructure and forcing abandonment of New Orleans for weeks.

Renae Conley, president and chief executive of the parent’s Entergy Louisiana LLC and Entergy Gulf States Louisiana LLC subsidiaries, said Ike damage estimates are being compiled. The companies are considering how to recover costs associated with rebuilding the power system after the hurricanes.

Conley said the Ike-Gustav impact, while significant, did not deprive Entergy of its customers and so a revenue base continues as power outages are resolved.

After Katrina, Entergy subsidiary Entergy New Orleans Inc. was forced to file for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court. ENO Inc. suffered not only devastation to its power system, but complete loss of its customer base as New Orleans was ordered abandoned. The company emerged from bankruptcy in May 2007.

The state Public Service Commission would consider Entergy’s cost report on Gustav and Ike before allowing the company to recover expenses from customers, Conley said. “If a federal funding means was available we would potentially look at that as a way of offsetting customer costs” for repairs, she said.

After Katrina, Entergy New Orleans received $200 million in federal funds administered by the Louisiana Recovery Authority to help pay for getting New Orleans’ power system running. ENO Inc. estimated total Katrina damage at about $665 million.

Gustav came ashore on Labor Day, Sept. 1, battering the Louisiana coast and causing damage on the Alabama and Mississippi coasts. Ike, which struck Sept. 13, slammed east Texas and flooded south Louisiana areas that were still recovering from Gustav.

The company said Gustav, a Category 2 storm, caused the greatest destruction to transformers and circuits and caused the second-most outages in the company’s nearly 100-year history.

Entergy said its divisions set a speed record for restoration of service after Gustav, with power restored to 85 percent of customers within eight days.

The company said as of Sept. 18 231 of 241 power lines and 348 of 354 substations affected by Gustav had been restored.

Ike affected 238 transmission lines, as well as 383 substations. The company said the hurricane’s worst damage was to its Texas infrastructure.

Entergy Louisiana, which serves most of the company’s Louisiana territory outside New Orleans, took a heavy blow from Gustav, which came ashore near Cocodrie then turned north and downed transmission lines in the south-central section of the state and in the Baton Rouge area.

The damage blacked out sections of the capital for days and drew criticism from Gov. Bobby Jindal.