PSB Rejects Entergy Spinoff Proposal
06/25/10 5:50PM By John Dillon
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(Host) Vermont utility regulators will not allow the proposed spin-off of Vermont Yankee into a new company.
The Public Service Board said the corporate restructuring was financially risky, and was not good for the public.
As VPR's John Dillon reports, the ruling appears to close the books on the deal.
(Dillon) For several years, Entergy tried to convince regulators and lawmakers that it made sense to borrow $4 billion dollars to create a new company called Enexus. The debt-heavy company would own Vermont Yankee and five other aging nuclear plants.
Here's Jay Thayer - who was then an Entergy vice president - before a legislative committee last December.
(Thayer) "I think it's good for Vermont Yankee. I think it's good for the employees at Vermont Yankee. ... I could make the case that Enexus would have more debt capacity than Vermont Yankee. On paper, they are probably about the same."
(Dillon) But from the outset, lawmakers and regulators questioned the wisdom or transferring ownership of plants - and their liabilities - to a new company with that much debt.
They worried that the new company would not be able to pay for unexpected repairs, or the eventual decommissioning of the plants. Last spring regulators in New York rejected the spin off proposal. Late this week, the Vermont Public Service Board agreed.
The Board has significant concerns about the relative financial strength of Enexus, its anticipated credit rating, the amount of its debt leverage, its debt service and refinancing needs, and the adequacy of support arrangements," the ruling said.
James Moore is an energy policy specialist with the Vermont Public Interest Research Group. He says the PSB simply recognized the risk that the new deal involved.
(Moore) "I actually think it was really a good thing that Entergy applied for this spin-off because it showed Vermonters what kind of company they are. They are willing to go to the Public Service Board and make false claims about financial stability of the corporation, make the same claims to the legislators, and you know the record bears out they're not straight with Vermonters."
(Dillon) The PSB rejected the spin-off despite a deal reached between Entergy and the Douglas Administration that included an additional line of credit available to the new company.
The PSB said the financial concessions helped but were not enough. The board said the line of credit "does not appear sufficient to overcome the uncertainties and potential risks.
In its ruling, the board closed the docket on the case. And even before the Vermont decision, Entergy said the spin off appeared dead for now.
For VPR News, I'm John Dillon in Montpelier.