Entergy, Insurers File Second Suit Against Corps Over Katrina Flooding

January 19, 2010

Entergy Corp. has filed a second suit against the Army Corps of Engineers over flooding that followed Hurricane Katrina, leaving behind hundreds of millions of dollars to power systems and higher rates for hundreds of thousands of electricity customers in Louisiana.

The suit, filed in U.S. District Court, is similar to a 2007 action alleging negligence by the Corps in designing, building and maintaining navigation canals and levees resulted in New Orleans and surrounding areas being inundated by water shortly after the Aug. 29, 2005, storm.

Since the federal government alleges that Entergy filed its initial claim one day too soon, the new suit will throw out that argument, attorneys said.

In addition to New Orleans-based Entergy, plaintiffs include two of Entergy’s power utilities – Entergy New Orleans and Entergy Louisiana – and Entergy’s excess damage insurer, Hartford Steam Boiler Inspection and Insurance Co. The insurer is seeking what it paid to Entergy and its units – $69.5 million – from the federal government.

Entergy New Orleans, the city’s prime natural gas distributor, also saw its gas system largely wiped out by the storm. After the city was virtually abandoned for weeks after Katrina, that unit found itself without income and underwent federal bankruptcy reorganization. That utility also received $200 million in federal disaster relief.

Entergy Louisiana sustained at least $510 million in storm damage, while Entergy New Orleans’ tab ran above $600 million.

Despite the insurance payments and federal help, Entergy said it still has millions of dollars in uncompensated damage, the suit said. Due to the reduced post-storm population in the region, Entergy has lost customers and business activity, the suit said.

The suit was assigned to U.S. District Judge Kurt Engelhardt.

Corps spokeswoman Amanda Jones said it was the agency’s policy not to comment on pending lawsuits.

Because of the $200 million payment, Entergy New Orleans’ 150,000 power customers and 96,000 gas customers were spared higher rates. Before the storm hit, the utility had 190,000 electricity customers and 147,000 gas customers.

Paying for storm damage to Entergy Louisiana has resulted in higher charges for all of that utility’s 658,000 power customers, stretching from the New Orleans suburbs into northeastern Louisiana.

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