New Orleans City Council backs Entergy sale of gas service to private equity firm
23rd December 2024 · 0 Comments
By Katie Jane Fernelius
Contributing Writer
(Veritenews.org) — The New Orleans City Council voted Thursday to approve the sale of Entergy’s local gas utility to Delta Utilities, a newly formed company backed by a private equity firm.
The vote comes less than a week after the council first announced its intent to approve the sale and just days after the council’s utility committee voted unanimously to advance the resolution to the full council.
With all regulatory approval secured, the $484 million sale of Entergy’s gas utilities in Louisiana – which serves over 200,000 customers across the New Orleans and Baton Rouge area – can now officially move forward.
“Natural gas is a very resilient fuel,” Tim Poché, CEO of Delta Utilities, told Verite News on Monday. “It heats our homes. We use it to cook with. It’s a fuel that’s used in times of emergency. We look forward to providing that service in a regulated environment and serving our customers.”
The sale did not get a full hearing before the council on Thursday. Instead it was passed as part of the consent agenda – a group of ordinances and resolutions voted on en bloc – which came five hours into the meeting.
Still, nearly a dozen people and organizations gave public comments on it, all opposed to the sale, and approximately 80 people submitted online comments.
Their comments raised concerns over what it would mean for private equity to take over a city utility. Private equity has a reputation for delivering higher rates of returns for its investors than publicly-owned corporations – often through dramatic restructuring, cost cuts and price hikes.
Bernhard Capital Partners, the Baton Rouge-based private equity firm behind Delta Utilities, is led by Jim Bernhard, a former state Democratic Party chair and prolific political campaign donor.
“Your intent to approve the sale after less than a week of public input, to be decided less than a week before Christmas, is a shameful capitulation to the interests of private equity and is deeply disrespectful to your constituents,” Jack Reno Sweeney, co-chair of the local chapter of Democratic Socialists of America, said.
Other opponents of the sale said any kind of rate increase would be an economic burden for the city’s low-income residents.
“Too many residents of our city live paycheck to paycheck, and any increase in their utility bills, including the initial $3 per month increase, will cost them and their families,” Sarah Bodenstein said, referencing the council’s analysis that the transition will only result in an estimated $3 per month in bill increases with their conditions.
Delta Utilities has pledged to “step into” Entergy New Orleans’ existing rates and not raise rates for the first fifteen months after the sale, which is expected to close in the second half of 2025. The earliest that Delta Utilities could bring a rate case to the council is the beginning of 2027.
Commenters also expressed concern over how this deal would impact the city’s climate and clean energy goals.
“The city’s climate action strategy requires disinvestment in fossil fuels and investment in clean energy,” said Wendy Beck of the Deep South Center for Environmental Justice. “[Delta Utilities] has declared plans to make additional investment in investments in New Orleans natural gas infrastructure. These investments would likely lead to higher emissions of natural gas combustion, hindering our progress toward meeting the goal of net zero [emissions] by 2050.”
But the council also received a handful of letters of support – from the United Way of Southeast Louisiana, the Home Builder Association of Greater New Orleans and the Black Chamber of Commerce, among other organizations. Supporters said it was important to have the economic development generated from having a new utility company based in the city.
Delta Utilities has promised to locate its headquarters in New Orleans and create 100 new jobs. In addition to purchasing Entergy’s gas utilities in Louisiana, the company has also made a bid to purchase CenterPoint’s gas systems in Louisiana and Mississippi and Emera’s gas systems in New Mexico. Together, these systems will serve over one million customers.
The $484 million sale of Entergy’s gas systems was first announced last year, but it needed to pass regulatory muster with both the Louisiana Public Service Commission, which regulates utilities in the state, and the New Orleans City Council, which regulates utilities in the city.
The Louisiana Illuminator reported that Bernhard and other executives at his firm donated over $200,000 to members of the Public Service Commission – with the majority going to Baton Rouge-based Commissioner Craig Greene – over the past seven years.
The commission approved the deal in August, but there were no formal challenges to the docket. Because of this, Commissioner Davante Lewis said that rejecting the deal would be “arbitrary and capacious.”
That was not the case in New Orleans, where the council’s utility advisers and the Alliance for Affordable Energy, a local consumer nonprofit, both raised concerns over how the sale would impact electric and gas bills, as well as how new investment in fossil fuel infrastructure would impact the city’s commitment to achieving net zero emissions.
Ultimately, the council chose to advance a resolution supporting the sale – with mitigating conditions. Those conditions limited the amount of transition and transaction costs that could be passed onto ratepayers, alleviating the advisers’ concerns.
But Jesse George, policy director for the Alliance for Affordable Energy, maintained that even with mitigating conditions the deal was bad for New Orleans as a whole and neglected to address how the deal would impact the city’s climate and clean energy goals.
“I invite any one of you to explain to the public,” George said at last Monday’s committee meeting, “how the perpetuation of a fossil fuel distribution system, with its direct contribution to climate change, is not relevant to the question of public interest.”
This article originally published in the December 23, 2024 print edition of The Louisiana Weekly newspaper.
