The proposed rules would turn the traditional regulatory process on its head by allowing a utility to earn money on a nuclear plant before it is in operation. The rules would also require the PSC to approve of the need for a nuclear plant before it is built and again at the beginning of each of three phases. The PSC would annually review the construction costs and, in the case the plant is never completed, would allow a utility to collect its costs from its customer.
The rules were requested by Commissioner Jay Blossman last year. Other states, including Florida, Georgia and Indiana, have adopted similar rules to encourage the development of nuclear plants.
"I wanted Louisiana to have an aggressive rule," Blossman said Wednesday. "We may decide in two years that we really don't think it's a smart idea. I just hope we would have the chance."
In crafting the rule, the Louisiana Public Service Commission staff gave "significant deference" to Entergy and its position, PSC staff attorney Ann Hill said. Entergy is the only company that has expressed an interest in building a nuclear plant in the state.
Entergy Nuclear, a subsidiary of Entergy Corp., has said it is considering a new nuclear unit at its Riverbend facility in St. Francisville. It plans to apply for a license for such a plant next year. It also intends to apply for a license to build a new unit at Grand Gulf, in Port Gibson, Miss.
Mike Twomey, vice president of regulatory affairs for Entergy Louisiana, has said the company may build only one unit, and could chose between Louisiana and Mississippi, depending on which state offers the best environment. Louisiana needs to adopt rules that provide the company certainty it will recover its costs for a nuclear plant, he said.
When companies built the last generation of nuclear plants in the 1980s, many utilities were not allowed to collect all of their costs because public service commissions found them to be imprudent. Twomey has said that such regulations discourage development of new nuclear plants.
The rules presented on Wednesday take positions on issues favorable to Entergy that the staff opposed.
The commissioners seemed inclined to adopt at least one of the staff's recommendations -- to remove language from the rule that would make all costs involved with the construction of a nuclear plant "presumptively valid."
"We have to make sure they are prudent," said Commissioner Foster Campbell. "As a safety net, you have to leave it in there."
The staff also recommended the utility not be guaranteed the right to earn money from customers before a nuclear plant is completed.
That staff recommended that earnings be granted if the utility can demonstrate that they would be in the public interest, which a company could do when it came before the commission for approval of the project.
"We're not suggesting we're for or against (collection of earnings), but it should be done in the certification process," when the commission can look at all of the facts of a particular proposal, said David Dismukes, a consultant to the PSC who helped draft the rules.
Dismukes said collecting earnings can be good for the public because they lessen the eventual rate shock of paying for a nuclear plant and can keep the company in good financial standing.
Some commissioners agreed.
"I don't feel comfortable at all saying that they can collect this without" proving it's necessary, Commissioner Jimmy Fields said.
Even without the guarantee, the rule goes far in changing the way such earnings were handled in the past, Dismukes said.
In the 1970s and '80s, utilities that were constructing nuclear plants were allowed to earn money on their work in progress only if they could prove to the commission that they were in financial distress, he said.
"This company is not in financial distress," Campbell said. "I don't have a problem with looking at nuclear. My dilemma is making a sweetheart or handsome deal with a company that is flush."
The commission postponed adopting the rules after Commissioner Lambert C. Boissiere III asked to amend them to make sure that if Entergy stopped construction of a nuclear plant for its own reasons, that the company would not be able to collect its costs from Louisiana customers.
Boissiere later said such a provision is necessary because Louisiana is competing with Mississippi for the nuclear plant. Mississippi could offer Entergy a better deal after construction begins in Louisiana. In that case, Entergy shouldn't be able to move the project and charge Louisiana customers for the unfinished plant here, he said.
After the meeting, Twomey said he has no problems with Boissiere's amendment or the staff's recommendation to take out the language saying the costs would be presumptively prudent.
But, he said that not including the guarantee on earnings doesn't provide the incentives needed to attract nuclear to the state.
"I don't think it provides the same positive message," he said.
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Pam Radtke Russell can be reached at prussell@timespicayune.com or (504) 826-3351.
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