Several comments are in order concerning the analysis by Dan Donoghue and David Haarmeyer of the pending sale of the New York Power Authority's Indian Point 3 and James A. FitzPatrick nuclear power plants to Entergy Corp. (, June 15, 2000, p. 90).

The authors substantially reduced their calculation of the sale's value in real dollars by assuming a high discount rate of 17-1/2 percent. They apparently did not account for the fact that Entergy's payments to NYPA will be backed by a letter of credit from an AA-rated bank. NYPA's financial adviser, J.P. Morgan Securities Inc., assumed a discount rate of 7-1/2 percent, a full 10 points less.

The article incorrectly stated that Dominion Resources had offered to pay an additional $50 million at closing of the agreement and had agreed to exclude a $25 million transfer payment from the Power Authority for employee benefits. Both utilities offered to pay $50 million at closing, and those offers did not change throughout the negotiating process. As for the transfer payments, the Power Authority had already accrued much of the money for the designated purposes, so the payments required by each of the utilities were not major factors in assessing the proposals.

The article also erroneously contended that prices in the Power Authority's power purchase agreements with Entergy will be above market. Since the agreements guarantee fixed prices for several years into the future, it is impossible for any analyst to predict with certainty that the prices will be above market. Moreover, NYPA's recent experience in obtaining, via competitive bid, capacity and energy for New York state's highly successful "Power for Jobs" program, as well as the prices seen in the New York Independent System Operator day-ahead and hourly energy markets, strongly indicates that the prices in the Entergy agreements will be at or below market.

In spite of these flaws, the article was on target in its assessments of the transaction's potentially significant influence on future nuclear sale prices and did present an accurate portrayal of the decisive factors in NYPA's choice of Entergy.