Entergy: Utility sale, municipal takeover options for New Orleans unit after post-Ida criticisms

Image credit Entergy

Entergy Corp. is responding to criticisms by New Orleans leaders and others in and outside the city with four potential options for the future of the utility in the wake of the grid devastation brought by Hurricane Ida.

Among those preliminary responses by Entergy include a sale of Entergy New Orleans to another owner, a merger with the utility’s Louisiana subsidiary and also turning over direct management to the City Council. Last week Helena Moreno, president of the New Orleans City Council and chairperson of the city’s Utility Committee, proposed a resolution to study future ownership of the New Orleans electric and gas operations.

Entergy has owned the century-old company, formerly known as New Orleans Public Service Inc., since 1996. City leaders and others have sometimes criticized Entergy’s service in the region, including tens of thousands of outages during most recent hurricane.

“Despite a comprehensive and dedicated restoration effort that saw the overwhelming majority of New Orleans customers’ power restored within a week after the strongest hurricane ever to hit our region, several members of the council have expressed their intent to introduce and support a process that could potentially have another entity own and operate electric and gas service in the city,” said Rod West, utility group president of parent Entergy Corp. “We are positioned to support the City Council as they evaluate various options and prepared to move forward with whatever path the council chooses.”

A group called Energy Future New Orleans has accused Entergy of mismanagement and challenged the City Council to hold the company accountable. Earthjustice attorneys for the group last week filed motions asking for full investigations into the Hurricane Ida outages and an audit of Entergy corporate business.

The Energy Future New Orleans motion also seeks a review of costs and rates related to the new gas-fired power plant in the city.

According to the Entergy outline of proposed response on the future of Entergy New Orleans, it could be merged with Entergy Louisiana to establish one company statewide. This move could bring lower rates and a stronger financial picture, according to the company.

Selling Entergy New Orleans to another public utility or private owner would allow the city council to retain regulatory authority over ratemaking, according to the plan. Any other impacts of the sale would be uncertain at the moment, it added.

Entergy also could spin off the New Orleans utility into a standalone. The city council also would keep regulatory oversight but might create a “significant credit risk,” Entergy warned.

A city-operated municipal utility would allow direct management with maximum control over rates and operations, plus eliminate the requirement of rate of return benefits for the corporate owner. This could lead to higher financing and operational costs, Entergy said.

Overall, Hurricane Ida caused more than 1 million outages nationwide, according to reports. Along the Louisiana coast, Entergy has reported, the storm brought 150-mph winds and storm surges above 15 feet.

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(Rod Walton is content director for Power Engineering, POWERGEN International and the online POWERGEN+ series. He is a 13-year veteran of covering the energy industry both as a longtime newspaper journalist and trade publication editor. Walton can be reached at 918-831-9177 and rod.walton@clarionevents.com).

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