Entergy considers options for the company’s New Orleans subsidiary after Hurricane Ida, including possible sale
September 27 - October 3, 2021
By The Daily Record Staff
As Entergy Corp. rebounds from Hurricane Ida after restoring power to nearly 950,000 customers in Louisiana and Mississippi, the parent company of Entergy Arkansas announced a plan to sell off its New Orleans subsidiary amid criticism of weeks-long outages in the region.
Entergy released a broad plan on Tuesday (Sept. 21) announcing that it is preparing to respond to the New Orleans City Council with four preliminary options for the future operation and ownership of its subsidiary, Entergy New Orleans LLC. As one of the nation’s largest utility operators, Entergy has subsidiaries in New Orleans, Louisiana, Mississippi, Texas and Arkansas.
Earlier on Aug. 30, Entergy Corp. and utility crews from across the U.S. began the difficult and dangerous task of restoring power to a large swath of southern Louisiana after Hurricane Ida came ashore with 155 miles per hour winds off the coast of Louisiana on Sunday in Port Fourchon.
According to the National Weather Service, the Category 4 storm was one of the strongest storms to ever make landfall in Louisiana with maximum sustained winds of 150 mph. At the time, New Orleans-based Entergy Corp., parent company of Entergy Arkansas, said based on historical restoration times, customers in the direct path of Category 4 hurricanes can experience outages up to three weeks.
Entergy’s preliminary options on its New Orleans subsidiary are in response to the Sept. 14 announcement by New Orleans City Council President Helena Moreno, who is also chairperson of the city’s Utility Committee. Moreno said she intends to propose a resolution to study the future ownership of the electric and gas operations in the Crescent City, including municipalization, or a city-owned and managed utility.
“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 Entergy in New Orleans. “We are positioned to support the City Council as they evaluate various options and prepare to move forward with whatever path the council chooses.”
Moreno said on Sept. 14 that she will author a series of new steps focused on getting answers and accountability on behalf of the people of New Orleans, including tens of thousands of Entergy customers in the city she said sat in the dark and heat for more than a week after Hurricane Ida’s exit from our area.
Among the Moreno-sponsored measures is a full investigation of the power, generation, and transmission failures that led to the Hurricane Ida blackout; a new study on retail competition and utility ownership in New Orleans; a management audit of Entergy New Orleans’ operations; and filing complaints to the Public Service Commission and Federal Energy Regulatory Commission about transmission infrastructure failures.
“While we are still assessing the damage from Hurricane Ida, this much is clear — we need to do everything in our authority to reform our power delivery system, build clean resiliency into everything we do, and hold Entergy accountable to limit the damage to our community from future storms,” Moreno said in a statement. “We need to know the answers to important questions about how Entergy’s system truly performed and further, what reforms we must make to create a more sustainable, affordable future for New Orleanians.”
Moreno said she is also sponsoring legislation to suspend any rate changes by Entergy for recovery costs of Hurricane Ida. Entergy New Orleans, including its predecessor New Orleans Public Service Inc., has been part of Entergy Corporation and the New Orleans community for more than 100 years. New Orleans was one of the first U.S. cities to have a public gas and electric light system for its residents. Entergy New Orleans’ geographic footprint is defined by the New Orleans city limits and its regulating body is the New Orleans City Council.
Entergy New Orleans currently services 207,000 electric customers and 108,000 gas customers in the City of New Orleans, representing $633.8 million or approximately 6% of Entergy Corporation’s total operating revenues, for fiscal year ending Dec. 31, 2020. The subsidiary owns more than 1,800 miles of electric distribution lines, 144 miles of transmission lines and approximately 640 megawatts of power generation. The company also owns 36 miles of natural gas transmission lines and more than 1,700 miles of natural gas distribution lines.
Entergy said preliminary options for Entergy New Orleans fall into four broad categories. They include:
• Merger with Entergy Louisiana – A merger of Entergy New Orleans with Entergy Louisiana, a separate subsidiary of Entergy Corporation, to establish one company for all Louisiana customers and regulated by the Louisiana Public Service Commission. A merger would bring lower rates to New Orleans residents, create a larger company with stronger financial strength for investments and spread the risk of storm costs across a larger customer base.
• Sale of Entergy New Orleans – A sale or merger of Entergy New Orleans with another public utility or private entity. This would allow the City Council to retain regulatory authority over ratemaking and regulatory policy. If a willing buyer with sufficient financial strength is identified, such a transaction could lead to benefits or drawbacks depending on the specific circumstances regarding the transaction.
• Standalone Company – A spinoff to establish a standalone company without Entergy Corporation’s ownership. This would allow the City Council to retain regulatory authority over ratemaking and regulatory policy and retain the headquarters of a smaller-scale company. Contrastingly, it would likely create significant credit risk, which in turn would raise financing costs and could challenge the ability to fund ongoing business operations and secure funds for storm restoration. Even as part of Entergy Corporation, Entergy New Orleans has been downgraded twice in the last twelve months by rating agencies due to its storm risk and weakening financial performance.
• City of New Orleans Run Utility – A municipalization of Entergy’s assets by the City of New Orleans so the city can assume direct management of the electric and gas systems for customers. This would allow the city to have maximum control over customer rates and business operations, the elimination of a rate of return requirement, and access to potential reimbursements afforded under the Stafford Disaster Relief and Emergency Assistance Act. However, it could result in higher financing costs and additional operational expenses.
“It is obvious that we have reached a critical juncture in our relationship with the City Council,” said West. “While we believe that the actions of Entergy New Orleans have always been in the best interest of our New Orleans customers, some members of the council have publicly expressed a different opinion. Certain proposed actions would prohibit ENO from recovering critical storm restoration costs and freeze funding mechanisms previously approved by the council, thus inflicting further financial decline on ENO and adversely impacting ENO’s ability to provide quality service to its customers.
Following Hurricane Katrina in 2005 that left over 1 million Entergy customers without power and damaged over 3,000 miles of power lines, West said Entergy New Orleans has established several initiatives and programs in partnership with the City Council. Those initiatives include establishing a mutually beneficial operational framework in 2006 that guaranteed the continued service for customers and the financial solvency of the business in the aftermath of Katrina, the most devastating natural disaster in the city’s 300-year history.
Other renewable energy initiatives that came out of the city’s partnership with the New Orleans-based utility giant include the expected addition of 90 megawatts (MW) of solar projects, including a new 20 MW solar plant in the city and a rooftop solar program that gives low-income customers the opportunity to have solar panels installed on their rooftop at no cost to the customer. The program has installed panels on more than 100 New Orleans homes.
Entergy commenced operations at its New Orleans Power Station in May, which is a 128-MW power station located inside the city limits that was designed to support the delivery of reliable power to customers more efficiently with less environmental impact. This facility was critical to providing the first lights to New Orleans customers in the wake of Hurricane Ida, officials said.
“The New Orleans City Council and ENO have a long history of working together to find common ground on solutions for customers that solve complex problems and achieve important objectives to a sustainable energy future for New Orleans,” said West. “The council’s expected resolution will require it to make an important choice: will the city continue with Entergy as its energy partner or pursue another alternative?”
Concerning the continued restoration work for Hurricane Ida, Entergy said it has restored power to approximately 932,000 customers, which is 98% of customers affected by the storm. Entergy is still making significant progress in the remaining hardest hit areas of southeast Louisiana, officials said, while crews have restored power to all affected Entergy customers in Mississippi.
In response to the extensive damage caused by the storm, Entergy deployed a workforce of approximately 27,000 workers from 41 states and has committed $1.25 million in financial support to help affected communities rebuild and recover from the storm.
Company official also said the multistate utility giant also deployed 165 commercial scale generators to power critical community infrastructure such as medical facilities, gas stations, grocery stores, municipal water systems and community cooling centers in advance of their power being restored.
PHOTO CAPTION: (Photos provided by Entergy Corp.)
Entergy Corp. said Sept. 21 that its utilities have restored power to Louisiana and Mississippi to nearly 932,000 customers impacted by Hurricane Ida, which is 98% of customers affected by the storm. In response to the extensive damage caused by the storm, Entergy deployed a workforce of approximately 27,000 workers from 41 states, including Entergy Arkansas crews.