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Who Will Pay for New Orleans’ Updated Power Grid?

A New Orleans power utility wants customers to pay for the $750 million to $1 billion price tag, which could raise bills an additional $11.86 per month. But the city has pushed back saying there must be an affordable option for ratepayers.

A little over two years after Hurricane Ida exposed the New Orleans' electric grid as fragile and outdated, Entergy New Orleans launched a public campaign aimed at garnering support for an expensive plan to strengthen it.

The catch, which has put the utility at loggerheads with City Council leaders, is that Entergy wants ratepayers to foot the bill—an estimated $750 million to $1 billion.

The council is signaling that it's unwilling to make residents pay more to fund the massive effort, amid questions about Entergy bills that are already rising steeply and fights with the utility over chronic reliability problems.

Bolstering the grid has been a front-burner topic since Ida left thousands across south Louisiana without power for days in some cases weeks. Consumer advocates and Entergy have agreed that climate change, which is strengthening storms, makes preparing the region's infrastructure imperative.

The key question of who pays, though, has not yet been answered. If Entergy gets its way, customers would see bill increases as the company would recoup its costs — plus its allowed profit — from ratepayers. The utility has estimated bills would rise gradually to an additional $11.86 per month in 2028 under the first five years of the 10-year plan.

City Council President J.P. Morrell said during a September forum with Axios that the council must negotiate a plan that's affordable to ratepayers. He said he thought the council would take up the plan before the end of the year, but the plan now is not expected to come up until the new year.

City Councilmember Helena Moreno, in a new letter to Entergy, told the utility it needs to be more "tenacious" to find other ways to pay for resilience projects without passing the cost to ratepayers. In particular, Moreno directed the utility to apply for low-interest loans from the federal Department of Energy. PG&E, a utility giant in California, recently applied for a $7 billion loan for similar resilience efforts.

Federal Aid?

The prospects for New Orleans' grid may rest in part on how much money Entergy can get from the federal government, which is doling out billions for climate and infrastructure projects through a bill that was one of President Joe Biden's key legislative victories.

The company has already landed one such award.

In October, shortly after Entergy began publicly stumping for its resilience plan, the utility announced it had landed a $54 million grant. The company said it would match that with its own money to bolster lines and build a battery to back up its solar station.

But grid investments are expensive, and that money is only enough to cover investments in one area, a series of transmission and distribution lines near Michoud in New Orleans East. In all, Entergy has sketched out $1 billion worth of similar projects around the city. It has also presented the council with a $750 million plan it describes as a "minimum" resilience effort.

The utility told federal officials it would use the grant money to upgrade 97 transmission structures from Slidell to Michoud that feed power to about 48,000 customers. It also plans to upgrade 381 distribution poles and bury casings for them deep underground, benefiting about 1,300 customers along and near Chef Menteur Blvd.

Entergy also plans to install a 30 megawatt battery to connect to its solar station, with the capability of handling the energy needs of the same 1,300 people for about four hours.

Reliability or Resilience?

One key point of contention in the debate over Entergy's plan is how the grid came to be so ill-prepared for storms.

The City Council tried to fine Entergy $1 million in 2019 for failing to properly invest in maintaining its grid. But the utility sued, and the fine has been tied up in court, in part because the council hadn't established reliability standards that the utility must meet.

The council has since established those standards, and Entergy touts reports showing it has improved its reliability metrics compared to 2017.

But advocates are pushing the council to tighten the standards, which could provide another avenue for forcing Entergy — not ratepayers — to pay for investments in the grid.

"The idea is we set clear expectations with them," said Jesse George, New Orleans policy director for the Alliance for Affordable Energy. "If they don't meet them, you have grounds to say 'Your investments were not prudent, and we're not going to approve you recovering this from rates.'"

Entergy Makes Push

Entergy, meanwhile, has ramped up a public campaign to persuade the council to approve its resilience plan.

It has erected signs across the city denoting "future project sites" and held town halls touting the planned investments. In an email and mail pieces sent to customers recently, Entergy encouraged people to contact their councilmembers.

Entergy New Orleans CEO Deanna Rodriguez said in an interview that the utility is continuing to apply for federal funds. But she argued the city can't count on the feds to fund all the needed improvements.

"What are we waiting for?" Rodriguez said. "It's not going to get cheaper in 5 years. We're not going to get fewer storms. Climate change has really changed our environment.

"You may not want to pay more, but you also don't want your lights to go out."

If the grid is not improved proactively, Entergy argues, it will wind up paying more to rebuild after future storms. And residents will need to evacuate and stay in hotels for longer.

Entergy modeled its plan after Florida's yearslong effort to improve its grid following bad hurricane seasons in the mid-2000s. Those investments were ultimately covered by customers.

But advocates like George point out that Florida customers are wealthier on average than residents of New Orleans. And while Entergy touts its low rates — the average cost of electricity per kilowatt — customers' electric bills are not low. Louisianans have the 5th-highest electric bills in the nation, according to data from the Energy Information Administration. The state is No. 1 in electricity consumption—and customers here pay for rebuilds of the grid from past storms on bills for years.

In her letter, Moreno said that while she wants the utility to improve reliability, the council must "protect ratepayers from spiraling costs."

A recent analysis by Verite, a nonprofit news outlet, found Entergy New Orleans bills are rising at a historic pace. The average city resident paid about $112 per month for electricity in 2019; that has risen to $179 per month in 2022, the outlet found. Rodriguez declined to discuss the analysis.

Moreno noted that current interest rates will add to the burden, potentially costing ratepayers millions in borrowing fees.

"We need to explore all avenues — even those without wide precedent — to keep New Orleanians' lights on, now and into the future," she wrote.

(c)2023 The Advocate, Baton Rouge, La. Distributed by Tribune Content Agency, LLC.

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