Oct. 23-- Oct. 23--New Orleans City Council members signed off Wednesday on reduced energy bills for most city residents in a vote that ends, at least for the moment, a year of debate with Entergy over what price consumers ought to pay for reliable power.
The plan endorsed by the Utility Committee will cut bills by nearly $3 a month for the average East Bank customer. On the west bank, bills would stay steady for now, but increase starting in 2021. Entergy would be allowed a 9.35% return on equity, which is a measure of the profit they are permitted to make.
If the full council approves the plan, an outcome that is almost certain, the rate decreases will be retroactive to August.
The decreases apply to the rates that residents pay for their energy use, and any savings on customers' overall bill will likely be short lived. The plan does not contemplate the added costs of two power plants slated for New Orleans East, which will show up on customers bills once those plants come online next year.
But the plans, which set Entergy's return considerably lower than the 10.75% the utility originally requested, nevertheless show the council's willingness to put pressure on the city's main electricity and gas provider to offer good service at lower rates with slimmer profit margins.
As if to highlight that stance, members also slapped Entergy with a $1 million fine Wednesday for failing to prioritize the maintenance of the lines and poles that deliver power to homes and businesses in the city.
"The people of this city are faced with many financial pressures from every direction," said Councilwoman Helena Moreno, who chairs the committee. "We owe it to them to deliver the best deal to reduce their bills and provide a positive path for the city's energy future for years to come."
Entergy officials balked at the lowered return and the fine, saying the move to lower profitability was likely to turn off investors who might otherwise support projects the council wants to see in New Orleans. It said the fine was unsupported by the law.
The council's rate plan "makes little to no effort to ensure (Entergy) is a financially healthy utility that will stand ready to provide customer service now and into the future," utility attorney Alyssa Maurice-Anderson said.
Entergy declined to say Wednesday whether it intends to appeal the council's decisions in court, a process that would likely extend the fight over what rates are fair for the utility and consumers.
The unanimous vote to reduce rates capped a year of negotiations between Entergy and the council, the utility's primary regulator, over what Entergy may charge for supplying electricity and natural gas to residents and businesses in the city. The proposal, called a "rate case," is the first time in more than a decade that energy rates have changed significantly.
The proposal will cut bills for East Bank customers by almost $3 a month, and increase West Bank customers' bills by at least 4%, starting in 2021.
The latter move will ensure Algiers customers' rates are comparable to those paid by East Bank customers; customers on the city's West Bank have paid lower rates for years because they were formerly serviced by Entergy Louisiana, a separate Entergy Corp. subsidiary.
The plan also forces Entergy to freeze the $8 a month fee it levies upon to all of its electric customers, regardless of their level of energy use. The utility had proposed nearly doubling that fee to $15 to help pay for recent investments in the city, but council members said that rate would burden low-income residents.
It also contemplates a "green pricing option" for customers who are willing to support renewable power, and offers continued funding for a council-created incentive program for customers who install energy-saving features in their homes.
The plan's contours were shaped based on input from the council's advisors, Entergy, and notably, a group of businesses and city agencies that consume large amounts of energy.
Though the council typically sets the price of power in the city independently of the mayor, Mayor LaToya Cantrell swung her weight this year behind the large-energy users' proposal.
The Cantrell-backed proposal included a return for Entergy of 9.35% that the council eventually adopted. The return was higher than what the council's advisors suggested, but lower than Entergy wanted.
Entergy has argued it needs a higher return in part because New Orleans is prone to hurricanes, which creates more risk for investors. The New Orleans subsidiary of the utility filed for bankruptcy shortly after Hurricane Katrina hit in 2005, which continues to burden the company with a lower credit rating that makes borrowing money for projects more expensive.
But Moreno said the utility's emergency fund, at $89 million, was healthy enough to persuade lenders to invest.
The utility's most ardent critics praised the council for approving a plan that came in under Entergy's requested profit margin, but still criticized members for a plan they said would ensure the utility is paid for the gas plant it wants to build in New Orleans East.
The savings customers will realize "are only short term... because this gives Entergy a path to profits and new gas plant that still does not have legal approval," said Logan Burke of the Alliance for Affordable Energy.
The rate case contemplates how Entergy may recoup its costs for the $210 million gas plant but does not approve the costs themselves, council consultant Emma Hand said.
When that plant and a separate $42 million solar plant slated for New Orleans East come online within the next year, bills will spike by about $6.63 a month and $1.50 a month, respectively.
Members also on Wednesday levied a $1 million fine on Entergy for repeated power outages in the city, after an investigation found the utility failed to properly invest in the lines and poles that funnel power to homes and businesses.
The committee did not say how it will spend that money, the second penalty it has levied on Entergy in the last year.
The first fine, of $5 million, was levied in February after the council found Entergy culpable in a scheme to pay actors to voice support for its gas plant at council meetings.
