Entergy trial focuses on franchise fees

The city of Port Arthur will ask jurors to make Entergy honor a 43-year-old franchise agreement and force the electricity provider to pay the city hundreds of thousands of dollars in allegedly unpaid franchise fees.

Jury selection began Monday, Oct. 29, for the trial of city of Port Arthur vs. Entergy Gulf States Inc. et al in Judge Donald Floyd's 172nd District court. The trial is expected to conclude sometime in early November.

The city originally sued Entergy back in 2006 claiming the power company failed to live up to a franchise agreement executed in 1964 by misrepresenting the amount of money it was collecting from Port Arthur industrial businesses.

Under the franchise agreement, Entergy and its predecessor Gulf States Utilities, has been permitted to operate its electrical and power business "in, under, upon, across and along public roads, highways, streets, avenues and alleys owned" by the city, the original petition states.

The franchise was approved in 1964 by Ordinance No. 2964 for a term of 50 years and obligates Entergy to pay the city of Port Arthur 4 percent of its gross receipts from sales within the city's corporate limits.

Port Arthur argues Entergy "miscoded" some of its industrial customers as "outside the city" when in fact the businesses were within city limits.

Entergy Corp. merged with the Gulf States power company in 1994, inheriting the franchise agreement executed between Gulf States and Port Arthur.

Entergy argues the merger and a 2001 Texas Senate bill modifying the way franchise fees could be paid to a city influenced changes in Entergy's franchise fee pay structure. The power company contends that the changes may mislead the city into thinking it is receiving less in franchise fees when in fact it is receiving more street light rental fees.

"Anytime you have a change in calculation, the numbers won't come out the same," testified an Entergy tax and accounting official. "Miscoding and mistakes will happen from time to time…but never intentionally."

Conversely, the city argues that after the merger Entergy altered the deal and withheld revenue.

What the lawsuit says

"The city of Port Arthur has fulfilled its obligations under the agreement and (Entergy) has made use of the privileges conferred by the (franchise) agreement," the suit said.

"Over the years, (Entergy) has purported to comply with the terms of the agreement with plaintiff by providing payments of fees based on defendant's 'gross receipts' calculations. However, Defendant has understated actual 'gross receipts' calculations. However, Defendant has understated actual 'gross receipts' and underpaid plaintiff's franchise rentals."

The three-count suit alleges Entergy committed breach of contract, negligent misrepresentation and fraud.

The city is represented by the Parker Law Firm. Entergy is represented by the Germer Gertz Law Firm.

Case No. E159-725-A

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