Gulf States Utilities (GSU) Company Profile 6,18,37

On December 31, 1993, GSU became Entergy's newest utility subsidiary since LP&L joined the Middle South System in 1949. GSU brings into the Entergy System a customer base of almost 600,000 and a service area of about 28,000 square miles. GSU generates, transmits, and sells electricity in a service area that stretches 350 miles across southern Louisiana and southeastern Texas from its eastern edge at Baton Rouge to about 50 miles northeast of Austin. GSU's Louisiana service area is shown on the map in Figure 5. The territory has a population of about 1,540,000 and includes the northern suburbs of Houston and the major cities of Conroe,. Huntsville, Beaumont, and Port Arthur in Texas and Lake Charles and Baton Rouge in Louisiana. The company's principal business address and telephone number are:

Gulf States Utilities Company
350 Pine Street
Beaumont, Texas 77701
Phone: 409/838-6631

In 1992 GSU provided wholesale service to six municipalities and three rural cooperatives in both states and supplied steam and electricity to a large industrial customer through a cogeneration facility in Baton Rouge. GSU is a partner in a cogeneration project near Lake Charles, the Nelson Industrial Steam Co. In 1992 GSU purchased almost 75% of all cogenerated power purchased by the five investor-owned utilities operating in Louisiana.

GSU's 1993 system electricity sales by customer sector as a percentage of total sales of 29,756 million KWH were 24.2% residential, 19.2% commercial, 48.0% industrial, and 8.6% other.

The fuel sources for the power generated in GSU's Louisiana and Texas plants in 1992 were 76.2% natural gas, 15.9% coal, and 7.9% nuclear. Peak demand in 1993 was 5,612 MW, up about 7% from 1992. Normal dependable capacity and firm purchased power agreements totaled 6,704 MW at the time of the peak on August 18, for a capacity reserve margin of 16.3%. The 5,612 MW peak demand exceeded the company's all-time historic peak load of 5,604 MW set in August of 1980. The decline in the oil industry and a national economic recession during the mid-1980s had a very adverse effect on the Gulf Coast economy, a part of which is served by GSU Both of these factors affected the company's sales and peak load.

In addition to these economic factors, cogeneration of electric power by large industrial concerns also negatively affected the company's sales and peak load. To reduce the anticipated loss of load to cogeneration, the company has obtained approval from regulators in Louisiana and Texas of special industry and economic development incentive rates for certain classes of industrial load. The company has also reduced rates to certain wholesale customers in an attempt to retain existing business and to compete for new load. Approval of these rates was on the condition that the shareholders, rather than other customers, absorb the discount. The rates do not fully recover costs of service like traditional rates, but the company deems them necessary to compete. GSU also owns and operates a natural gas retail distribution system serving almost 85,000 customers in the Baton Rouge area.

Louisiana Electric Generating Facilities
In 1992 GSU operated and either owned or had an interest in six Louisiana steam electric generating stations with capacity totaling 4,159 MW (GSU's share). The company has an additional 40 MW of hydroelectric capacity available under a long-term contract with the Sabine River Authority of Louisiana.12 GSU is the sole owner of four generating stations with 2,895 MW of natural-gas fired capacity. The company also owns a 70% share in the 550 MW coalfired Roy S. Nelson Unit 6, a 70% share in the 931 MW River Bend Unit 1 nuclear plant and a 42% share in Unit 3 of Big Cajun 2, a. 540 MW coal-fired generating unit operated by Cajun Electric Cooperative. The 1992 generating capability of each GSU generating station according to primary fuel type is listed in Table 3. The location of each plant is plotted on the map in Figure 1.

GSU's 1992 Louisiana generating capability was 31.6% of the total capability of the IOU's Louisiana plants, 25.1% of the total capability of the state's utilities, and 21.7% of the total capability of all generating sources within the state.

In 1992 the 14,523 million KWH generated by the Louisiana plants operated by GSU was 32.2% of the total generated by the IOUs Louisiana plants. This output was 26.3% of the total produced by the state's utilities and 19.6% of all power produced in Louisiana. The 1992 net generation of each GSU Louisiana generating plant according to fuel type is listed in Table 1.

GSU's existing coal-fired generating units use low sulphur coal and operate with pollution control equipment which enables them to be in compliance with limits set by the federal Clean Air Act Amendments of 1990 (CAAA). As a result, capital and operating cost increases due to these requirements are presently expected to be modest in relation to costs anticipated by other utilities and industries.

Recent Developments
In December 1993, GSU filed a Least Cost Integrated Resource Plan with its Texas and Louisiana regulators. The plan was filed before the company's merger with Entergy and reflects the strategy of an independent company. The plan includes both demand and supply-side measures to delay the building of new power plants to at least the year 2008.38

As of December 31, 1993, GSU was merged into Entergy and became one of Entergy's system operating companies. As part of Entergy's plan to integrate GSU into its system, a new regional structure was adopted. The new regional alignment is designed to facilitate greater operating efficiencies and enhance customer service. GSU's pre-merger territory is now shared by Entergy's Southwest and Southern Regions. The Southwest Region, headquartered in Beaumont, takes in all of the old GSU territory in Texas plus a portion of the old GSU Lake Charles Division in Louisiana. The rest of GSU's old territory is in the Southern Region, headquartered in Baton Rouge. Despite these internal structural changes, GSU's pre-merger territory will remain intact as a legal entity for regulatory jurisdictional purpose.31

On March 19, 1994, Entergy announced a three-year program to bring GSU's River Bend nuclear plant up to par with the company's other three nuclear generating stations. The performance of the plant has been under fire by the U.S. Nuclear Regulatory Commission for some time.33

On April 12, 1994, a federal judge began hearing arguments in the first of two civil trials on Cajun's June 1989 suit against GSU. The suit alleges that GSU misrepresented construction costs for the River Bend nuclear plant so as to encourage Cajun's participation in the project. The object of the suit is to annul its 1979 Joint Ownership Participation and Operating Agreement with GSU regarding River Bend and to recover its $1.6 billion investment in the unit. The arguments the judge is now hearing pertain to the portion of the suit by Cajun to rescind the Operating Agreement. If the judge does not rescind the agreement, and Cajun decides to go ahead with related claims that GSU violated the terms of the contract, a jury trial would start in October. Cajun and GSU are also involved in litigation over Cajun's having partially withheld funds for its 30% share of certain operations and maintenance costs of River Bend.18,52

On April 12, 1994, the Nuclear Regulatory Commission fined Entergy Operations $100,000 for fire safety deficiencies at River Bend that go back to the plant's original construction by GSU.34

On April 22, 1994, the NRC levied another fine of $112,500 on Entergy Operations for security violations at River Bend based on NRC inspections and investigations between April 1992 and August 1993, when GSU operated the plant.34

History 6,18,33,52
During the late 1800s, many power companies served Southeast Texas and South Louisiana. Some failed and others were merged into larger units and holding companies, where the pooled resources of the myriad of small operators translated into greater strength.

In 1888 one of GSU's corporate ancestors, Beaumont Ice, Light and Refrigeration Company, did just about everything for the cattle and lumber town of 3,000. The company sold electricity and ice, furnished water, and even ran a meat market. At about the same time in Baton Rouge, local businessmen formed the Baton Rouge Electric Light and Power Company. Like its counterpart in Beaumont Baton Rouge Electric was a diversified business that by the turn of the century had bought several small companies. In 1890, the company changed owners and became the Baton Rouge Electric and Gas Company.

A holding company formed during that time, Eastern Texas Electric (under the control of the Boston engineering firm Stone & Webster), eventually led to the creation of GSU. A series of mergers and acquisitions of various ice, water, gas, and transportation properties culminated on August 25, 1925, in the incorporation of a single company - Gulf States Utilities - charged with the task of providing electricity, gas, water, and ice to the public.

In general, there were three years in which major acquisitions occurred to form the basis of the GSU service area of today. In 1926, Louisiana Electric Company and Eastern Texas Electric were brought into GSU and with them such properties as Jennings Utilities and Lake Charles Electric Company in Louisiana and the ice, water, and light utilities of Beaumont, Port Arthur, and Silsbee in Texas.

The next major expansion brought in Western Public Service in 1929, which included the area in Texas that now makes up the bulk of GSU's pre-merger Western Division, including the cities of Conroe, Navasota, Cleveland, Huntsville, Liberty, and Dayton. The final major expansion occurred in 1938, when the eastern part of the Louisiana service territory was formed by a merger of GSU with its sister companies, the Baton Rouge Electric Company and the Louisiana Steam Generating Corporation.

Other isolated acquisitions during 1925-1938 added to the fast-growing GSU system, which now served an area that at one time had been served by more than 60 different power companies. Plant and facility investments grew steadily with the increased demand for utility services in a growing geographic area. The petroleum-related industries of the region, spurred by the huge Spindletop oil strike in 1901, created a ready and increasing market for electricity. Firms that depended on the timber, cotton, sugar cane, salt, and sulphur resources of the area also increased the demand for reliable electric service

Neches Station near Beaumont was constructed soon after incorporation to serve as a major generation source at one end of the system. Louisiana Station was acquired in the 1938 acquisitions, followed by construction of additional generating plants in load centers of the system: Roy S. Nelson Station near Lake Charles and Willow Glen Station south of Baton Rouge went into service in 1960, Sabine Station near Port Arthur in 1962, Lewis Creek Station near the city of Conroe in 1970, and Nelson Coal near Lake Charles in 1982.

In the latter part of the 1970s, GSU entered the age of nuclear power with the start of construction on River Bend Station. GSU's 940 MW boiling water reactor put power into the GSU transmission and distribution system for the first time in December 1985, The unit was declared to be in commercial operation in June 1986.

While River Bend provided additional fuel diversity and a substantial capacity reserve, the plant was controversial. While the plant was under construction, the growth in electricity demand stopped, and even declined in some years. This caused regulators to question the need for the plant. Ultimately the LPSC disallowed a portion of the plant' s cost in the rate base. This resulted in the deterioration of GSU's financial condition, which was one of the factors that led to the merger of GSU with Entergy. The performance of the plant has also been criticized by the U. S. Nuclear Regulatory Commission, spurting Entergy to embark on a three-year program to improve it to the standards of the four other nuclear generating units in the Entergy System.

In addition, Cajun Electric Power Cooperative, Inc., which owns 30% of River Bend, filed suit against GSU in June of 1989, alleging that the company misrepresented construction costs for the plant so as to encourage Cajun's participation in the project. The object of the suit is to dissolve its 1979 contractual agreement with GSU regarding River Bend and to recover its $1.6 billion investment in the unit. On April 12, 1994, a federal judge began hearing the portion of the suit to rescind the Operating Agreement, If the judge does not rescind the agreement and Cajun decides to go ahead with related claims that GSU violated the terms of the contract, a jury trial would start in October 1994.

Cajun has partially withheld funds for its 30% share of certain operations and maintenance costs. This issue is also in litigation. In November of 1992 two of Cajun's rural electric power cooperative members also filed suit against GSU asking the federal court to dissolve Cajun's share of River Bend. This suit is being processed in conjunction with Cajun's 1989 suit.

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