Moving Mississippi Forward With A Plan for Clean, Affordable Energy

Entergy Mississippi, Inc. is working hard to prepare for the energy needs of the future.

Toward that end, the company supported recently enacted legislation that authorizes the Mississippi Public Service Commission to utilize an alternative method for cost recovery of certain baseload generation. This creates a process for moving Mississippi forward by providing the tools the commission needs to allow an electric utility to consider large and long lead time generation options for the benefit of our customers.

Entergy Mississippi and other proponents of this new law recognize that it will allow utilities to build needed power plants at a much more efficient level and will ultimately save Mississippi customers money. Following are some frequently asked questions about the legislation.

1. How will the new legislation impact Entergy Mississippi customers?
2. Doesn’t Mississippi already have plenty of power?
3. Are we really using that much more energy?
4. Without the new legislation, would the cost of electricity really go up that much more?
5. So we pay now or pay later?
6. Does the “pay-as-you-go” portion of the legislation place an unfair burden on customers?
7. Will the new law negatively impact low-income and elderly Mississippians?
8. Did Entergy Mississippi support this legislation so it can raise electricity rates?
9. Does the new law give utility companies a blank check for constructing power plants?
10. Does Entergy Mississippi sell electricity that it generates to other states? If so, will customers in other states be required to pay for Entergy Mississippi’s new plant?
11. What are the consumer benefits of the “pay-as-you-go” plan?
12. What happens to the dollars customers have paid if Entergy Mississippi abandons its plans to construct a new nuclear plant?
13. Aren’t Entergy stockholders responsible for raising capital for expansion projects? Ratepayers don’t have any assurance that the unit would ever be built.
14. What will a new nuclear generating facility cost?
15. Is Entergy Mississippi researching the use of alternative fuel sources, such as solar or wind?
16. What about global warming and greenhouse gas emissions? Is Entergy Mississippi taking steps to reduce its carbon footprint?

Q: How will the new legislation impact Entergy Mississippi customers?
A: The new legislation protects our customers from future rate shock associated with new nuclear or coal plant construction, it helps Mississippi achieve energy independence and it ensures tomorrow’s customers have clean, affordable power. Entergy Mississippi supported this legislation because of the lessons learned during construction of the Grand Gulf nuclear plant. By paying the interest costs of a new plant during the construction process, we can avoid large rate increases in the future, such as the 50-plus percent rate increase that came about after Grand Gulf came on line.

Q: Doesn’t Mississippi already have plenty of power?
A: Entergy Mississippi is working hard to keep electric costs at affordable levels. Currently, Entergy Mississippi must buy power from independent power producers that utilize costly natural gas to serve Mississippi’s growing energy demand, and the cost of that natural gas has increased more than 500 percent since 2002. Entergy Mississippi currently needs an extra 500 megawatts of baseload (non-natural gas) power, and that need is predicted to continue to increase in the next 10 years. Additional baseload power, such as the kind produced by a nuclear generating plant, will allow Mississippi to address this power shortage, be economically competitive and provide affordable, clean power to customers.

Q: Are we really using that much more energy?

A: Entergy Mississippi currently needs an extra 500 megawatts of baseload (non-natural gas) power, and that need is predicted to continue to increase in the next 10 years. Gains have been made in energy efficiencies, for example with appliances. But we’ve also increased energy usage due to computers, video games, plasma televisions and other similar technologies. They far outweigh any efficiency that we have gained.

Q: Without the new legislation, would the cost of electricity really go up that much more?
A: Based on recent increases in natural gas prices, we know that electricity prices will rise significantly in the future—regardless of whether or not Entergy Mississippi chooses to build a new power plant. The legislation keeps our option open to build a nuclear plant if it is determined to be in the best interest of our customers.

Q: So we pay now or pay later?
A: That is correct. Entergy Mississippi wants to meet the electrical needs of our customers in the most efficient and cost effective way.

Q: Does the “pay-as-you-go” portion of the legislation place an unfair burden on customers?
A: The “pay-as-you-go” financing option is of great advantage to customers as it eases their cost burden by saving millions in interest costs and helping stabilize the rates they pay for electricity well into the future. In addition, Entergy Mississippi worked with legislators to address consumer concerns with a provision for rebates to customers if a construction project is cancelled to the detriment of our customers.

Q: Will the new law negatively impact low-income and elderly Mississippians?
A: The opposite is true. Electric rates are rising now. Volatile natural gas prices and other pricing pressures on electricity are hurting our customers, particularly low-income customers who make up 25 percent of our customer base. This legislation helps low-income Mississippians as it offers the most opportunity for managing energy costs.

Q: Did Entergy Mississippi support this legislation so it can raise electricity rates?
A: No. Over the years, Entergy Mississippi has kept base rates for electricity at mid-1980 levels. But due to growth, our baseload plants provide less than half of our energy needs today than when the units came online. The other half of the energy is now produced from natural gas. Volatile natural gas prices are increasing fuel charges, a part of every electric bill that is passed on directly to customers. The new legislation helps Entergy Mississippi control rising power costs by allowing the use of more diverse and stable fuel sources, such as nuclear and coal. This also would increase Mississippi’s energy independence. There will be no change in rates until Entergy Mississippi makes a filing with the Mississippi Public Service Commission to show the need for a new baseload generating facility and the benefits to the customer, and the commission agrees to authorize it.

Q: Does the new law give utility companies a blank check for constructing power plants?
A: The legislation does not allow Entergy Mississippi to set or increase rates, or even to build a generating plant. Instead, it addresses how utilities can recover construction costs of new generation plants. Under previous Mississippi law, public utilities could not collect these costs in rates until plant operation began. The new legislation provides new authority to the Mississippi Public Service Commission to let utility companies charge customers over the course of planning and building certain approved facilities. The commission must also approve the need for such a facility.

Q: Does Entergy Mississippi sell electricity that it generates to other states? If so, will customers in other states be required to pay for Entergy Mississippi’s new plant?
A: Entergy Mississippi customers only pay for 33 percent of Grand Gulf and receive all the energy from that 33 percent share. The remaining two-thirds is owned by Entergy Mississippi’s sister companies in Arkansas, Louisiana and New Orleans, and electricity generated for these companies is paid for by their customers. [The amount of electricity that is generated by Entergy Mississippi’s generating units is determined through an Entergy System economic dispatch process that considers the economics of all 80 something generating units owned by all of the Entergy Operating Companies, and the economics of purchased power. Subject to the need to maintain the reliability of the electric system, the lowest cost units operate first, followed by more expensive units. All of this is closely and fully regulated “at cost” by the Federal Energy Regulatory Commission and the state public service commissions.]

Q: What are the consumer benefits of the “pay-as-you-go” plan?
A: This “pay-as-you-go” financing option is of great advantage to customers as it eases their cost burden by saving millions in interest costs and helping stabilize the rates they pay for electricity well into the future. In addition, it allows the utility to move forward with the planning and design phase of the project. The process is much like completing your house plans and then deciding when you want to build. Your plans have value and you have the option of waiting until economic conditions are right to move forward.

Q: What happens to the dollars customers have paid if Entergy Mississippi abandons its plans to construct a new nuclear plant?
A: Entergy Mississippi worked with legislators to address consumer concerns with a provision for rebates to customers if a construction project is cancelled to the detriment of our customers. If the Mississippi Public Service Commission does not agree that halting construction is in the best interest of the customer, Entergy Mississippi would have to refund dollars collected from customers.

Q: Aren’t Entergy stockholders responsible for raising capital for expansion projects? Ratepayers don’t have any assurance that the unit would ever be built.
A: Traditionally Entergy stockholders provide part of the capital for expansion (approximately 50 percent and the company borrows the rest. The company then recovers these costs from customers after the plant begins operation. However, this approach alone will not work in the case of long lead time generation facilities. The magnitude of the cost of building a multi-billion-dollar nuclear power plant precluded Entergy Mississippi from pursuing this project without financing reform. Such plants take about 10 years to build, and we simply are not able to finance a project of this length and cost without being able to recoup costs along the way. Even if traditional financing methods were an option, the interest accrued during this construction time frame would greatly add to the cost of the plant and would result in rates being higher than they otherwise would need to be when the plant went online. This is a unique project and it requires a different financing approach. That is why before construction could begin we would make a filing with the Mississippi Public Service Commission to assure that building a nuclear facility is in the best interest of the customer. The stockholders do put up half of the equity in order to build the facility, so stockholders bear significant risk in a construction project such as this.

Q: What will a new nuclear generating facility cost?
A: The full cost of a new nuclear unit at Grand Gulf could range between $4.9 billion and $6.1 billion, according to the research contained within Entergy’s construction and operating license application. Entergy Mississippi’s share of the plant would be proportional to the percentage ownership of Entergy Mississippi in the plant. For example, if Entergy Mississippi were to own approximately one-third of the new unit, then Entergy Mississippi’s cost would be approximately one third, or around $2 billion.

It is important to remember, though, that no new nuclear unit has been built in the United States in almost 30 years. Costs and schedules are being developed and evaluated, and there are many dynamic variables involved. With negotiations for engineering, procurement and construction ongoing, it still is premature to discuss a number as Entergy’s estimate for a new nuclear plant. Our responsibility is to provide to ratepayers a reasonable and cost-effective baseload option to meet current and future needs, and our economic analysis continues to result in nuclear power being a competitive choice for baseload generation. Entergy will have a detailed cost estimate prior to making a final decision on whether to proceed with the project.

Q: Is Entergy Mississippi researching the use of alternative fuel sources, such as solar or wind?
A: Entergy Mississippi does research the use of alternative fuel sources, and as such has determined that nuclear energy is the most cost-effective, environmentally-friendly alternative for our state. Mississippi does not have enough sustained wind power to make that a viable energy alternative here, nor does it have a high enough number of sunny days to make solar power a reliable energy source. These two sources also require large blocks of land which is very expensive in the South. We need new baseload generation, the kind that provides power 24 hours a day, 365 days a year at the lowest possible price.

Q: What about global warming and greenhouse gas emissions? Is Entergy Mississippi taking steps to reduce its carbon footprint?
A: Concerns about pollution and greenhouse gas emissions are rising, prompting utilities—including Entergy Mississippi--to look for ways to provide power while preserving the environment for future generations. Entergy Mississippi is working to evaluate what source of energy will be best for meeting the needs of tomorrow’s customers. Each fuel source has pros and cons, but the most promising appears to be the new generation of nuclear power plants. These offer zero emissions with no carbon output, are environmentally friendly, have a long and outstanding track record, and a low and stable fuel cost.