La.’s poorest might see higher energy costs from natural gas business deal
30th September 2024 · 0 Comments
By Elise Plunk
Contributing Writer
(lailluminator.com) — Michelle Sinclair, living in eastern New Orleans, is tired of choosing between catching up on her electric bill and buying groceries for her family of three.
“It would take food out of my kids’ mouths, these high light bills,” Sinclair said. A level billing program helped her catch up on overdue bills after Hurricane Ida raised rates for Entergy customers. Now she’s once again feeling the squeeze of high prices.
The first bills Sinclair saw when she got off leveled billing were in the mid $100 to $200 range, which she thought was manageable. But summertime brought bills into the mid-$300 range for the three-bedroom duplex she rents.
“Every month it’s creeping back up higher and higher,” Sinclair said.
In August, her bill increased another $120. Now she’s back in the red, receiving a bill of $670 in September.
New Orleans residents are no stranger to high energy burdens, especially those making below Louisiana’s median household income of $57,650. But customers and advocates worry about an increase in already above-average energy burdens for Louisiana residents now that Entergy is moving to sell its natural gas distribution system to a private equity group.
Private equity’s interest in utilities
Entergy Louisiana and New Orleans customers are currently charged for both gas and electric services in a single utility bill each month. But the potential sale of their natural gas operations to Bernhard Capital Partners’ new subsidiary, Delta Utilities, could produce two bills instead of one – and possibly charge more for gas.
Bernhard filed a request to purchase Entergy Louisiana’s and Entergy New Orleans’ gas distribution operations with utility regulators in late 2023. The company is also looking to purchase CenterPoint Energy’s Louisiana and Mississippi natural gas distribution systems.
The Louisiana Public Service Commission unanimously approved the sale of Entergy Louisiana’s gas distribution to Delta Utilities last month. The sale of Entergy New Orleans’ system awaits approval by the New Orleans City Council.
If approved, Bernhard Capital Partners would pay $484 million for Entergy’s gas operations in Louisiana.
Private equity firms such as Bernhard typically purchase businesses to make them more profitable and generate money for their shareholders.
“It’s a firm that’s basically not dealing with hard goods or products” but ownership of assets, said Anthony Greco, a University of Louisiana at Lafayette economics professor.
Utilities generate a consistent stream of money, making them a lucrative investment for a private equity firm. Entergy Louisiana and Entergy New Orleans serve a combined 204,000 natural gas customers. With the purchase of CenterPoint and Emera’s New Mexico Gas Co., Delta Utilities would increase its customer base from zero to 1.1 million people.
Consumer concerns
Fears surface among consumer advocacy organizations, such as the Alliance for Affordable Energy, when a private equity group gets involved in utilities, including a lack of transparent business strategies.
“As a private equity firm, that means that Bernhard Capital doesn’t have the same federal financial reporting requirements, for instance, to the Securities and Exchange Commission” that publicly traded companies have, said Jesse George, policy director with the Alliance for Affordable Energy.
Without access to information on how a utility conducts its business, there’s little accountability for the actions that could affect consumers’ bills, according to the Alliance.
“We already have the well documented issues with the Sewerage and Water Board, with Entergy New Orleans,” George said. “Add into that a new company to bill you inaccurately and to give you the runaround when you try to navigate their customer service, that will just add to people’s frustrations.”
No long-term promises on rate increases
Higher natural gas bills could have a compound effect on communities already feeling the squeeze of high energy burdens.
“Low-income people pay a higher proportion of their household income toward their utility bills, sometimes upwards of 28 percent,” George said. “That’s alarmingly high.”
Data from the U.S. Department of Energy corroborates this, showing that households making 60 percent or less than Louisiana’s median income have an average energy burden of eight percent, and those making 30 percent or less spend an average of 22 percent of their income on electricity and gas.
High energy burdens also disproportionately affect Black, Hispanic, Native American, and older adult households, according to a study from the American Council for an Energy-Efficient Economy, a nonprofit research organization.
Louisiana echoes a similar narrative, with a study from the Sierra Club detailing how liquified natural gas exports play a role in keeping energy burdens high for households in its historically Black neighborhoods and those making below the state median income.
Bernhard Capital promised the Public Service Commission that Delta Utilities would not increase gas rates for its customers for 15 months after its purchase, which would be finalized around the middle of 2025. After that, there’s no guarantee.
Greco said that while many different factors can play a role in the price of natural gas, there is an economic incentive for companies to raise rates on customers.
“There’s an implicit understanding that they probably would,” he said, adding that the 15-month “grace period’ likely means Delta will increase prices afterward.
For customers already facing problems paying their bills, like Sinclair, higher natural gas bills will lead to some difficult decisions.
“My extra income that I thought I had this month went to a light bill,” she said. “You have to pay for energy … so I’m forced to pay that bill and basically say, ‘Hey, we can’t eat for this week of the month.’”
This article originally published in the September 30, 2024 print edition of The Louisiana Weekly newspaper.
