Energy Policy:

New Orleans counsel Vince says Federal assistance needed for utility customers

As New Orleans residents continue to try to rebuild their city one year after Hurricane Katrina, one of the major issues they face is a reliable electrical system. During today's OnPoint, Sullivan & Worcester partner Clint Vince gives an on-the-ground perspective of the state of affairs in New Orleans. He calls for federal funding to be allocated to Entergy New Orleans in order to rebuild the electrical system. Vince also discusses the massive rate increases that are being proposed by Entergy New Orleans and talks about ways to diminish the burden on customers.

Transcript

Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Clint Vince, a partner at Sullivan and Worcester and adviser to the New Orleans City Council on energy issues. Clint thanks for joining me.

Clint Vince: Thank you.

Monica Trauzzi: Clint, it's been one year now since Hurricane Katrina hit the Gulf Coast, please assess for us how things are looking on the utilities front one year later.

Clint Vince: Well, in New Orleans progress has been very slow. There's been a lot of work that's been done, but the city is still pretty shattered. The good news is that, in terms of electric and gas service, about 99 percent of the service has been restored to anyone that wants to receive it. The bad news is that the local Entergy utility that's serving New Orleans is still in bankruptcy. They're seeking a massive rate increase. And the system is…there's been a lot of good work on it, but it's still fragile. There's a lot of rebuilding that still needs to be done.

Monica Trauzzi: The last time you were on our show, in January, you pointed out several key issues that would determine New Orleans recovery in the energy sector. You had mentioned federal appropriations, and also the number of people who decided to return to the city, as major factors. What's your assessment of how that turned out?

Clint Vince: Well, that's another good news bad news story. The bad news is that less than half of the population is returned now. So it's a very small customer base with the same fixed costs that existed prior to Hurricane Katrina. We're trying to right-size the system, but that will take time. The good news is that we've made a lot of progress in trying to get federal funds through a state mechanism called Community Development Block Grants, CDBG. We need about $400 million or so, together with insurance money, to rebuild the system without putting all those costs on the back of ratepayers in New Orleans. And we're beginning to be very optimistic. We should have a decision next month. Monica Trauzzi: So what have you seen from FEMA and the feds so far?

Clint Vince: No money has come for the electric and gas system from either FEMA or the feds.

Monica Trauzzi: OK.

Clint Vince: But the Entergy parent company did give a debtor-in-possession loan authorized up to 200 million for the local unit, so it's been able to continue to operate, the Entergy New Orleans affiliate.

Monica Trauzzi: How much of the city is back online power wise and what areas are still vulnerable?

Clint Vince: Ninety-nine percent of the system is back up, but many areas are vulnerable. There are a lot of outages. Any time there's a bad storm there are plenty of outages because about 50 percent of the substations were flooded, about 75 percent of the transmission lines were knocked out, so all of that rebuilding is still under way.

Monica Trauzzi: Do you think New Orleans and Katrina have faded from the public eye at all during this one year time period?

Clint Vince: I think so. I'm happy to see that on the anniversary of Katrina folks like you and other national media are really taking a look and doing a little bit of a scorecard to see what's happened because there's a lot more work that needs to be done and, frankly, a lot more money that's needed in New Orleans.

Monica Trauzzi: I wanted to talk about the Entergy New Orleans-Entergy Corp relationship a bit. Entergy New Orleans filed for bankruptcy right after Katrina. Why hasn't their parent company stepped in to help ease the financial burden, because they did pull in hundreds of millions of dollars last year?

Clint Vince: Well, this is a question that's on the lips of every New Orleans City Council member who I represent. City council is the equivalent of a state regulator. And everyone would like the Entergy parent to do much more than they have. By putting their local unit into Chapter 11 they isolated a lot of their liability there, so the City Council has only limited legal jurisdiction. But we're trying to use the bully pulpit. And with a combination of federal funding through the Community Development Block Grants, and putting conditions on that, we hope to get the Entergy parent to step up more than they have so far.

Monica Trauzzi: And as a result, there are many disgruntled customers in New Orleans these days because there's a lot of talk about increased rates.

Clint Vince: Yes.

Monica Trauzzi: We're hearing $45 per month per customer as a possibility. How can New Orleans residents who are essentially rebuilding their lives be expected to take on the burden of Entergy?

Clint Vince: They can't. If we don't get the CDBG funding Entergy estimates that rates would double and the ratepayers can't sustain that type of burden. I mean a lot of them, as you point out, have lost everything, and they're trying to come back and rebuild. It was a city that had a lot of poverty to begin with, and they just need some help. That's why they're urging that the federal government and the state follow the example of 9/11 in New York, where federal funds did go in for Con Edison to rebuild their system. It's unusual, but when there's a disaster of this order of magnitude it's appropriate.

Monica Trauzzi: Talk about the compromise that is being negotiated between New Orleans City Council and Entergy. Should ratepayers be preparing themselves for higher bills?

Clint Vince: Well, there will probably have to be some level of increase, but we hope to keep it way down in a very moderate range. They certainly can't sustain the level of increase that the company is seeking. Right now they're going through a rate proceeding. The first part of that will conclude by the beginning of November and the second part by the beginning of February. But part of that, the size of their rate increase, is dependent on how much Community Development Block Grant money we are able to get. That could really cut down the size of it tremendously.

Monica Trauzzi: Can you give us an idea at all of how much ratepayers can expect to be paying?

Clint Vince: Well, we're hoping to get about $400 million in CDBG money. If we do, then my recommendation to the council would be to cut that rate increase way, way down. And to defer whatever other portions of that increase we could over a sustained period of time.

Monica Trauzzi: And we can expect that decision by February?

Clint Vince: Well, the first part of it will probably occur at the end of October or beginning of November and then the second part will be February.

Monica Trauzzi: What are population projections looking like right now for the near term?

Clint Vince: It's hard to do. I've seen population studies that are showing, right now, for example Entergy's studies show that they have about 75,000 customers. They had 190,000 just before Katrina, and so as you can see, they have less than half, probably around 40 percent of their customer base. And they're looking at projections of just one to 2 percent a year for the next couple of years. People are waiting to see if the levies hold, the new levies, and what this next hurricane season brings to the city. And so repopulation has been slow.

Monica Trauzzi: One of the major ideas that's being talked about in New Orleans right now is the push to make new buildings more energy-efficient. Brad Pitt is affiliated with Global Green USA, and they're really pushing sustainable design. Should this play a major role in the redesign of New Orleans and should the city Council be putting funds towards sustainable design?

Clint Vince: Absolutely. In fact, the new president of the City Council, and the new chair of the council utility committee, Oliver Thomas, has put energy conservation and rebuilding as one of his top priorities for us, and I agree with that priority totally.

Monica Trauzzi: What about incentives for people who decide to build energy-efficient homes in New Orleans?

Clint Vince: I think we have to do that, and we have to get some funding. And hopefully, also, some federal grants. We're working on all of those things. And we're going to have an energy summit in coordination with the Alliance for Affordable Energy on September 6 in New Orleans. And then we'll have a council utility committee hearing, on this specific subject, on September 14.

Monica Trauzzi: Prior to Katrina the council supported a push for greater energy efficiency. Katrina happened. Where do the New Orleans energy-efficiency programs stand now, one year later?

Clint Vince: Well, that program got wiped out by the hurricane.

Monica Trauzzi: OK.

Clint Vince: First of all, the landscape changed totally. Most of the houses that would have been affected under that program were ruined, were flooded out. And also, we needed to use a lot of the funding that we had set aside to help Entergy with its emergency restoration efforts. So there's a huge need for energy efficiency, but we have to start over right now.

Monica Trauzzi: OK. Final question, we're almost out of time. Historically the relationship between Entergy and New Orleans has been a bit rough, a little rocky. How has the relationship changed during the past year?

Clint Vince: Well, the council has tried hard to help Entergy get federal funding, so they've been very cooperative there. But the council is also requesting that Entergy and the Entergy parent step up and contribute much more to take some of the burden off ratepayers. So in that area there's some tension.

Monica Trauzzi: OK. Clint thanks for joining us.

Clint Vince: Thank you, Monica.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

[End of Audio]

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