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Back on the Bayou: Electricity & Entergy

by Eliza StricklandSpecial to CorpWatch
August 27th, 2007

Early this August, Rosina Phillipe and Ruby Ancar drove from the government-issued trailers where they are still living two years after Katrina, to a boat landing at the end of a long dirt road. You have to go by boat to get to their tiny town of Grand Bayou, a “wetland community” in Plaquemines Parish, not far from where the Mississippi River empties out into the Gulf of Mexico.  

“How you doing, my cousin?” Ancar calls out to the man lounging by the shrimp boats. “We’re going out to see Ruby’s house,” adds Phillippe. They pile into a small aluminum skiff and fire up the outboard motor. A few minutes later, they’re chugging down the bayou, which functions as the town’s main street. Small wooden houses line both sides of the waterway, and each has a dock instead of a driveway. When neighbors go visiting in this town, they don’t walk, they paddle.

Ancar’s house, like all the others in Grand Bayou, had to be gutted after the storm. Many families have not even begun to repair their homes, because they don’t have the money. And because the insurance companies charge high rates for houses situated in such a vulnerable spot, most of the residents lacked home or flood insurance. Ancar was lucky, though – a contingent of volunteers from Mennonite Disaster Service came this spring and rebuilt her entire house.(1)  

Inside, it smells of fresh paint, and the appliances sit waiting in the kitchen. But Ancar can’t move in, she says. Entergy Louisiana raised the electricity rates for Grand Bayou, and Ancar says she won’t be able to pay the bills.

“That’s the only thing keeping me from being home,” Ancar says. “So close and yet so far.”  

Entergy Louisiana sent each of the former residents of Grand Bayou a letter explaining the new rates. Because the power lines for Grand Bayou “travel over water,” the letter said, the lines are more expensive to repair and maintain. Grand Bayou residents will therefore have to pay a $70 surcharge every month, and must sign a contract agreeing to the new terms before Entergy will turn on the electricity.(2)

“Seventy dollars may not sound like a lot of money to some people,” Phillippe says, “but for us it’s impossible.” She explains that most people in the community make a modest living from shrimping and fishing; in the off months, there’s almost no money coming in at all.(3)  

Phillippe says the families in this tight-knit community have lived here for generations; most are descended from the Attakapas Indians who originally settled the area. Phillippe says she doesn’t object to the risks of living in a hurricane zone: “There have always been storms in coastal Louisiana, but we always rebound,” she says. However, she’s upset that Entergy is making it harder for her to live in the place she loves. “What we’re facing this time is a political and bureaucratic storm."

Entergy Louisiana did suffer steep financial losses because of Katrina and spent an estimated $545 million to repair and rebuild the grid. But residential customers in other storm-damaged areas aren’t facing drastic rate hikes. In a plan approved this August, most residential customers will pay an extra $2 or $3 each month to cover those expenses.(4)  

Phillippe says the Grand Bayou families are angry that they have to bear a large portion of the financial burden for Entergy’s recovery. “It’s my opinion that they don’t think we should be living here, so they’re trying to drive us out,” she says. For now, she and the other residents of Grand Bayou aren’t sure what to do next. Ancar locks up her new house and steps back onto the boat, resigned to a few more months in the trailer provided by FEMA (Federal Emergency Management Agency).

One way or another, they’ll find a way back home, says Phillippe. “This is where we belong,” she says. “We won’t leave – it would be a slap in the face to all those who came before us, and thrived.”

Entergy

New Orleans serves as the corporate headquarters for only one Fortune 500 company: Entergy Corporation, the energy giant with annual revenues of $10.9 billion in 2006.(5)  

But when Katrina devastated the New Orleans power grid, Entergy’s corporate side quickly distanced itself from the expensive task of repairing the city’s infrastructure. Its spokespeople pointed out that the company is divided into many subsidiaries: In Louisiana, it operates Entergy Gulf States in the northern part of the state; Entergy Louisiana in the southern part; and Entergy New Orleans in the city. Because they are all independent companies, Entergy says it is prohibited from sharing the costs of Katrina recovery among the corporation’s 2.6 million ratepayers across the South.

Entergy New Orleans declared bankruptcy just three weeks after Katrina hit, and started looking for a federal bail out. The company began the bargaining high, first asking for $718 million (6),  then dropping the request to $592 million.  

Initially the head of the federal Gulf Coast Recovery and Rebuilding Council rejected the possibility of handing out federal aid to private corporations. In November 2005, the federal official told Entergy Corporation that it was “inappropriate to transfer taxpayer resources to those investors after the fact for a risk they chose to take.”(7)

A Cozy Relationship

New Orleans has an unusual relationship with the private utility that serves its citizens. The city regulates Entergy New Orleans through its city council, rather than giving that responsibility to the state. (Washington DC is the only other city with that arrangement.)

Last year, some New Orleans activists questioned the current system. Filings with the Federal Energy Regulatory Commission showed that the city council spent almost $6 million regulating the utility, which breaks down to more than $32 per customer. In contrast, Louisiana’s state Public Service Commission spent $3.3 million policing the much larger Entergy Louisiana and Entergy Gulf States, or $3.37 per customer.(12)  Since the city bills the utility for those regulation costs, much of the expense gets passed on to ratepayers.

“You definitely have a flag going up that's begging for inquiry,” said Janet Howard, president of the watchdog group Bureau of Governmental Research.(13)

The New Orleans Times-Picayune suggested in several editorials that this deal was bad for residents, and suggested that Entergy New Orleans merge with one of the larger, state-regulated Entergy subsidiaries.(14) 

Several critics have noted that the city council’s utility committee only has two employees, leaving much of the work to high-priced consultants. Some worry that handing out those contracts can amount to patronage. “Those consultants are habitual donors to the campaigns of council members and make nearly $4 million a year in council contracts,” a Times-Picayune editorial said.(15) 

In response, Entergy New Orleans pointed out that it was legally allowed to pass on its storm-related expenses to its ratepayers – the struggling citizens who had returned to rebuild New Orleans. The company warned that it might raise rates by as much as 140 percent.  

With New Orleans and Louisiana officials desperate to avoid yet another blow to the city’s residents, the federal government blinked. The Louisiana government announced its intention of giving $200 million from a federal block grant to Entergy New Orleans, and a Bush administration spokesperson said that while it opposed the move on principle, it would not interfere with the state’s decision about how to use the money.(8)

Entergy New Orleans exited bankruptcy in May 2007, after it received the first $171 million of its aid package. The company and city also agreed to work together on lobbying the U.S. Congress to amend the Stafford Act, which governs emergency federal spending. The amendment would permit FEMA to cover Entergy New Orleans’s expenses if the city is hit again within the next ten years.(9) 

“The issue is the cost of restoration that would be borne by customers in the event of another hurricane,” spokesman Morgan Stewart of Entergy New Orleans said of the proposed amendment.(10)  “Because Entergy New Orleans is uniquely vulnerable to flooding, the issue is about giving some protection to our customers,” Stewart said.

Meanwhile, Entergy Corporation enjoyed a year of record profits. In April 2007, the parent company’s stock hit a record high of $117 per share, up 68 percent from the year before.(11)

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