In a unanimous vote on a controversial issue, in front of a booing chorus of constituents, the City Council’s Utilities Committee greenlighted Entergy New Orleans to sell its natural gas distribution system to Delta States Utilities.
While committee members pointed to the new jobs that would be created by Delta’s move to the city, critics said that the jobs did not outweigh the almost certain harm to be caused by the sale: to the City Council’s own environmental goals and to local gas customers, whose rates will rise as one of Entergy’s largest customers, the Sewerage & Water Board of New Orleans, shifts to its new power plant and is no longer reliant on natural gas.
Though proponents emphasized that the sale required a moratorium on ratepayer increases for the first two years, most opponents seemed convinced that rate increases were a certainty as soon as the moratorium expired.
Later this week at the regular City Council meeting, the deal will cross its final hurdle as part of the Council’s consent agenda, a group of items including unanimously passed Council committee resolutions that are typically approved with little or no discussion at the start of every Council meeting.
Delta State Utilities is a new affiliate of Bernhard Capital Partners, a private equity firm based in Baton Rouge.
The statewide utility, Entergy Louisiana, has already gained approval from the Louisiana Public Service Commission to sell its gas distribution system in Greater Baton Rouge. Bernhard agreed to pay $484 million in total for Entergy Louisiana and Entergy New Orleans’ gas systems.
Delta Utilities is new to the natural gas business but also plans to purchase CenterPoint’s gas systems in Louisiana and Mississippi as well as the largest natural gas utility company in New Mexico.
The purchases are set to close in mid to late 2025, which will elevate Delta Utilities into becoming a top 40 natural gas provider in the U.S., with about 1.1 million customers.
At this point, despite the big plans, Delta has yet to serve even one customer.
Letters of support often cite the same statistics
Many southeastern Louisiana organizations submitted letters of support ahead of the vote, pointing to the economic opportunity of bringing Delta Utilities’ headquarters to New Orleans.
With all of Delta’s planned acquisitions next year, company officials boasted about its reach. “This is a corporate headquarters of not only the New Orleans gas system located in New Orleans but the corporate headquarters of a multi-state public gas utility,” said Ryan King, chief regulatory and growth strategy officer at Delta Utilities.
Many of the supporting organizations pointed to statistics prepared by David E. Dismukes, the former executive director of the Louisiana State University Center for Energy Studies, who’s now a consulting economist with Acadian Consulting Group.
Dismukes estimates that Delta Utilities is poised to become a $1.7 billion company with about 900 employees serving 600,0000 customers in Louisiana and Mississippi. Representatives of the new utility told council members that all 700 gas employees of Entergy New Orleans will be retained and that Delta will create an additional 200 new jobs in the New Orleans area.
The creation of those jobs is not a condition of the sale, noted opponents, who saw Council members swayed by big economic promises instead of focusing on the sale’s risk to ratepayers and environmental downsides.
Several organizations that submitted support letters recently received awards from Entergy as part of the Super Bowl LIX legacy program, including the New Orleans Council on Aging and the Hispanic Chamber of Commerce of Louisiana. Another supporter, United Way of Southeast Louisiana, is a member of the host committee responsible for distributing more than $3.5 million in grants to 65 nonprofit organizations in Greater New Orleans.
But encouraging sentiments were scarcely reflected during the deal’s public comment period on Monday. Instead, the room was mostly filled with opponents to the sale—ratepayers concerned about their gas service and affordable-energy advocates asking the councilmembers to consider climate impacts.
Even the New Orleans Office of Resilience & Sustainability did not support the sale.
“This deal will place an undue burden on low- to middle-income households, particularly those who are unable to afford the costs of electrifying their homes,” said Greg Nichols, the city’s Deputy Chief Resilience Officer & director of the Office of Resilience & Sustainability. “Fossil Gas usage represents approximately 40% of the City’s carbon emissions from energy use, and our office is deeply concerned about the long-term implications of this transaction on our collective progress toward a cleaner, more equitable energy future.”
‘An undue burden’ on ratepayers and climate goals
The Alliance for Affordable Energy, a nonprofit dedicated to saving money for Louisiana utility customers and transforming the “energy state” into a “clean energy state,” began sounding alarms months ago and has followed the creation of the brand-new utility over the last year.
The utility has yet to address a few looming issues, said Jesse George, New Orleans policy director of the Alliance for Affordable Energy. The two largest, he told the Council committee, are the inevitable rate increases that Orleans customers will shoulder and the impact of the sale on the city’s climate and clean energy goals.
The sale of Entergy’s natural gas utility business and infrastructure stems from a strategy shift, to focus on supplying only electricity to homes and businesses. The most vulnerable ratepayers, including renters, will be unable to adapt by purchasing new electric appliances.
Dan Mills, CEO of the Home Builders Association of Greater New Orleans, wrote in a letter of support that Delta was stepping in to provide an essential service to existing gas customers since the cost to convert a gas-powered home into an electricity-powered home runs up to $31,000 per home – which can be out of reach for many families.
Also, elderly and low-income people accustomed to weathering hurricanes in their homes, instead of evacuating, will likely be hesitant to electrify their homes. Like other storm-weathered, stalwart New Orleanians, these households typically rely on gas to power stoves and generators when Entergy’s electric power fails.
Delta will be stepping into the Orleans market on the brink of losing Entergy New Orleans’ largest natural gas customer, the Sewerage & Water Board of New Orleans, which purchases gas at retail prices to generate power to run the antiquated system that purifies drinking water and runs the pumps.
The Alliance for Affordable Energy estimates that the Sewerage & Water Board currently represents 10% of Entergy New Orleans’ retail gas revenues. But with the board’s plan to build a substation to draw power directly from Entergy’s transmission grid, the fledgling Delta Utilities will soon be without a crucial segment of its business, which will shift cost burdens to a shrinking pool of vulnerable ratepayers who cannot afford to electrify their homes.
“Last year, 19% of New Orleans households were disconnected because of their inability to pay their energy bill,” said Logan Burke, executive director of the Alliance for Affordable Energy. “That’s nearly one in five homes that couldn’t keep the lights on or the gas flowing.”
Plus, with the sale, the Council is allowing a new utility into the market that solely bases its business on selling and burning fossil fuels. That hinders the Council’s own climate and clean energy goals, such as the City’s Renewable and Clean Portfolio Standard and the Council’s target of powering 100% of municipal operations with renewable energy by 2025. It also runs contrary to the goals of both the Mayor’s and the State of Louisiana’s Climate Action Plans, according to the Alliance for Affordable Energy.
As the council voted 4-0 to approve the sale, the chambers erupted in an echoing concert of “boos,” “shames,” and “liars.”
In a statement made after the vote, the Alliance for Affordable Energy said that sale costs alone are projected to raise average residential gas bills by at least $31 a year.
To put it differently, the United Way of Southeast Louisiana said that costs will rise, but that mitigation measures were added to the deal – meant to cap bills for typical residential gas customers. The initial rate increase is the same as the Alliance predicted, less than $3 per month.
It is unclear what the costs will be after the two-year moratorium ends. Critics are convinced that customers will be hard hit.
Despite the decision, the Alliance will remain committed to holding Delta Utilities and the Council accountable for minimizing bill increases and ensuring protections for vulnerable ratepayers, George said.