Entergy nuclear spinoff plan hits obstacle in NY

Press Writer

Entergy Corp.'s plan to improve its finances by spinning off its nuclear
plants into a standalone company hit a new obstacle Thursday.

Top staff at New York's Public Service Commission recommended against the
proposal to allow the sale by the New Orleans-based company, saying it's
against the public's best interest.

The current proposal, which would create a new company called Enexus, raised
questions about potential financial and environmental problems.

The proposed $3.5 billion deal would transfer the James A. FitzPatrick
Nuclear Station in Oswego County and the Indian Point Energy Center in
Westchester County to Enexus. Entergy shareholders would eventually get all
of Enexus's capital stock as well as cash.

Entergy also operates the Pilgrim Nuclear Power Station in Massachusetts,
the Palisades Nuclear Plant in Michigan and the Vermont Yankee Nuclear Power
Station, all of which would go to Enexus if the deal were approved.

Entergy and Enexus would trade independently, and the two companies would be
separate and unaffiliated. Opponents say the plan would enrich Entergy and
its stockholders at the expense of consumers while allowing the company to
avoid responsibility and liability for the plants.

PSC staff offered several suggestions to reduce some of the deal's risk, but
they would make the deal less appealing for Entergy. The commission may
deliver a decision based on the suggestions when it meets March 4.

"It was evident that the details of these conditions are not fully defined,
a point acknowledged by the commission itself," said Michael Burns, a
spokesman for Entergy. "So we cannot comment on any of the proposals
outlined by the staff, ... Beyond there being further discussion of the
transaction at the meeting on the 4th, it was not clear to us what the
process will be going forward."

A major suggestion by the PSC staff is cutting the new company's debt by
$550 million - essentially shrinking Entergy's return on the sale. The goal
would be to reduce upfront debt for Enexus and allow it to get a decent
credit rating to minimize risks to ratepayers.

Since the plants in question are responsible for 15 percent of New York's
energy consumption, the staff describes them as "too big to fail." If the
company became insolvent and couldn't operate the plant, the public would be
affected because the energy market would have to scramble to replace that
power and rates would go up.

Another problem with that scenario is the potential environmental damage
from turning to other power sources and increasing air pollution.

The staff also suggested requiring the new company to offset risks to
ratepayers by limiting dividend payments to shareholders.

Another suggestion would be to share with consumers 20 to 25 percent of
extra revenues generated from any future energy market increases.

If the commission accepts the staff suggestions, another public comment
period would be allowed before the final decision is reached.

To make the deal work, Entergy also needs the approval of the Federal Energy
Regulatory Commission, the Nuclear Regulatory Commission and the Vermont
Public Service Board to transfer indirect ownership of Entergy's non-utility
nuclear plants.

FERC and the NRC gave initial approvals in 2008. Hearings in the Vermont
case ended in 2008, but the Vermont Public Service Board hasn't taken final
action.