Moreno initiates process to overhaul how the City Council regulates Entergy
15th April 2019 · 0 Comments
By Michael Isaac Stein
The Lens
The New Orleans City Council has relied almost exclusively on outside consultants to regulate Entergy New Orleans for over 30 years. And it is those consultants that have largely decided what direction the city takes on a wide number of energy-related issues: How much can Entergy charge customers? How should the city generate or source electricity? How should the city prepare for hurricanes and deal with Entergy’s frequent outages?
But Councilwoman Helena Moreno – who chairs the council’s utility committee, which regulates Entergy – told The Lens she wants to break that structure. Specifically, she wants to expand the council’s in-house staff and expertise in order to become less reliant on contractors.
As The Lens recently reported, some of the utility contractors have held onto their lucrative contracts for more than three decades. And three former council members said that political patronage has played a role.
“There have always been these recommendations about building up the [Council Utilities Regulatory Office] and starting to reduce our consultants, because the amount of money we’re spending just stopped making sense,” said Moreno. “But for some reason, there was never any action taken on that.”
Moreno is taking a first step by directing the Council Utilities Regulatory Office (CURO) — the council’s in-house utilities staff — to produce a document that will outline how it can grow to take on a more prominent role. It will lay out goals for the next year, the next three years, and the next five years. It’s expected to be finalized and made public in June. Moreno said that she’s trying to answer one main question.
“How do we eventually come out with a utilities committee that is much less reliant on consultants to where we only really need them for some of the federal regulatory matters, but all of the local stuff we can do on our own?” she said.
It remains unclear what the document will recommend, how fast Moreno will be able to move, or whether she will remain at the helm of the utility committee long enough to see the changes through.
“No one’s ever done this,” said Moreno’s Chief of Staff Andrew Tuozzolo. “New Orleans has never had this, really.”
There have been other council members who have tried to remake Entergy regulation, however, including Shelley Midura, Stacy Head, and Susan Guidry. Like Moreno, all of them wanted to boost in-house staff and reevaluate the advisers’ multimillion-dollar contracts. Moreno shares many of the same critiques with those previous utility committee members. So did the New Orleans Office of Inspector General, in a 2015 report on the city’s utility regulation system.
That report found that 96 percent of the city’s 2013 utility regulatory budget was spent on consultant fees. Those costs added up to $7.5 million that year, paid by Entergy New Orleans, but passed on to ratepayers in their monthly bills. By comparison, the Public Service Commission of Washington D.C. spent less than $1 million on consultants in 2013.
When it comes to in-house staff, New Orleans is again an outlier. The Council Utilities Regulatory Office has consistently had only a handful of staffers, often no more than two. Recently, the office has grown to five employees. But it remains a stark juxtaposition to regulatory bodies across the country, which routinely employ dozens, if not hundreds, of full-time staff.
“They’re mostly just trying to shuttle information between the advisers and the council,” Tuozzolo said about the current role of CURO.
That means everything else falls to the consultants, including relatively mundane tasks such as writing resolutions and memos, Tuozzolo said.
“I’m not aware of any place that has any resemblance to that paucity of internal expertise and the near total dependence on outside expertise,” attorney Scott Hempling told The Lens last month. “No place.”
Hempling has represented 19 U.S. utility regulatory bodies, according to his resume, and wrote a textbook on utility regulatory law.
“We support the expansion of CURO,” said lawyer Clinton Vince, the council’s lead legal adviser on utilities, in an email. “This kind of policy issue would be determined exclusively by the City Council.”
Tuozzolo said that at the very least, the council should be able to call CURO for quick information and advice.
“I think CURO should be able to present a independent policy agenda that represents the leading edge of what is being done around the country,” he said. “The advisers are really doing that now. But every time you ask them something, it’s $600, and I don’t think ratepayers should have to pay for that.”
Tuozzolo was referring to the $600 an hour fee collected by partners at the council’s legal advisory firm, Dentons US, where Vince works.
Overall, the IG report found that regulatory costs for Entergy New Orleans customers were six times higher than for customers of Entergy subsidiaries regulated by the Louisiana Public Service Commission.
“At the core of this, there is a huge efficiency advantage to bringing some of this in-house,” Tuozzolo continued. “We could pay people $200,000 a year and we’d still save money.”
Moreno said that besides expanding CURO, another key to limiting consultant expenditures is changing how their contracts are structured. It is routine for utility regulators to employ outside consultants on specialized issues such as litigation at the Federal Energy Regulatory Commission. In those cases, regulators will hire firms for that specific project.
New Orleans’ consultant contracts are different, she said. Instead of issuing specific contracts for each matter, the city uses catch-all contracts that allow firms to bill up to a certain amount each year, without specifying exactly what they will be consulting on. The IG report suggests that the unusually broad nature of these contracts could be dissuading firms from competing when the council periodically rebids the work.
Moreno said she envisions a regulatory structure in which all work would be directly assigned to CURO, with an exception for certain specialized work at the federal level. When outside help is needed, consultants would be hired to deal with specific issues.
Who’s driving the ship?
For Moreno, it’s not just an issue of money. It’s a matter of control.
“You can either have the advisers do the leading or you can lead yourself,” she said. “And I wanted to do the leading. … At the end of the day, it’s the council that’s the regulator, not the advisers. So that’s the position I’ve been pushing, and I hope that continues long after I’m gone.”
But historically, that’s not always how it worked. The IG report, for example, said the consultants roles “can create an echo chamber in which their findings and recommendations go unchecked.”
Two council members echoed those criticisms during last year’s vote on Entergy’s $210 million gas plant in eastern New Orleans.
In February 2018, the utility committee voted to approve the plant. Then-Councilwoman Stacy Head voted yes, but before casting that vote she said that it was the only option available based on the information laid out by the consultants and that she believed the alternatives were treated as “afterthoughts.”
“We rely on a system where we rely on our advisers to provide us with advice on how we move forward,” she said at the meeting. “I have been a critic of our system for quite a while. We have paid, however, our advisers, who are smart, who are well informed, and who have done incredible amounts of research on these matters to give us advice. And their advice today, I cannot ignore. We have paid them handsomely to give us advice, that again, I don’t see how we ignore.”
“Should our advisers have pushed more on Entergy?” she continued. “Probably. However, right now we have a reliability problem that must be addressed. … And our experts tell us that the only current solution is the 128 megawatt RICE plant.”
Then-Councilwoman Susan Guidry was the only member to vote against the plant, and she leveled similar criticisms in a recent interview with The Lens.
“What’s changed is that I feel as though the advisers have taken to advocating for a position rather than remaining in the consulting mode they should be in,” she said. “When I couldn’t get them to do what I wanted them to do, it became a matter of me relying on myself and doing my own research. I was fighting a losing battle.”
Long road ahead
Moreno isn’t the first utility chair to try to overhaul the structure of New Orleans utility regulation. But in the past, a number of roadblocks got in the way.
One of the long-time impediments to change, several former council members told The Lens, was that political contributions and connections helped the consultants sustain and increase their contracts.
According to those members, that political favoritism has faded in recent years. But other obstacles remain.
The first is that the consultants are already engaged in a number of important, long-term utility issues. Transitioning those matters to in-house staff would be difficult, Tuozzolo said.
And that’s not even possible until the council can hire more employees. It will take time to both find qualified candidates and convince the civil service commission — which handles personnel matters for the city — to approve the new positions.
“I can talk all this game, but it’s not just as easy as us waving a magic wand and hiring people,” Tuozzolo said. “We need to create positions, build capacity, we need to hire people who are going to stay. It takes time.”
All of that means that a total transition will take years, perhaps longer than Moreno remains at the head of the utility committee. But Moreno said her tactic is to create enough momentum in the right direction that change will be hard to reverse.
“My hope is by the time I leave the council, I will have created CURO so that it is functioning so well, as far as advising the utility committee, that it would be too hard to disband. I want to leave this office in a way that it’s self reliant. And I want to reduce our consultant use to a level where it would just be too hard to build back up,” she said.
Then, it becomes a matter of focus. Tuozzolo said that making sure the long-term changes happen will be a question of whether residents and the council stay engaged.
“There are a group of people in this community, who I very much appreciate, who are intimately involved in the regulatory environment,” he said. “But that is a small group of people.”
Moreno said the key is bringing the complex utility jargon down to a level that anyone can understand. She also wants to explain how the regulatory structure connects to.
“I’m trying to bring it down to a level that everyone can understand,” said Moreno. “Because it affects what you’re paying, it affects what sources of energy we’re using, it affects transparency from Entergy, it affects energy efficiency. I could go on and on. And I don’t think that has been explained enough. And I don’t think there’s been a way for people to find this information on their own.”
The above article originally appeared in The Lens on its website (www.thelensnola.org). The Louisiana Weekly enjoys a partnership with The Lens.
This article originally published in the April 15, 2019 print edition of The Louisiana Weekly newspaper.
