July 12, 2007 / 9:04 PM / 12 years ago

UPDATE 1-Entergy seeks OK for $1.55 bln La. power plant

(Updates with company comment)

NEW YORK, July 12 (Reuters) - Entergy Corp.’s (ETR.N) Entergy Louisiana LLC subsidiary asked Louisiana regulators Wednesday to approve its $1.55 billion plan to reconfigure an existing natural gas unit at the Little Gypsy power plant so it could burn petroleum coke and/or coal.

The new unit, which will use circulating fluidized bed technology and take about five years to reconfigure, would provide 538 MW of base load or round-the-clock generation. It will replace the existing 545 MW Unit 3.

The plant is located in Montz in St Charles Parish about 30 miles west of New Orleans.

“Power generated with petroleum coke is significantly cheaper than natural gas. At today’s price of gas, this project can provide customers with substantial savings in fuel costs (of about $2 billion) over the next 30 years,” Renae Conley, president and CEO of Entergy Louisiana, said in a release.

Petroleum coke is a byproduct of the oil refining process.

Entergy is seeking initial approval by November so manufacturers can start building vital equipment with a long lead-time, such as the boiler and piping components, in time to complete the project in 2011 to 2012.

Shaw Group Inc. SGR.N, of Baton Rouge, Louisiana, is the engineering, procurement and construction services contractor for the Little Gypsy project.

One MW powers about 500 homes in Louisiana.

RECOVERY IN CONSTRUCTION

Entergy also wants the state to allow the company to recover a portion of the construction financing costs during construction rather than wait until the unit is operating.

Allowing the company to recover a portion of the costs during construction reduces the overall cost for customers by reducing the company’s financing costs, the company said.

Louisiana regulators allowed Entergy to recover a portion of the construction financing costs during construction of the 1,158 MW Waterford 3 nuclear reactor, completed in 1985 for $2.84 billion. That was the last plant the company built.

Since 1985, independent power producers have built several natural gas plants in the state, which in part allowed Entergy to avoid building new plants of its own.

Entergy now buys about 40 percent to 50 percent of the power supplied to customers in the wholesale market.

“With natural gas being so volatile, we have paid the price for buying so much power from the market,” Mike Twomey, vice president of regulatory affairs for Entergy Louisiana, said.

“That is why we want to diversify the fuel mix and add some solid fuel plants,” Twomey added.

Moreover, Entergy noted state regulators allowed neighboring Louisiana power company, Cleco Corp. CNL.N, to recover some of their construction financing costs during the construction of its 600 MW petroleum coke Rodemacher 3 unit.

Twomey also noted regulators adopted a plan that could allow builders of new reactors in Louisiana to recover some of their construction financing costs during construction.

Entergy, of New Orleans, owns and operates about 30,000 MW of generating capacity, markets energy commodities, and transmits and distributes power to 2.6 million customers in Arkansas, Louisiana, Mississippi and Texas.

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