Regulating the local public utility ranks among the most arcane yet important tasks of the New Orleans City Council. I've sat through a lot of utility hearings in City Hall, and the harder I try to comprehend the subject the faster my eyes glaze over. I'm not alone.
This much I've learned: Utility regulation is all about balancing competing interests. Constituents demand low rates. The utility is entitled by law to a fair rate of return. Advocates like the Alliance for Affordable Energy push for clean energy alternatives and effective conservation initiatives.
Few local governing bodies get to set utility rates, and it's never easy. On just about any given issue, at least one constituent group winds up disappointed when a decision comes down.
This week, the New Orleans Council will formally set in motion a process on which all the major players agree: transferring the Algiers electric utility operations of Entergy Louisiana to Entergy New Orleans. It sounds simple, but it isn't. Once it's done, however, regulating utility rates in New Orleans will be a lot simpler.
The two companies are related; both are subsidiaries of Entergy Corp. Under the current setup, Entergy New Orleans provides gas service to the entire city and electric service to the East Bank of New Orleans. Algiers ratepayers get electricity from Entergy Louisiana.
That arrangement, which has existed for generations, forces the council to regulate two utilities instead of one — which drives up the costs of utility regulation. It also creates disparities in electric rates between Algiers and the rest of the city.
For almost 30 years, Entergy Louisiana didn't seek a rate increase for its Algiers operations, even though small increases were justified. When the company finally filed for a rate hike, it was huge: 42 percent over four years, starting this past July.
At the suggestion of the council's lead utility consultant, Washington-based attorney Clint Vince, Entergy and the council negotiated a lower rate increase (31 percent over four years) — with the kicker that Entergy Louisiana transfer its Algiers operations to its New Orleans affiliate. The process will require hearings to vet the efficacy of the proposed transfer, but in this case the watchdogs (including the Alliance) as well as the utility agree that it's a good idea.
"The transfer of electric facilities for 22,000 customers in Algiers from Entergy Louisiana to Entergy New Orleans will finally allow all New Orleanians to be served by one single utility," Vince said. "It will allow for much greater efficiencies, create a larger and stronger customer base and will create a coherent and less costly regulatory structure."
Moreover, having one utility serve all of New Orleans should put to rest the occasional push (mostly by Entergy) to let the Louisiana Public Service Commission (PSC) set utility rates in the city. That happened briefly in the 1980s, and rates shot up so fast that voters wasted little time returning regulatory authority to the council.
For its part, Entergy says the Algiers rate increase will help the company recover the costs of restoring and upgrading its system, which was damaged by successive hurricanes. Those improvements have benefited Algiers residents but were not reflected in Algiers ratepayers' bills, according to Entergy.
The Algiers rate hike was approved in July, and now the transfer of Entergy Louisiana's Algiers operations is set to begin with council adoption of a proposed timetable. The proposal passed the council's Utility, Cable, Telecommunications and Technology Committee unanimously, so its prospects look good. The process includes a hearing in May, possible council approval in June and formal transfer by Sept. 1, 2015. The transfer also needs PSC approval.
At-Large Councilman Jason Williams, who chairs the council's utility committee, said the transfer would create "a unified and more efficient system for all Entergy New Orleans customers." Williams added that the transfer would facilitate the citywide expansion of energy efficiency programs currently in place on the East Bank.
Some details still have to be resolved, including the costs of the transfer — and who will pay for it. That will require another balancing act.