Frequent outages could lead to big fines for Entergy New Orleans under new standards
Entergy’s New Orleans Power Station. (Photo by Julie Dermansky)
The New Orleans City Council established a new set of reliability standards Thursday for Entergy New Orleans that could lead to fines up to $3.7 million per year if the number of annual blackouts exceeds those standards. The council is the regulator of Entergy New Orleans.
“Entergy New Orleans must meet our standards or owe the people of New Orleans, their customers, millions of dollars in fines,” Councilwoman Helena Moreno said at a utility committee meeting this month. “I believe we’re one of the only regulators in the southern region that’s set up these types of reliability standards.”
The council hopes the new standards will finally allow it to collect a $1 million fine it imposed on Entergy in 2019 over frequent outages. The fine was levied after a council investigation found that the grid’s reliability fell sharply shortly after the company cut millions of dollars from its budget to maintain it.
Entergy challenged the fine in court, arguing it was unfair because the council hadn’t established reliability standards. An Orleans Parish Civil District Court judge ruled in Entergy’s favor in June.
Moreno’s chief of staff Andrew Tuozzolo told Verite that the council’s plan was now to re-levy the $1 million fine, in the hopes that the new reliability standards will make it easier to defend in court.
The new standards only apply to “fair-weather day” outages, and exclude outages caused by major events like hurricanes. The council is currently conducting a separate process to create new rules and improvement plans for the grid’s storm resilience.
While hurricane-related outages are a well-known and deadly occurrence in New Orleans, the city has also struggled for years with frequent outages on sunny days. In fact, the process to pass these new rules began in 2017, when complaints grew about the number of blackouts happening on clear days, when the grid should have been operating normally.
In 2019, a council investigation found that Entergy failed in its responsibility to maintain an adequate grid. It found the city experienced 2,599 outages between June 1, 2016 and May 31, 2017 alone, the majority of which occurred on fair weather days. The report said the main cause of the outages were equipment failures in the local distribution grid — the poles and lines that run down every street and deliver electricity directly to buildings.
The investigation also found that the grid’s reliability started to fall shortly after Entergy New Orleans made multi-million dollar cuts to investing in distribution system maintenance and improvement. That investigation led to the council’s decision to fine Entergy $1 million.
Under the measure passed Thursday, Entergy will have three new reliability standards that could lead to the fine.
The first standard is how many fair weather outages New Orleans customers face each year. That’s based on an industry standard called the system average interruption frequency index (SAIFI). The minimum SAIFI established by the council is 1.53 — meaning that a customer in New Orleans should experience, on average, 1.53 outages per year. The exact fine depends on how off that mark Entergy was in a given year, with a maximum penalty of $2.7 million.
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The second standard is about the duration of fair weather outages every year, based on the system average interruption duration index (SAIDI). The maximum baseline SAIDI score for Entergy was set at 178.2, meaning New Orleans customers on average would experience 178.2 minutes — roughly three hours — of outages each year. Entergy could face an annual fine of $500,000 for failing to achieve that.
The last standard could lead to fines up to $500,000 if Entergy fails to adequately improve the grid’s worst performing feeders — a piece of equipment in the distribution system that has been blamed for outages in the past.
The council’s ordinance notes that under the newly established fine schedule, Entergy’s poor reliability in 2016 and 2017 — for which the council originally levied a $1 million fine — would have resulted in a fine of almost the exact same amount — $1,005,000.
Representatives of the Alliance for Affordable Energy, which advocates on behalf of customers, applauded the move. But they also said they believe the council should go farther and use these new standards as a starting point.
“We’re certainly supportive of having them in place, but we’d like to note this is merely a first step,” Alliance policy director Jesse George said at the utility meeting this month. “We encourage the council to continue making these standards more stringent over time.”
The council’s utility advisers noted that from 2013 through 2021, Entergy New Orleans would have only run afoul of the new standards in two years, 2016 and 2017.
“I think if you ask the average New Orleanian whether their electric service was reliable over the last five years they would probably say no,” George said in a recent Facebook video.
Moreno said during the committee meeting that because of pressure from the council, Entergy New Orleans had improved its reliability.
“Their reliability is definitely not perfect, but it has improved due to insistence from the City Council,” Moreno said. “Entergy New Orleans has now increased its reliability performance to just above the national average. This is progress, but we are certainly far from done.”
Entergy did not respond to a request for comment.
This article first appeared on Verite and is republished here under a Creative Commons license.
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