Entergy Corp. sought a 42 percent increase Thursday for the monthly electric bills of its 22,500 customers on the West Bank of Orleans Parish.
The proposed rate increase, if approved by the New Orleans City Council, would be phased in over three years, according to the filing by subsidiary Entergy Louisiana LLC. It would not include any of the city’s 160,000 customers of Entergy New Orleans Inc., another of the utility’s subsidiaries.
“We understand that this is a significant rate change, so we are proposing phasing it in over three years,” said Kimberly Fontan, director of Entergy’s Regulatory Affairs in Louisiana. “Algiers has been well below (the rates charged) Entergy Louisiana’s other customers for a number of years, but they have receiving the benefits for a number of the costs.”
“They’re filing, that doesn’t mean we’re going to approve it,” said New Orleans Councilwoman Cynthia Hedge-Morrell, who chairs the Council Utility Committee that will review the rate request, hold hearings and make a recommendation to the full Council, which could vote on the request about a year from now.
“I’m waiting to look at the filing and there will be time for the public to comment, for intervenors to comment,” Hedge-Morrell said.
One of those intervenors expecting to comment is the Alliance for Affordable Energy, a New Orleans-based group funded that advocates for “environmentally responsible energy.” “We have every reason to believe that the 42 percent increase is in excess of what’s needed. This is a common negotiating tactic that Entergy utilizes to maximize rate increases,” said Casey DeMoss Roberts, the group’s executive director.
City Councilwoman Kristin Gisleson Palmer, who represents the customers affected by the request, did not agree to an interview. But her chief of staff, Vincent Rossmeier, released a statement: “She does not support any rate increase in Algiers.”
The filing was made with the New Orleans Clerk of Council at 3 p.m. Thursday, after the stock markets closed in New York City.
Under Entergy’s proposal, a residential customer using 1000 kilowatt hours of electricity would pay an additional $30.44 on the $71.86 current monthly bill, depending on the scenario approved by utility regulators.
Entergy has two pending proposals for changing the way power is transmitted from generating plants to its retail customers. The difference in costs to residential customers under the Entergy Louisiana Algiers rate request is about $1.07, depending on which transmission system changes is eventually approved by regulators.
Starting in April 2014, under the request’s first year, rates would increase by $17.49 for a residential customer buying 1,000 kilowatt hours, or kWh. The second year, under this scenario, the rates would increase another $6.47 and the third would add $6.48, according to Entergy’s proposal.
A typical residential customer in Louisiana uses about 1,400 kWh each month, according to the state Public Service Commission, called PSC.
Even if the increase was approved and implanted in full today, the Algiers customers of Entergy Louisiana would still pay less than the $118.80 national average for a residential customer buying 1,000 kWh of electricity in a month, Entergy’s Fontan said.
Entergy Louisiana, which has about 673,000 customers statewide, is regulated by the PSC. However, state law gives authority to the City Council to regulate rates charged by privately owned utilities in New Orleans.
The PSC has, over the years, increased rates on Entergy Louisiana customers to help pay for higher costs for making and distributing electricity. Rates have not increased for the 22,500 Algiers customers of Entergy Louisiana in more than a dozen years, Fontan said.
For instance, the monthly bills of most Entergy Louisiana customers include a special rider to repay the utility company for its costs in repairing the system and getting lights back on after hurricanes Katrina, Rita, Gustav and Ike, she said. Algiers customers of Entergy Louisiana were not charged, Fontan said.
“This is actually brings Algiers in line,” Fontan said.
Entergy also is seeking approval of a “formula rate plan,” which would use various costs to calculate a rate to charge customers more often.
Very generally, a utility company can charge a “base rate” — the cost of making and moving electricity — plus the cost to run the electricity generators. A “base rate” can include a built-in profit while fuel costs cannot.
The rate is multiplied by the amount of electricity a customer uses during a particular month. The pro-rata share of the fuel cost, also based on the amount of electricity, is added to the monthly bill.
The profit, called return on equity, would decrease slightly to 10.4 percent, according to the Entergy filings.
Entergy Louisiana calculated its Algiers rate request using two different scenarios.
One scenario includes the costs of joining a regional cooperative that oversees the transmission of electricity, called MISO, later this year. Entergy projects its customers will save more than $1.4 billion over the next decade once the utility joins the 13-state Midwest Independent Transmission System Operator Inc., based in Carmel, Ind. Under this scenario, Entergy Louisiana is seeking a rate increase that would calculate to $29.37 for its Algiers residential customers using 1,000 kilowatt hours of electricity each month.
The second scenario projects costs for both MISO and for a plan to divest Entergy’s transmission system into a company called ITC Holdings Corp., of Novi, Mich. Approval for that $1.8 billion transaction is pending at the PSC. Under this scenario, Entergy Louisiana is seeking a rate increase that would calculate to $30.44 for its Algiers residential customers using 1,000 kilowatt hours of electricity each month.