Entergy Corporation announced 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. These preliminary options are in response to the Sept. 14 announcement by Helena Moreno, president of the Council of the City of New Orleans and chairperson of its Utility Committee, that she intends to propose a resolution to study the future ownership of the electric and gas operations in the City of New Orleans, 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 Corporation. “We are positioned to support the City Council as they evaluate various options and prepared to move forward with whatever path the council chooses.”
Entergy New Orleans, including its predecessor New Orleans Public Service Inc., has been part of Entergy Corporation and the fabric of 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. New Orleans is also home to the corporate headquarters of Entergy Corporation.
Entergy New Orleans currently services 207,000 electric customers and 108,000 gas customers in the City of New Orleans, representing US$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 1800 miles of electric distribution lines, 144 miles of transmission lines and approximately 640 MW of power generation. The company also owns 36 miles of natural gas transmission lines and more than 1700 miles of natural gas distribution lines.
Preliminary options for consideration fall into four broad categories:
- 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.
“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?”
Among the initiatives and programs Entergy New Orleans created in partnership with the City Council are:
- Established 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 Hurricane Katrina, the most devastating natural disaster in the city’s 300-year history.
- The expected addition of 90 MW of cost-effective solar projects for everyone, including the New Orleans Solar Station, a 20 MW solar plant in New Orleans.
- The ReNEWable Orleans Residential Rooftop Solar Program, which 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.
- The Entergy Energy Smart Program, which provides energy efficiency tools and services to all New Orleans residents. The program was recently awarded the ENERGY STAR partner of the year recognition by the U.S. Department of Energy for its commitment and dedication to energy efficiency.
- Total Power, which helps LIHEAP eligible households with monthly energy subsidies and energy efficiency education services.
- The installation of Advanced Meters, which helps customers better manage their energy usage and provides quicker response times during an outage.
- The Commercial Rooftop Solar Program, which has already installed more than 5 MW of distributed-scale solar resources on rooftops of New Orleans businesses. The largest installation of this kind in Louisiana resides in New Orleans East at 2.4 MW.
- The New Orleans Power Station, which is a 128-MW power station located inside the city limits and 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’s damaging, near Category 5 winds.
The City Council’s Utility Committee is expected to pass its resolution initiating an ownership study on Wednesday, Sept. 22, 2021.