A major resolution setting gas and electric rates for the city appears on the New Orleans City Council’s consent agenda for its meeting this Thursday, meaning that council members are likely to approve it without debate.
The decision to move the resolution — which is called a rate case — to the consent agenda indicates that the council may approve terms recommended by the council’s utility committee and a coalition of major New Orleans ratepayers over the objections of Entergy New Orleans, the city’s gas and electric utility, and Mayor LaToya Cantrell.
Last week, Cantrell sided with the company in the dispute, saying Entergy should be allowed to make a greater profit than the utility committee recommended in a unanimous vote last month. The resolution still needs to be approved by the full council, meaning there is still time to move it to the regular agenda and amend it before a final vote on Thursday.
Andrew Tuozzolo, the chief of staff for Councilwoman Helena Moreno, pointed out that the public still has the opportunity to comment on consent agenda items.
The issue centers on a key component of Entergy’s profit rate — called return on equity. The council resolution would lower the rate from 11.1 percent to 9.35 percent, which will help lower electric bills for east bank customers by an average of $2.86 per month and maintain Algiers customers’ current levels. Entergy and the Mayor have argued that should be set at 10 percent instead.
Entergy’s ROE is a key factor determining how much customers pay on their monthly bills. As The Lens has previously reported, the return on investment the company gets on its assets can be even larger than the cost of building those assets.
For Entergy’s $210 million power plant in eastern New Orleans, an analysis by the Alliance for Affordable Energy showed that a 8.93 percent return on equity would yield a profit of $245 million for Entergy over 30 years. That 8.93 percent rate had been originally suggested by the council’s own utility advisors.
That ROE, and many other key regulatory issues, are being determined through the rate case, which has been in the works for more than a year now. The utility committee approved the rate case resolution with a 9.35 percent return on equity on Oct. 23. Then last week, Entergy and Cantrell formally objected to the resolution.
On October 29, Entergy’s assistant general counsel Alyssa Maurice-Anderson, sent a letter to the City Council asking to renegotiate the return on equity rate “to avoid the lengthy and costly litigation.”
Entergy New Orleans CEO David Ellis also sent a letter, saying that the council’s proposed at 9.35 percent return on equity rate would “severely limit our plans to invest in” reliability, clean energy and the Sewerage and Water Board.
Those letters were received by the Council at around 6pm, according to Moreno’s Chief of Staff Andrew Tuozzolo. That morning, Entergy had its third quarter earnings call with investors. During it, CEO Leo Denault highlighted the importance of collecting returns from capital investments.
He said the “fundamentals that underlie our steady, predictable growth” consists of three things: “a robust capital plan,” “constructive regulatory mechanisms which give us the opportunity for fair and timely recovery of our capital plan” and a “proven track record” of executing large capital projects.
A day later, the mayor sent a letter backing Entergy’s request. The letter included language about improving the deal to more aggressively support clean energy and the “green economy,” but it only put forward one specific policy proposal: set the ROE at 10 percent.
Cantrell’s objection represents a split from the Crescent City Power Users Group — a coalition of major ratepayers that counts the city among its members and previously had the mayor’s support. CCPUG originally recommended the 9.35 return on equity rate that was included in the council resolution.
On Monday, the group sent a letter to the council saying that it still stands behind the resolution, including the 9.35 percent ROE.
“The [Entergy] letters provide no valid reason for the Council to divert from approval of [the resolution], and, instead offer speculative, unsupported, and, quite frankly, misleading arguments,” the coalition letter says.
The mayor’s office, Entergy nor utility committee chair and Councilwoman Helena Moreno did not immediately respond to requests for comment.
This story has been updated with comments from Councilwoman Helena Moreno’s Chief of Staff Andrew Tuozzolo