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$7-billion merger faces review from state regulators

Opinions vary on Entergy

JACKSON — Even though some details of the proposed $7-billion merger between Entergy Corp. and Florida Power & Light are sketchy, Entergy’s nuclear division plans are clear: Jackson-based Entergy Nuclear will continue its pursuit of more nuclear reactors. But determining how the merger will affect deregulation, or vice versa, is unclear.

“The merger works very well with the aggressive nuclear acquisition strategy that Entergy already has in place,” said Kelle Barfield, director of generation communications for Entergy Nuclear. “The largest impact you will see as a result of the merger is potential improvements in the sharing of business practices, enhanced career opportunities for their employees and ours, and the strength of a larger nuclear operation that could help us in recruitment and retention, which will strengthen our workforce over time.”

Entergy Nuclear, a non-regulated subsidiary of New Orleans-based Entergy with nearly 4,000 employees, operates six reactors in Arkansas, Louisiana, Massachusetts and Mississippi and is seeking regulatory approval from the New York Power Authority for its $967-million purchase of the 970-megawatt Indian Point 3 reactor in Buchanan, N.Y., and the 820-megawatt FitzPatrick reactor in Scriba, N.Y. FPL Group operates four reactors at two units in St. Lucie and Turkey Point, Fla.

“Entergy Nuclear is progressing with the acquisitions through NYPA and continues to pursue acquisitions of other units as their owners put them on the market,” Barfield said.

In the deal, Jerry Yelverton will remain president of Entergy Nuclear, which will be renamed to reflect Northeast Southwest Midwest Regions & Acquisitions. FP&L’s nuclear chief, Thomas Plunkett, will continue to maintain responsibility of its nuclear plants. The proposed merger that would make the combined companies the largest electricity producer in the U.S. — and could possibly lower bills for industrial and commercial consumers — caught many industry insiders off guard.

“We had no prior knowledge of the deal and have no more details other than what we’ve seen in the media,” said Kurt Brautigam, spokesman for Mississippi Power Company. “The merger is an example of the recent trend occurring in many industries. We hope it will be beneficial for both companies and their customers.”

Entergy, a major global energy company with power production, distribution operations and related diversified services, in which Entergy owns, manages or invests in power plants generating nearly 30,000 megawatts of electricity domestically and internationally, and delivers electricity to over 2.5 million customers in portions of Arkansas, Louisiana, Mississippi and Texas, is a leading provider of wholesale energy marketing and trading services.

Florida Power & Light serves more than seven million people, or about half of the population of Florida, in an area covering almost the entire eastern seaboard of Florida and the southern third of the state.

Even though the merger would put Entergy in the passenger’s seat of the new company, as yet unnamed, with its shareholders owning 43% of the stock, Entergy head J. Wayne Leonard will remain CEO and FP&L chairman James Broadhead will remain chairman. Both companies will retain separate headquarters.

“We will be bigger, and scale matters,” said Entergy Mississippi CEO Carolyn Shanks. “It will help us in our purchasing (and) help us better serve our customers.”

Jerry McBride, president of the Mississippi Manufacturers Association, said the larger merged company should be able to cut some costs and provide power at a cheaper rate because of economies of scale.

“Entergy is already a low-cost provider, but the merger could mean even lower prices,” he said. “I understand that Florida Power and Light has very few industrial customers and only 3% of its revenue is from industry. Entergy, though, has a major industrial customer base with 20% of its revenue from industry. I hope this merger does not take away any emphasis from Entergy Mississippi’s industrial customers’ needs.”

Edd Jussely, executive director of Energy Consumers for Choice in Mississippi, said if the larger company uses its size to negotiate for lower fuel prices, the merger could be good news for Mississippi ratepayers.

“Florida Power & Light serves more customers than Entergy with fewer personnel,” he said.

Before the merger can take place, approval must be received from public service commissioners in Arkansas, Florida, Louisiana, Mississippi and Texas and the Federal Energy Regulation Commission. The process is expected to be completed by the end of 2001.

“Florida Power & Light has a good reputation in terms of cost, service and reliability, so that’s a plus for the proposed merger,” said Michael Callahan, the newest public service commissioner for the southern district of the state. “This commission will review the proposed merger to ensure that it meets the public interest and that customers of Entergy Mississippi share in the benefits.”

Asked how the merger would affect deregulation, Mississippi PSC chairman Nielsen Cochran said the commission has determined that deregulation is not in the public interest at this time.

“But we will continue to monitor this matter,” he said. “I don’t see the proposed merger affecting the commission’s position on deregulation at this time.”

Entergy has already said it is preparing for electric competition in Mississippi, McBride said.

“While this merger may be a temporary distraction, I hope it does not slow the effort to give all Mississippi customers a choice in their electric provider.”

The merger will have little or no impact on the progress of competition in Mississippi’s electricity market, Jussely said.

“If competition were allowed in Mississippi, Entergy would be the most competitive company in the state,” he said. “But that was true before the merger.”

Bob Steele, an environmental and energy attorney with Baker Donelson in Nashville, said the announced merger of Entergy and FP&L illustrates that utilities and their parent companies, like many other major corporations, are feeling the pressure to get bigger in order to remain strong or even just to survive in the modern economy.

“Power companies face many changes due to the deregulation that is progressing at both the state and federal levels,” Steele said. “Customers are being allowed more choices, so the issues of achieving adequate power supplies, cost controls, and competitive rates become even more important. Even with the necessary approvals for this deal taking some time to be completed, I would not be surprised to see more announcements of this type involving other energy and utility companies in the near future.”

Contact MBJ contributing writer Lynne Wilbanks Jeter at lwjeter@yahoo.com or (601) 853-3967.


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