City Council directed Entergy to pursue power plant in 2015, months before company’s application for Michoud site

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Michael Isaac Stein

At a late October council meeting, a protester calls for a new vote on the Entergy New Orleans power plant.

At a council utility committee meeting last year, a protester calls for a new vote on the Entergy New Orleans power plant.

Michael Isaac Stein

Months before Entergy applied for its proposed power plant in eastern New Orleans, and over two years before the New Orleans City Council approved the application, the council directed the company to use “diligent efforts” to develop a new plant in the city.

In November 2015, the City Council passed a resolution that committed Entergy New Orleans to “pursue the development of at least 120 megawatts of new-build peaking generation capacity within the City of New Orleans.” Peaking plants are designed to augment an energy system when demand is unusually high. They typically spend the bulk of the year dormant.

It specifically lists two Entergy-owned facilities as potential locations: A.B. Paterson, which was shut down after Hurricane Katrina, and Michoud, which would be decommissioned seven months later in June 2016. Both were located in eastern New Orleans. The resolution was written and recommended by the council’s utility consultants, who are paid to advise the council in its role as Entergy New Orleans’ regulator.

The power plant that was ultimately approved by the City Council in March 2018 closely mirrors that description. The blueprint calls for a 128-megawatt peaking gas-plant at the Michoud site. Power plant critics see this symmetry as evidence that the outcome of Entergy’s application was determined before the community had time to weigh in.

The 2015 resolution has gone largely unnoticed, even by city officials involved in utility regulation. Councilwoman Helena Moreno, who chairs the council’s utility committee, wasn’t aware of it, according to her chief of staff. But it is now a key aspect in a legal dispute between opponents of the power plant and the city.

The plaintiffs in the suit argue that the contracted utility consultants had already made up their minds by the time the power plant application process began. They claim that the process leading up to the vote violated due-process rights and that the advisers played conflicting roles as both advocates for the plant and fact-finders for the City Council.

But the consultants argue that plant opponents are misinterpreting the 2015 resolution. They note that neither the resolution nor a related federal settlement agreement commits Entergy to building a plant, only that the company “use reasonable diligent efforts to pursue” new production capacity in the city.

The 2015 settlement

The 2015 council resolution ratified a portion of larger settlement deal made at the Federal Energy Regulatory Commission, which regulates the interstate transmission and sale of electricity. That settlement was negotiated by the council’s utility advisers on its behalf and was finalized in August 2015. The next month, those advisers presented the council with a resolution to approve the settlement.

It passed through the utility committee with no comments in opposition. It was then approved in the full city council through the consent agenda, meaning it didn’t come up for public debate.

“The settlement agreement was approved through full public, transparent, full participation meetings at both the FERC and the Council,” said the city’s lead utility legal adviser, Clint Vince. “It was widely hailed as a very successful negotiation.”

According to opponents of the proposed plant, the council didn’t properly inform the public that Entergy and the council had a prior agreement on a power plant before Entergy submitted its application.

Two resolutions written by the council’s utility advisers in 2016 and 2017 and related to the new plant begin with fairly extensive backgrounds, but nonetheless omit the 2015 resolution. It was mentioned, however, in the resolution that ultimately approved the plant in March 2018.

During Entergy’s application process in 2017, plant opponents tried to submit testimony from Dr. Beverly Wright of the Deep South Center for Environmental Justice that described the 2015 deal and what Wright characterized as the advisers’ potential conflict of interest. But the advisers successfully moved to have it stricken from the record.

The advisers argued that since parts of the testimony dealt with legal interpretations and Wright is not an attorney, those sections should be removed. They also said that Wright’s interpretation was wrong.

Emma Hand, who works with Vince at the law firm Dentons US, told The Lens that the settlement and resolution “imposed no requirement for any specific plant to be proposed to the Council and clearly contemplated that any specific proposal, such as [the eastern New Orleans plant], would be required to be reviewed and approved by the Council.”

As the advisers noted in their filing asking to have Wright’s testimony taken out of the record, the FERC settlement says that Entergy’s commitment to pursue a new plant was subject to the “mutually satisfactory resolution of all material considerations,” including affordability for ratepayers and whether alternative projects would be more economically feasible.

That language, Vince told The Lens, “gave the Council full jurisdiction over all aspects of the decisions.”

An administrative hearing officer, who presides over utility regulation, agreed with the advisers.

But former Councilwoman Susan Guidry, the only member of council to vote against the plant in March 2018, said that the 2015 settlement deal may have had lasting influence over the advisers’ decision making.

“This was a hard-fought thing, and I think the advisers were very proud of the settlement they came out with,” Guidry said. “So I would think that the advisers saw it as future planning, and a win, something that they would use an outline or guiding document for the future.”

Monique Harden, who represents the plaintiffs in the lawsuit against the council, told The Lens that whether or not the resolution was binding, it set the course for Entergy’s application process. She said that the council and its advisers should have informed people about the context of Entergy’s application.

“By keeping it silent, by keeping it covered up, by keeping information stricken from the record, the previous council did not want to come clean on the terms and conditions of their prior deal with Entergy,” said Monique Harden, the assistant director of law and policy at the Deep South Center for Environmental Justice.

On Wednesday, during a meeting of the council’s utility committee, Harden criticized Councilman Jay Banks — who joined the council in May 2018, two months after the power plant vote — for recently serving as the director of governmental relations for one of the utility advisers, Legend Consulting Group Limited. In a statement, Banks said that he worked for the company until June 30, 2017 — before he officially qualified as a council candidate for the 2017 election. It’s unclear when he began at the firm, but he worked there for much of the plant application process. His name and resume appeared in a 2016 bid for a contract renewal Legend submitted to the council.

Banks did not include his work for the advisers on his 2016 or 2017 financial disclosure statements filed with the Louisiana Board of Ethics.

The lawsuit claims that the advisers were biased by their role in negotiating the 2015 FERC settlement. It asks that the council’s March 2018 vote be overturned, Entergy’s application for the plant be reopened and that the advisers be recused from assisting the council in its decision-making process.

The groups had put that suit on hold in January, pending a potential council vote on a resolution to rescind the plant’s approval because of Entergy’s alleged role in the hiring of paid actors to appear at 2017 and 2018 council meetings to support the plant. (Entergy New Orleans has denied that it knew about or authorized the scheme.) But council members announced this week that they would not reconsider the plant’s approval.

The council is instead considering a resolution that would allow the plant to move forward but impose a $5 million fine against the company. That vote is expected at Thursday’s council meeting.

The advisers

New Orleans is rare in that it regulates its utility at the local level, through the City Council, instead of at the state level. It is also set apart by how heavily it relies on outside consultants to perform the responsibilities of regulator.

In 2015, a report from the New Orleans Office of Inspector General found that the city spent 96 percent of its $7.2 million regulatory budget on outside consultants in 2013.

“The issue is not whether the Council should use outside consultants; the issue is whether the Council should use outside consultants for everything,” the report said. “The Council’s regulatory approach and practices lacked basic controls to ensure transparency, prevent misconduct, and promote effective decision-making.”

In 2015, the consultants were called to bat for the city in negotiations between Entergy’s various corporate branches, including Entergy New Orleans. After more than 50 years, the companies were ending their Entergy System Agreement, which allowed them to share generation and transmission infrastructure.

The resulting settlement, made at the Federal Energy Regulatory Commission, included a requirement that Entergy pursue new peak generation within New Orleans. Hand, one of the legal advisers, said the provision was added due to the anticipated closure of the aging Michoud plant.

“The whole settlement was a package of different options that Entergy agreed it would start pursuing and taking a look at, and then whatever options out of the set of stuff we knew were reasonable near-term options, that we would hopefully come up with the best combination,” she said.

She said that this was vital to ensuring that New Orleans had its own “transmission pricing zone” in the new system that Entergy was joining, the Midcontinent Independent System Operator. This would “ensure that [New Orleans] customers would only bear the costs of transmission upgrades that directly benefit [New Orleans] customers,” rather than having to pay for upgrades outside of the New Orleans system.

Entergy New Orleans, Vince said, was not seeking an exclusive pricing zone. The advisers pushed for it to be part of the settlement.

“The system agreement termination presented an unusually contentious and complex set of issues,” Vince said. “The TPZ issue was particularly threatening to the City because Entergy Louisiana was planning a number of expensive transmission projects in the western part of the state that would have provided little or no benefit to New Orleans ratepayers. However, those ratepayers would have had to bear a significant cost burden.”

“The recent mischaracterization of the settlement language is not only unfortunate, but indefensible, and, I fear, intentional,” he said.

 ‘Do we dive into the past or dive into the future?’

Former Councilwoman Susan Guidry, the sole no vote in March 2018, told The Lens that although the plan may have made sense in 2015, it isn’t the right one in 2019.

“Times change so fast in this industry,” she said. “What you thought in 2015 isn’t something to rely on today.”

She pointed out that Entergy has significantly lowered its demand projections twice since 2015. One of these reductions caused Entergy to withdraw its application for a 226 MW plant and reapply in July 2017 with two options, the original 226 MW plant and the 128 MW alternative that was eventually chosen by the advisers.

She said that new options, such as battery storage as a reserve energy source, have made leaps forward in recent years and made peaking plants a more outdated option. She also pointed to demand response programs, which aim to reduce demand at peak times rather than increasing supply.

Though the FERC settlement called for alternative projects to be considered, Guidry has previously expressed doubt that they were. When she voted against the plant last year, Guidry said the council lacked a “complete analysis of other alternatives” and was not given a full set of options for conditions — possibly including caps on costs and emissions — that could be included as part of an approval vote.

“Do we dive into the past or dive into the future?” she said this week. “We’re at a crossroads. And building this plant is going to send us into the past and we’re going to be paying for it long after it’s of any further to use to us.”

Guidry said that Vince used to call her with updates on the negotiations, describing how he was wrangling concessions from Entergy. In retrospect, however, she said she isn’t sure what was going on behind the scenes.

“What’s been pretty sickening throughout this process is the City Council being blindly led by the advisers when they bear the responsibility of ensuring that the record is complete and the information is accurate,” Harden said. “But the buck ultimately stops at the city council, not the advisers.”

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