Utility cut multi-state deal by 3 years
Long before it became one of the country’s largest operators of nuclear power plants, Entergy Corp. founder Harvey Couch burned sawdust to produce power for its predecessor utility, Arkansas Power and Light.
A lot has changed since then. Now, Entergy — New Orleans’ lone locally based Fortune 500 company — has hundreds of thousands of customers in the New Orleans area and millions more across a four-state service area.
On Thursday, the New Orleans City Council, which regulates Entergy New Orleans, marked the company’s 100th anniversary with a proclamation and warm wishes to utility executives led by Entergy New Orleans CEO Charles Rice, a former city attorney and chief administrative officer under Mayor Ray Nagin.
“I’m proud of you personally, Charles,” council President Jackie Clarkson said.
Clarkson described a local-boy-makes-good story, calling Rice another example of “just ordinary people wanting to do extraordinary things, and that’s very important in this city.”
For his part, Rice credited Entergy’s longevity to having “helped build this community, you could say, almost from the ground up.”
But the good feelings didn’t last long.
Just moments after the proclamation honoring the company was read, council members signed off on the day’s “consent agenda,” which included resolutions to launch investigations into various recent decisions by the utility that were the subject of a contentious Nov. 14 meeting of the council’s Utility Committee.
Entergy executives recently voted in effect to cut by three years the length of a multi-state system agreement that has kept the cost of producing power comparable throughout the company’s four-state service area.
The agreement ensured that Entergy subsidiaries that produce the lowest-cost power — typically Entergy Arkansas and Mississippi, which have used low-cost coal at their power plants — would compensate the subsidiaries that relied on pricer power sources, thereby keeping everyone’s costs even.
Entergy Arkansas is scheduled to leave the pact this year, and Entergy Mississippi is slated to follow suit in two years. More recently, Entergy Texas has been looking to exit the agreement.
Under the new rules, Entergy utilities are required to give only 60 months’ notice that they plan to abandon the agreement, instead of 96. City Council members say the move could cost New Orleans ratepayers “tens of millions of dollars,” according to the resolution that was passed Thursday putting the council’s investigation into motion.
At last week’s committee meeting, Chairwoman Cynthia Hedge-Morrell voiced disapproval over local Entergy executives’ vote to shorten the waiting period. “I can’t see any benefit whatsoever to the ratepayers of New Orleans to let Texas withdraw and shorten the period that they have,” she said.
Rice countered that the agreement was “not designed to hold the company in the system against their will.”
The City Council also voted Thursday to launch an investigation into a complex issue on how costs of transmission upgrades will be allocated.
For years, Entergy has worked to gain support for relinquishing control of its vast transmission grid to a regional organization, the Midcontinent Independent System Operator, which the company says would save New Orleans customers tens of millions of dollars over a decade, in large part because MISO would dispatch power more efficiently. That move is expected to happen before the end of the year.
But local officials and their consultants contend that including Entergy New Orleans in a single pricing zone for the entire state, rather than a separate zone including only the city’s utility, would force New Orleans customers to foot the bill for transmission upgrades elsewhere in Louisiana.
Clint Vince, a Washington, D.C., utility lawyer who has worked for the City Council for many years, said at the Nov. 14 meeting that lumping New Orleans in with the rest of the state would mean local residents “essentially will be forced to cross-subsidize the ratepayers in other locations.” That would mean paying a share of “scores of new projects that are being planned to be built in other parts of the state, whether or not they directly benefit New Orleans,” he said.
Gary Huntley, Entergy New Orleans’ vice president for regulatory affairs, disagreed, saying New Orleans would pay less for transmission services in a single statewide zone. That could change if Entergy is successful in spinning off and merging its transmission business with ITC Holdings Corp., a Michigan-based transmission company, officials say. The $1.78 billion deal would improve the grid’s performance and help the company avoid huge capital costs, Entergy says.
At this point, hard numbers about the financial implications of the ITC deal are not available because the information is part of confidential settlement discussions between the utility and the city, officials say.
The council on Thursday also renewed almost $6.9 million in contracts with the lawyers, technical experts and consultants that it works with in regulating Entergy.
The firms’ 2013 contracts totaled almost $7.7 million.
The highest-paid consultant, Vince’s law firm, SNR Denton, was retained with a contract worth up to $3.3 million, a 3 percent increase over 2013. Its senior managing directors, including Vince, will be paid up to $565 an hour for work under the deal.
Other contract amounts include up to $2.3 million for technical consultant Joe Vumbaco’s Legend Consulting Group; $875,000 for Wilkerson & Associates, a local law firm; and up to $200,000 each for the local accounting firms of Bruno & Tervalon LLP and Pailet, Meunier and LeBlanc.