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An end to Entergy New Orleans? Entergy lays out options as City Council weighs utility changes

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With pressure rising on Entergy New Orleans from its City Council regulators over its performance during Hurricane Ida, the local utility's parent company said ahead of a Wednesday council meeting that it would cooperate with a study aimed at determining whether it should remain as the city's power provider.

But in the new release Tuesday, as well as a series of internal documents released to its regulators in an apparent e-mailing error, the company pointed to a number of pitfalls to some of the more far-reaching potential alternatives to its monopoly floated by the council.

And it sang the praises of a new alternative that would remove City Council oversight altogether.

In recent days, Council members led by Utility Committee chairperson Helena Moreno have stepped up their criticism of Entergy's Ida response, questioning whether utility executives have committed enough resources to keeping the lights on during storms and their explanations for the prolonged post-storm outages.

As part of its effort to understand what happened, the council is preparing multiple investigations, including the study of alternatives to the current Entergy New Orleans monopoly.

Ahead of votes set for Wednesday to launch those studies and probes, Entergy put forward what it sees as four ways forward for the local utility: joining with Entergy Louisiana and shifting its regulatory apparatus to the state-run Public Service Commission; pursuing a sale of New Orleans assets to a different company; forming an entirely new private utility that could purchase Entergy's New Orleans assets; or selling its assets to a newly-formed publicly-run utility.

It was clear from the documents that Entergy favored a path that would see its New Orleans subsidiary combined with the rest of its holdings that supply power to the rest of the state.

Such a possibility has not previously been on the table and was essentially rejected Tuesday by Moreno and District A Councilmember Joe Giarrusso, who along with Moreno has been vocal in criticizing the utility's storm reponse.

"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 Moreno. "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."

New Orleans City Council member Helena Moreno. Photographed on Thursday, June 3, 2021. (Photo by Brett Duke, NOLA.com | The Times-Picayune | The New Orleans Advocate)

STAFF PHOTO BY BRETT DUKE

Rod West, the utility group president of Entergy Corp., stressed in the news release that Entergy had undertaken a major effort to restore power "after the strongest hurricane ever to hit our region" and had always acted in the best interests of its customers.

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.

"Certain proposed actions would prohibit ENO from recovering critical storm restoration costs and freeze funding mechanisms previously approved by the council," said West, using an acronym for Entergy New Orleans. That would inflict "further financial decline on ENO" and adversely impact the utility's ability to provide quality service, he added.

Entergy president Rod West, right, listens during a City Council meeting at City Hall in New Orleans, La., Wednesday, Oct. 31, 2018.

Advocate staff photo by SHAWN FINK

The competing statements from Entergy and Council members Tuesday marked a new low in the relationship between New Orleans' power provider and its primary regulator after years of increasing tensions.

The current council, which took office in 2018, has levied millions of dollars in fines against the company, first in response to its paid-actors scandal and later for failing to shore up its distribution system enough to prevent frequent outages.

And the company and the current Council also fought a contentious battle over what level of profit the utility ought to receive in the most recent rate-setting negotiations.

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West's statement Tuesday seemed to leave open the option of the council and Entergy coming to some agreement on how to resolve their latest conflict.

He said the utility and its regulator "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."

But the documents, particularly those that were inadvertently sent to Council members, didn't appear to soothe any hard feelings.

New Orleans City Council member Joe Giarrusso. Photographed on Thursday, June 3, 2021. (Photo by Brett Duke, NOLA.com | The Times-Picayune | The New Orleans Advocate)

STAFF PHOTO BY BRETT DUKE

Councilmember Joe Giarrusso said that he thought the release was "saber-rattling" intended to either "maintain the status quo or remove the council as their regulatory body."

"I guess I would be the second generation of Giarrussos to say that's a bad idea," said Giarrusso, who noted his grandfather had fought for the City Council to oversee Entergy when he was a member.

The City Council has overseen Entergy's local subsidiary since the 1980s, when it took over regulation from the state-wide Public Service Commission.

The council oversight has led to a different regulatory posture in New Orleans, with the council taking a harder line to get Entergy to integrate renewable power into its portfolio and launching multiple investigations of its actions, Giarrusso said. In addition, he said its oversight means there is a watchdog looking out for just New Orleans, rather than lumping the city's concerns in with those in dozens of other parishes.

"I don't understand why the City Council would want to cede its authority to another publicly elected group over which it can exercise no control," he said.

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 sent out its prepared statement, 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 was largely composed of a schedule for how the company would announce its plans and how executives could respond to various questions. But it also included a hint that Entergy might be considering a more drastic response depending on how the current imbroglio is resolved.

Entergy Corp. is New Orleans only Fortune 500 company, and in response to a question about what the different alternatives would mean for the utility's headquarters in the city, 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."

The talking points also recommend against speculating about potential buyers for Entergy New Orleans or the impact the options might have on the company's share price.

Alliance for Affordable Energy Executive Director Logan Burke, whose group has long been critical of Entergy, said the stance taken in the press release suggests Entergy New Orleans' position is aimed at avoiding further regulation.

"What is telling here is that Entergy New Orleans is saying: 'We won't submit to full regulation. We want either regulation light or we'll take our ball and go home,' " she said. "That is a very clear sign that they have been getting their way for just too long."

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