Scott Angelle’s first action as a regulator was to order an investigation Wednesday that would link utility company profits to specific standards, such its ability to get the lights on after hurricanes.
“We could support that,” said Phillip R. May Jr., who takes over as the head of Entergy Corporation’s two Louisiana subsidiaries on Friday. But the performance standards would have to be reasonable, measurable and objective, May said in an interview after the Louisiana Public Service Commission monthly meeting during which Angelle announced his directive.
Since winning election in November to represent on the five-member PSC in parts of Baton Rouge, Lafayette and the bayou communities of Lafourche and Terrebonne parishes, Angelle said he had been hearing a lot about ROE, or “return on equity,” as utility companies call profits.
“We need to establish standards, I think, to say if you meet these goals, then you can have this ROE,” said Angelle, of Breaux Bridge, adding that the decision should not be solely based on financial issues.
PSC Commissioner Foster Campbell, of Bossier Parish, has argued that utilities are allowed too much profit given the low interest rates being charged and guarantees that shareholder investments will be repaid by customers. Entergy Gulf States Louisiana LLC and Entergy Louisiana LLC, which together provide electricity to 1 million customers, about half the state, are scheduled to have their rates reviewed by the PSC in 2013. The return on equity is part of that review.
Because privately owned utility companies operate as monopolies within their service area, state law gives the PSC authority to oversee what customers are charged. Generally, customers have to pay a utility company for making and transmitting electricity plus a predetermined return on equity or profit.
Angelle’s directive asked the PSC staff to determine if standards for “reliability of service and disaster preparedness and response” could be developed as part of the profit calculation and, if so, what those conditions would be and what procedures would be necessary for assuring compliance, he said.
When he was secretary of the Department of Natural Resources and Gov. Bobby Jindal’s liaison with the Louisiana Legislature, Angelle said he routinely oversaw contracts that required private companies to do specific things in order to get paid. “My overall philosophy goes back to establishing specific standards,” Angelle said.
Public officials in the New Orleans area, including Sen. David Vitter, R-La., criticized Entergy’s response after Hurricane Isaac made landfall on Aug. 28.
While most customers in the Baton Rouge area had their power restored within a few days, customers in Jefferson and Orleans parishes were without electricity for about a week, while some flooded areas in Plaquemines and St. John the Baptist parishes went powerless for weeks.
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