Entergy New Orleans is seeking to partially break away from its parent company in a restructuring move the utility says could lead to as much as $25 million in customer savings over five years, perhaps saving individual customers a few dollars a year.
The move would affect about 197,000 Orleans Parish electricity customers but not people in surrounding parishes whose electricity is provided by Entergy Louisiana.
For those in New Orleans, it could work out to a few dollars in savings per customer a year, though Entergy said it was too soon to say how much individual customers could save.
The partial split is designed to insulate Entergy New Orleans from Entergy Corp.’s more financially risky business dealings. It would need to be approved by the New Orleans City Council and the Federal Energy Regulatory Commission.
If approved, there will be a “seamless transition” for customers, said Gary Huntley, Entergy’s vice president of regulatory affairs.
“They will see it only as a name change: Entergy New Orleans Inc. will become Entergy New Orleans LLC,” he said. The move won’t result in any layoffs or new hires.
At issue for Entergy New Orleans is Entergy Corp.’s merchant generation business, or the part of Entergy that produces power for the competitive wholesale electricity market.
That unregulated business depends heavily on the market price of power in the Northeast, which may go up or down over time, officials said.
In contrast, Entergy Corp.’s utility business is subject to rate regulators, such as state public service commissions and, in Entergy New Orleans’ case, the New Orleans City Council, Huntley said. In other words, it’s generally more predictable.
So, to insulate itself from unpredictability, Entergy New Orleans wants to create a new corporation, one that will not be used to borrow money on behalf of Entergy Corp.’s merchant regulation side or be required to invest in that side.
Though the local utility will remain a part of Entergy and remain in New Orleans, it will be incorporated in Texas, Huntley said.
That’s because Texas laws allow for this type of restructuring to be done cost-effectively, he said. Being located in one state but being incorporated in another is not an uncommon practice, Huntley said.
Entergy Corp. itself is organized under Delaware law but doesn’t operate there, and Entergy Louisiana is also organized under Texas law.
If the City Council approves the move by Dec. 31, Entergy New Orleans said it will guarantee customer credits of $5 million in 2016 and $5 million in 2017.
If the federal regulatory commission approves it by Dec. 31, 2018, the local utility will tack on an additional $5 million in 2018, $5 million in 2019 and $5 million in 2020, totaling $25 million.
Further, the local stand-alone Entergy would not be required to pay corporate franchise tax under the restructuring, saving it an extra $1.7 million a year.
It’s not clear how all that would work out per customer, or even whether the savings would go directly to customers’ bills. The council has to work through those details, Huntley said.
Entergy hopes to complete the restructuring by the end of 2017.
The council's Utility Committee, which deals with Entergy regulation, will meet at 11 a.m. Thursday.