Monday, December 31, 2012

The morning report: You pay for storm cleanup

Posted By on Mon, Dec 31, 2012 at 6:43 AM

THE COST OF DOING BUSINESS: Linemen at work; customers eventually will reimburse cost.
  • Entergy
  • THE COST OF DOING BUSINESS: Linemen at work; customers eventually will reimburse cost.
The number without power has been dramatically reduced (to 11,400 by 8 a.m., Entergy says). But, gee, that's small consolation for the thousands still in the dark, nearing a full week after the power went out.

Repair crews soldier on. One small point: I noted a line in the newspaper today saying that the cost of all this falls on Entergy. They indeed put up the money, but, eventally, ratepayers pay.

Utilities are allowed to charge ratepayers for repairing storm damage. Sometimes it comes in the form of a surcharge after insurance payments have been made. (See Louisina after hurricane cleanup.)

Ratepayers are already paying into an accrual fund for disruptions. The damage can sometimes exceed reserves, such as last year in Mississippi, when Entergy asked for a rate increase to cover storm damage.

In Arkansas in 2000, the method of covering Entergy's costs for ice storm cleanup became the subject of some dispute. The Entergy/state plan used accumulated rate overcharges to pay for the cleanup. Some customers wanted to amortize the costs over 10 years in rates. In Louisiana, bond issues were floated (paid off by customer bills) to cover massive hurricane costs over time.

This is just a reminder: The repair work isn't charity or a permanent Entergy freebie. When the lights come on, we all appreciate the 16-hour days that linemen are putting in to restore power. But they are being paid for the overtime (plus significant expenses for out-of-state crews) and ratepayers will foot the bill, sooner or later. That's fair, given our expectations for reliable utility service as a living essential. But it's also worth remembering that unregulated businesses that don't operate as monopolies under state oversight don't have the same fallback when catastrophic events befall them. They can't always pass along unexpected costs to customers because they have competition who might not have been affected by the same catastrophe.

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