In November 1982, New Orleans Public Service Inc. -- the predecessor to Entergy New Orleans -- pulled a fast one on the ratepayers of this city. NOPSI offered to underwrite the cost of a low-turnout special election in which the only matter on the ballot was a proposition to transfer regulatory authority over the East Bank's gas and electric utility to the Louisiana Public Service Commission. The cash-strapped New Orleans City Council, seeing no public opposition and what appeared to be a case of corporate generosity, accepted NOPSI's offer and the election went forward, with the utility paying for the special election and for a slick campaign promoting the proposition.
It didn't take long for New Orleanians to realize they'd been had.
Instead of electing all the utility's regulators, the ratepayers of New Orleans constituted only portions of two Public Service Commission districts. Moreover, decades of cozy relationships between NOPSI's parent company, Middle South Utilities (predecessor to Entergy Corp.), and PSC members worked against New Orleanians getting a fair shake. Before long, local ratepayers were being stuck with the skyrocketing costs of the utility system's white elephant -- an expensive nuclear power plant in Mississippi called Grand Gulf. Local electric rates soared, and there was nothing local ratepayers could do about it. City Council members, realizing too late that they had been hoodwinked, suddenly became the targets of grass-roots citizen lobbying efforts aimed at restoring local control over the utility. Chief among the proponents of "getting NOPSI back" was this newspaper, which was then in its infancy.
In 1985, in response to an outpouring of public pressure and citizen activism, the City Council held another referendum on the issue of utility regulation -- this one not bought and paid for by NOPSI. The campaign was hard fought and bitter. NOPSI spent $2 million against the proposal to return regulatory control to the City Council, alternatively portraying it as either a "takeover" or too complicated for the council stumblebums to manage. Citizens groups (led by the nascent Alliance for Affordable Energy) had a simpler and more effective message: "Get NOPSI back." Angered by rising monthly utility bills, citizens voted more than two-to-one to return regulatory authority to the City Council, and ever since then New Orleanians have enjoyed substantially more aggressive utility regulation than most Louisiana ratepayers. The result: lower base rates in New Orleans than anywhere else in the Entergy system in Louisiana.
Lower rates do not happen by luck or accident. Utility regulation is a painstaking, complex, often thankless task, and doing it effectively takes a team of top-drawer advisers, analysts and attorneys. For more than two decades, the New Orleans City Council has employed some of the best utility advisers in the country, notably attorney Clint Vince of the Washington law firm of Sullivan and Worcester. A passel of local attorneys and consultants works with Vince -- all of them hired by the City Council but paid for by Entergy New Orleans. Many of those costs are passed on to ratepayers by Entergy, and the utility delights in painting the city consultants' contracts as City Hall patronage. Truth is, the New Orleans City Council and its utility consultants since 1985 have saved local ratepayers billions in excessive costs, including more than $1 billion in Grand Gulf charges that the utility was forced to absorb. We find it more than a tad coincidental that Entergy now wants to build a $4 billion nuke -- and make customers pay for it in advance. And guess what? Some on the PSC think that's a good idea.
In the wake of Hurricane Katrina, New Orleans' population has shrunk significantly, thereby shrinking Entergy New Orleans' pool of ratepayers. The utility dove into bankruptcy in the wake of the storm and continues to take full advantage of "bankruptcy protection" even as the council's advisers try to prod Entergy back into the open market -- where it will have to take steps to seek lowest-cost fuel sources, among other pro-consumer obligations. We find it interesting that Entergy appears in no hurry to emerge from bankruptcy, yet it is all too eager to seek more pliable regulators. Last week, The Times-Picayune, long a front man for the utility, ran a front-page story "exposing" the high cost of regulating Entergy New Orleans -- calling it 10 times more expensive than the PSC's costs for regulating other Entergy companies. That story was followed quickly by an editorial calling for the merger of Entergy New Orleans with Entergy Louisiana -- and the transfer of regulatory authority to the PSC.
Don't be fooled again, folks. This is a power play, pure and simple. The costs of regulating Entergy New Orleans are far outweighed by the billions saved in excessive costs -- costs that Entergy will gladly pass on to local ratepayers as soon as it gets to present its case to its lapdogs on the PSC.
We have been down this road before, and we know where it ends. As New Orleans struggles to recover in the wake of Katrina, we have seen how daunting the task of rebuilding can be when we are placed at the mercy of others. One of the few areas in which New Orleans can control its own destiny is that of utility regulation. We would be foolish to give that up again.