The New Orlean City Council’s utility committee signed off on a measure that will reduce electric rates for most New Orleans residents and businesses. But those rates could soon go up again once two new power plants — including a controversial gas plant in eastern New Orleans — go online.
The Council also advanced a proposal to fine Entergy New Orleans $1 million for the city’s frequent power outages. Both will now go before the full council for a final vote.
The resolution setting Entergy rates was the result of a process called a rate case, which has been ongoing since September 2018. There hasn’t been a full rate case since 2008, according to the council.
Councilwoman and utility chair Helena Moreno touted the resolution as one that focused on affordability and clean energy, while also being fair to Entergy.
In a presentation, Moreno’s Chief of Staff, Andrew Tuozzollo, and Council Utilities Regulatory Office Chief of Staff Erin Spears claimed the new rates will lower costs for residents and support clean and efficient energy practices.
According to the council, the resolution represents a much better deal for customers than what Entergy had originally proposed. The changes will reduce monthly electricity costs for east bank residents by $2.86, as opposed to an increase of $4.46 that Entergy had requested. West Bank residents — whose bills are lower on average and faced monthly increases of more than $20 under an earlier proposal by Entergy — will see no change.
The resolution freezes the monthly base rate that customers pay on their bills at $8, even though Entergy had requested $15. And it lowers the incremental costs that customers pay for additional units of electricity.
One of the most impactful alterations to Entergy’s original proposal is the return on equity rate. The return on equity rate is the most important factor in determining how much profit Entergy can collect when it makes capital investments.
The current rate is 11.1 percent. Entergy wanted to change that to 10.75 percent. In this resolution, the return on equity rate would be reduced to 9.35 percent. The resolution also changes the balance of equity to debt Entergy must use when making investments. The resolution’s ratio would force Entergy to use more debt than it had proposed, which reduces the amount of profit it can collect on capital investments.
The resolution creates, for example, a “green power option,” which will give customers the option to pay extra to have their electricity sourced from “green” sources. It will allow customers to buy more clean energy than what is provided on the local grid through the purchase of Renewable Energy Credits from other renewable energy producers. The council is still deliberating over the definition of “green” energy and adequate standards for renewable energy credits.
But not all at Wednesday’s meeting were pleased. Monique Harden, an attorney with the Deep South Center for Environmental Justice, brought up Entergy’s controversial gas plant in eastern New Orleans, which is currently under construction. Harden and other advocates have argued that the bill reductions from the resolution will be overshadowed by bill hikes that will come in the next couple years due to the gas plant and a new solar plant also being built in eastern New Orleans.
“I just want to be clear that the resolution your considering today is not just about utility rates,” said Monique Harden, an attorney with the Deep South Center for Environmental Justice. “You’re allowing Entergy to come back at a later date to saddle us with additional charges for a plant that doesn’t yet have approval.”
One of the council’s utility advisers, Clint Vince, had previously said that the new gas plant will add $6.63 a month to bills while the solar plant will add $1.50. It’s possible that those numbers could change as a result of provisions in Wednesday’s resolution. The plants are tentatively scheduled to go online next year, at which point the increased rates could take effect.
Earlier this year, The Lens reported that although the gas plant’s price tag was repeatedly reported at $210 million, the real cost to customers would likely fall between $650 million and $685 million over 30 years, according to an analysis by the Alliance for Affordable Energy.
That range was based on two possible return on equity rates — 8.48 percent and 9.72 percent. The rate from Wednesday’s resolution, 9.38, falls within that range.
The analysis was also done under the assumption that customers would pay for the plant over 30 years. Wednesday’s resolution set the timeline for 50 years. That would reduce monthly payments for the plant, but would likely increase the overall cost on customers for the entire plant.
Harden is part of a coalition of advocates who sued the council over its decision to approve the gas plant, saying it violated the open meetings law by keeping members of the public out of two key public hearings because the room was at capacity. A judge in civil district court ruled in the advocates’ favor in July, but the council has appealed the decision.
The language of the resolution leaves room for the possibility that the council ultimately loses the lawsuit, which would rescind their prior approval for the plant.
If the council ultimately prevails in the lawsuit and Entergy gets final approval for the plant, today’s resolution will determine how much customers will have to pay for the new gas plant.
Committee advances $1 million fine
The committee also voted in favor of levying a $1 million fine against Entergy New Orleans for persistent reliability issues that have resulted in thousands of outages.
The fine is the culmination of two years of investigations by the city council concerning frequent power outages in new orleans from 2013 through 2017. In 2013 and 2014, Entergy cut funding for maintenance and system improvements by millions of dollars.
The number and duration of power outages has increased every year after 2013, when the disinvestment began, according to reliability measures provided by Entergy included in the resolution.
“No regulator, including the Council, is responsible for directing a utility to operate in a specific manner with respect to distribution reliability,” the advisers say in the resolution. “Every utility including [Entergy New Orleans], is required to operate prudently in all aspects of its operations. [Entergy New Orleans] has an independent and indisputable responsibility to maintain and operate a reliable distribution system.”
If passed by the full council, this would be the second major fine the council has levied against the council this year. The first was a $5 million fine against Entergy for its role in a scheme to pay actors to go to two key City Council hearings to support the new gas power plant in eastern New Orleans.