Image by Colin Behrens from Pixabay

The city lost power. My thought was if Entergy New Orleans had ever thought the cables would break. If not they had no preparation for fixing it. Some thought it took too long to get power up and running again. Now the city council is looking at their response and Entergy Louisiana is threating to fold Entergy New Orleans into the overall Entergy fold. If so – the city council loses control. Hard ball on both sides.

The parent company of Entergy New Orleans opened the door to severing ties with the city or making a significant change in its regulatory structure on Tuesday in response to calls from members of the City Council for a study of alternatives to its monopoly on the local power grid. In laying out multiple options for what could potentially succeed the current utility structure, Entergy Corp. suggested that its preference would be to merge Entergy New Orleans’ assets in the city with Entergy Louisiana, the subsidiary that supplies power to Jefferson Parish and other areas of the state and is regulated by the state Public Service Commission. That move would eliminate the City Council’s local oversight of the utility. Such a plan has already drawn blow back from the City Council, which accused Entergy of trying to escape oversight. “So now, after Hurricane Ida, when we question whether the New Orleans Power Station really worked or the corporation’s transmission investments as a whole, their pitch is to change regulators,” said Councilmember Helena Moreno, who chairs the committee that regulates Entergy New Orleans. “Here’s the thing, all we’ve ever wanted from Entergy New Orleans is to provide reliable and affordable services to people of this city and that’s why we’ve held them accountable when it hasn’t occurred.”

The loss of Entergy New Orleans will hurt the city despite what Entergy Louisiana says.

In a media plan the company accidentally sent to Moreno, the company suggests that it could pull its corporate headquarters from New Orleans if the company were no longer providing power to the city. Entergy is the only Fortune 500 company now headquartered in the city. The company announced in a news release Tuesday morning that it planned to cooperate with efforts by Moreno to study alternatives to Entergy New Orleans. Moreno last week called for those studies in response to the failure of eight transmission lines that provide electricity to the New Orleans region during Hurricane Ida. The loss of those connections to outside power sources left New Orleans completely in the dark for two days after the storm. Many customers in the city were without power for more than a week and those in other parishes were without power for even longer.

The ball is now in the city councils court where some tough questions have to be asked in order to make a good decision.

The first step in launching those studies is to hire consultants who could look into the city’s options. The council is expected to move forward on putting out a bid for those consulting services this week. Rod West, the utility group president of Entergy Corp., stressed in the press release that Entergy had undertaken a major effort to restore power “after the strongest hurricane ever to to hit our region.” He argued that the council’s threatened actions in recent days, if enacted, would make it hard for the local subsidiary to maintain its level of service in New Orleans. “It is obvious that we have reached a critical juncture in our relationship with the City Council,” West said. “While we believe that the actions of Entergy New Orleans have always been in the best interest of our New Orleans customers, some members of the council have publicly expressed a different opinion. Certain proposed actions would prohibit ENO from recovering critical storm restoration costs and freeze funding mechanisms previously approved by the council, thus inflicting further financial decline on ENO and adversely impacting ENO’s ability to provide quality service to its customers.”

The city council has four options proposed by Entergy. Most, of course, benefit Entergy. Are they just looking for more money?

Entergy laid out four options for the council. Three of those — the sale of the company to another utility, a spin-off into a standalone company outside of Entergy’s corporate umbrella and the creation of a new city-owned utility — are essentially the options that Moreno has floated. But an additional proposal would see Entergy New Orleans merge with Entergy Louisiana, which provides power throughout much of the rest of the state. That proposal would remove the utility from the City Council’s direct oversight, putting it under the jurisdiction of the state Public Service Commission. Such a move – which would require the approval of both regulatory bodies – would serve to reduce the council’s leverage over its electrical provider, which the current council has used to push for priority in power restoration as well as to craft more long-term initiatives such as increased investment in renewable energy. Entergy’s press release, however, pushes the potential benefits of that option, arguing that it would lead to lower rates and the ability to strengthen the combined company’s financial standing. The company presented the other options as requiring trade-offs.

The main question is do we need a separate utility in the city or could we use a state wide one? If state wide, the city council loses control.

The sale of Entergy New Orleans to another would keep regulation in the city’s hands but any benefits or drawbacks would be dependent on which firm bought the company’s assets, which include 1,800 miles of power lines, 144 miles of transmission lines and power generation that includes the New Orleans Power Station in Michoud. The company also noted the council could spin off Entergy New Orleans into its own company, but warned that could lead to financial instability and an increased credit risk. Finally, Entergy included the option of creating a municipally run utility, though it warned doing so could lead to higher financing costs and operating expenses. Such a move would be unprecedented in New Orleans, which has never run its own power company. “The New Orleans City Council and ENO have a long history of working together to find common ground on solutions for customers that solve complex problems and achieve important objectives to a sustainable energy future for New Orleans,” West said. “The council’s expected resolution will require it to make an important choice: will the city continue with Entergy as its energy partner or pursue another alternative?”

Considering how the Sewerage and Water Board works, do we want to city to run an electrical utility?

A break with Entergy would mark a sea change for New Orleans, which has received power from Entergy or its predecessors for more than a century. That began with the New Orleans Railway and Light Company, founded in 1905, and continued with privately owned New Orleans Public Service Inc., which was later merged into the companies that eventually became Entergy. Shortly after the company’s press release, Moreno tweeted that Entergy had – apparently by accident – sent out its media plan and talking points surrounding Tuesday’s release. “When you’re coming at your regulatory body with a media ploy to change up regulators, don’t accidentally send me your whole messaging and media plan with your news release,” Moreno tweeted. The media plan – obtained by The Times-Picayune | The New Orleans Advocate through a public records request – is largely made up of a schedule for how the company will announce the plan and how executives can respond to various questions. In response to a question about what the options would mean for the Entergy headquarters in downtown New Orleans, the talking points say, “The location of our corporate headquarters is strictly a corporate business decision, and this would be an option for us to consider.” It also includes a list of “stakeholders” for company executives to call. In addition to the council and Public Service Commission, that includes a call to Mayor LaToya Cantrell by Entergy New Orleans President and CEO Deanna Rodriguez; a call to Governor John Bel Edwards by Entergy Louisiana President and CEO Phillip May; calls to the city’s representatives in Baton Rouge and Washington, D.C. and various members of the business community.

I wonder if it was “by accident”. The city council need to look at this as what is best for the city, not as do we not want to lose power.

Do we lose Entergy New Orleans?