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No more Entergy New Orleans? Entergy proposes merger or sale

A merged company would be managed by the Louisiana Public Service Commission and not the City of New Orleans.

NEW ORLEANS — Slammed by regulators and sued by customers for allegedly failing to properly harden and maintain its transmission system, Entergy announced Tuesday that it’s considering selling its New Orleans subsidiary or merging it with Entergy Louisiana.

City Council President Helena Moreno, who serves as the lead regulator of Entergy New Orleans, has been highly critical of the company’s performance during Hurricane Ida and called a public hearing for Wednesday, to launch a study of alternatives to the current Entergy monopoly.

She has also called for Entergy to avoid passing on hundreds of millions of dollars in power restoration costs to the city’s 207,000 electric customers.

Entergy responded with a news release Tuesday, signaling that its relationship with the City Council is at a crossroads. The utility company said it would work with the City Council on a new path forward, but also suggested that the council’s proposed actions could make its service worse.

“It is obvious that we have reached a critical juncture in our relationship with the City Council,” the news release quoted Rod West, Entergy Corp.’s utility group president and a former CEO of Entergy New Orleans. “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.”

Entergy sent Moreno a copy of its news release Tuesday and also sent her its strategy for dealing with the media and shareholders. Moreno posted the documents to Twitter, including Entergy’s timeline for releasing its proposals to the media and talking points focusing on how Entergy’s improvement projects could suffer if the City Council cracks down.

Most notably, the talking points said a critical substation being built to make Entergy service to the Sewerage & Water Board more reliable could be “suspended” if Entergy New Orleans is “not a financially viable option as a result of the City Council’s mandate.”

"When you're coming at your regulatory body with a media ploy to change up regulators, don't accidentally send me your whole messaging and media plan with your news release," Moreno tweeted.

Entergy tried to recall the email it sent to Moreno, but Logan Atkinson Burke of the Alliance for Affordable Energy thinks it was meant as a threat.

"It serves as one of the first times we've seen the threat, said (with) the quiet part out loud, which is 'we'll take our ball and we'll go home if you regulate us,'" Burke said. 

Entergy offered four broad options for change: 

- Merging Entergy New Orleans with Entergy Louisiana, which would place its New Orleans operations under the Louisiana Public Service Commission instead of the City Council;

- Selling Entergy New Orleans to another utility;

- Spinning off a standalone company not owned by Entergy;

- Creating a public utility run by the City of New Orleans.

Entergy's talking points memo says it doesn't have a preference at this time, but the way it presented the merger option made it seem the most palatable. It said a merger with its statewide subsidiary would bring lower rates to New Orleans customers and would create a larger company that could spread the risk of storm costs across a larger customer base. 

Moreno said it's really about getting friendlier regulators at the Public Service Commission, which also allows utilities to make a higher percentage return on equity than the New Orleans City Council does.

"We've been pretty tough on Entergy lately," she said. "And then not to mention that with Entergy Louisiana, they do have a higher ROE as well, so they make more money being part of Entergy Louisiana." 

Entergy has come under a torrent of criticism for its performance in Hurricane Ida, particularly losing all eight of its primary transmission lines into the New Orleans metro area.

Moreno has been particularly vocal about Entergy's performance and has sent out notices to Entergy requesting that the company do everything in its power to limit the cost burden of the storm's recovery on ratepayers. 

Moreno said a "Securitized Storm Reserve Fund" that was established after Katrina with a current balance of $39 million could help. But it's likely to be a fraction of the recovery costs for Ida. Entergy is seeking to charge customers more than $2 billion for repairs that were necessary after the less damaging storms of 2020.

Entergy cited Ida as "the strongest hurricane ever to hit our region," and bragged that it restored "the overwhelming majority of New Orleans customers' power within a week."

While Ida made landfall near Port Fourchon and pummeled Lafourche and Terrebonne parishes before heading inland, it brought far less powerful winds to the city of New Orleans. 

WWL-TV Meteorologist Payton Malone said said gusts in New Orleans for Ida were up to 99 mph at Bayou Bienvenue and 86 mph at the Lakefront Airport. By contrast, Hurricane Katrina registered gusts of 110 in New Orleans East, Malone said.

Entergy claimed it had hardened its infrastructure so it could withstand 150 mph winds. A class-action lawsuit was filed against Entergy this week on behalf of all 900,000 customers who lost power in Ida, blaming Entergy's "greed and lies" and "grossly inadequate maintenance and inspection" of its transmission system.

The lawsuit cites WWL-TV's interview with Entergy Louisiana CEO Phillip May, who claimed a "robustly engineered" transmission tower in Avondale didn't need to be replaced. It collapsed into a rusty heap, even though the National Weather Service said wind gusts nearby only reached 92 mph.

Entergy declined an interview request Tuesday. It says it will attend Wednesday's City Council hearing. 

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