Entergy to shift another $1.5B in storm costs to customers

State utility regulators get tiny reduction

By: - January 19, 2023 10:00 am
Entergy sign with power plant in distant background

Smoke rises from distant stacks at Entergy’s power plant in Reserve, Louisiana, on Wednesday, Nov. 10, 2021. (Wes Muller/Louisiana Illuminator).

Utility regulators approved a request Wednesday from Entergy Louisiana to bill customers $1.5 billion over 15 years to cover the costs of repairs the company made after Hurricane Ida. The measure involved a new strategy in which the regulators negotiated with Entergy to obtain a small reduction in the cost of the storm fee rather than accept the company’s initial proposal.

The Louisiana Public Service Commission, which regulates most of the state’s electric utilities, approved the measure in a 3-2 vote along party lines.

Newly elected Commissioner Davante Lewis, D-Baton Rouge, said the total cost should translate to a fee of about $5.50 on the monthly bill of a typical 1,000 kilowatt-hour home. Lewis, who ran a campaign promising greater scrutiny of the state’s utility companies, opposed the recovery reimbursement along with Commissioner Foster Campbell, D-Bossier City.

The PSC approval allows Entergy Louisiana to secure about $1.5 billion in financing to cover the cost of storm repairs associated with Hurricane Ida in 2021 as well as remaining expenses from Winter Storm Uri earlier in the year and hurricanes Laura, Delta and Zeta in 2020.

Entergy customers to pay $3.2 billion for storm repairs over 15 years

The new rate hike comes on top of a $3.2 billion storm fee the Public Service Commission approved a year ago.

Entergy initially requested authorization for nearly $1.7 billion in financing. But in an unprecedented move, the commissioners negotiated to lower Entergy’s proposal roughly $180 million.

The PSC has typically rubber stamped requests for storm rate hikes from utility companies because many believed customers are legally required to bear all storm-related costs. Some of the commissioners, however, have begun to question that practice.

When Entergy first made its request last year, commissioners delayed approval to find ways to reduce the cost passed down to customers. An outside lawyer, Pat Patrick, was hired to research whether state law requires the commission to transfer 100% of storm restoration costs to ratepayers.

At a Dec. 15 meeting, Patrick told commissioners his research found the practice of passing along 100% of storm costs to customers dates back only to 2005. State law doesn’t prevent the PSC from making a utility company responsible for some of those costs.

“The [Louisiana] Constitution and the statutes do not require the pass-through at 100%,” he said, later adding that there is also no court precedent that requires it.

Not all the commissioners bought into Patrick’s analysis. Commissioner Eric Skrmetta, R-Metairie, said he was concerned the delay could draw litigation from Entergy and cost customers more due to rising interest rates. He repeated his concern Wednesday, saying increased interest rates have reduced the $180 million ratepayer reduction to about $130 million.

“Unfortunately, this was largely unnecessary,” Skrmetta said. “What I am mostly sorry [for] is that the delay increased the rate of costs on this money needlessly. And if you go and read the Bank of America reports, it’s a sad thing.”

A financial consultant told the commission interest rates have actually dropped slightly this month and have not had the effect Skrmetta described, though rates could change over the next six to eight weeks, which is when Entergy will secure the financing, he said.

Before voting Wednesday, Campbell criticized those who told the commissioners such a deal could never be done. Many lawyers and experts told him there was no room for negotiation because everyone believed the PSC was legally bound to allow Entergy to pass along all its costs to its customers, he said.

Campbell also grilled Entergy Louisiana executive Mark Kleehammer over Kleehammer’s attempt last month to get the commission to vote on the measure while Campbell was out of the room.

“Do y’all play that hard?” Campbell asked him. “Do you play to win that much that you got to win at all costs?”… “I leave the room, and y’all say, ‘Foster’s gone. He’s gone. Let’s pass it now.’”

Former Commissioner Lambert Boissiere, in his last meeting after losing his seat to Lewis in an upset election, was the chairman at the time and refused to reconsider the matter, saying it would be unfair to Campbell.

Kleehammer apologized to Campbell but maintained he was concerned about rising interest rates and getting the best deal for both the customers and Entergy investors.

“There are two pieces of investors here,” Kleehammer said. “It’s not just the equity investors. It’s the debt investors. And when looking at the financial health of the company, time matters. So, I apologize.”

Campbell said he was glad to see the negotiations reduce the cost to customers but still opposed the $1.5 billion pass-through, saying he felt more could have been done. He also said he felt it was unfair to his constituents in north Louisiana.

“North Louisiana don’t have hurricanes,” he said. “We just don’t have them… but we have to pay for all the damage.”

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Wesley Muller
Wesley Muller

Wes Muller traces his journalism roots back to 1997 when, at age 13, he built and launched a hyper-local news website for his New Orleans neighborhood. In the years since then, he has freelanced for the Times-Picayune in New Orleans and worked on staff at the Sun Herald in Biloxi, WAFB-9News CBS in Baton Rouge, and the Enterprise-Journal in McComb, Mississippi. He also taught English as an adjunct instructor at Baton Rouge Community College. Among his recognitions are McClatchy's National President's Award, the Associated Press Freedom of Information Award, and the Daniel M. Phillips Freedom of Information Award from the Mississippi Press Association. Muller is an alumnus of Jesuit High School and the University of New Orleans and is a veteran U.S. Army paratrooper. He lives in Louisiana with his wife and two sons.

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