Update, 11/19/15: The full Council approved the contracts.
Five months after the Office of Inspector General urged the City Council to reduce its reliance on outside consultants in regulating Entergy New Orleans, a council committee moved Friday to slash three of those consultants’ pay. If the full council approves the move, which is almost certain, it will be the first significant cuts in recent memory to the lucrative but often controversial contracts.
The savings would be used in part to beef up the council’s in-house regulatory capacity, a longtime goal of some council members.
The cuts, included in the firms’ annual contract renewals, came as chief consulting firm Dentons US touted its work to secure a $170 million savings to New Orleans ratepayers through the acquisition of a new power block at an El Dorado, Arkansas, power plant.
Dentons also touted its work in securing a new funding source for Entergy New Orleans’ Energy Smart Program.
The full council will consider the contract reductions at its next meeting.
Discussed Friday were three outside firms — the international law firm Dentons; Legend Consulting Group, of Denver, the council’s chief technical consultant; and the local law firm Wilkerson and Associates — that advise the council as it sets rates and regulates Entergy New Orleans.
The Inspector General’s Office recommended in June that the council continue regulating Entergy but with less help from costly outside firms.
The consultants’ bills are passed on to Entergy, which pays them with the money it collects from customers.
If approved, Dentons’ $3.3 million 2015 contract would be cut by 8 percent, to $3.037 million. Legends’ $2.3 million 2015 contract would be cut by 11 percent, to $2.037 million. The contract for Wilkerson would be slashed by 31 percent, from $875,000 to $600,000.
The three firms have five-year contracts with the city. The cuts would come in year four of those five-year contracts.
By comparison, the council’s in-house Utilities Regulatory Office has a 2016 budget of about $590,000, office Chief of Staff Pearlina Thomas said.
The cuts approved Friday would amount to an $800,000 cost savings to the council’s overall regulatory budget, officials said. That budget includes both money spent to support the in-house office and money spent on the outside consultants.
The cost savings will be used in part to help beef up in-house personnel — the regulatory office will add an administrative assistant and two analysts — and provide more training, Thomas said.
The consultants were supportive of the cuts, Councilman Jason Williams said, even though “no one wants their bills cut. You want your bills to grow.”
As for the inspector general’s opinion, Williams said he agreed with that office on some points but not all. “This body, and I as a chair of the committee, have been very well served and are very pleased with the work product of all of our consultants,” he said.
Other officials said later that Williams, who chairs the council’s Utility Committee, sought to reduce reliance on outside consultants well before the inspector general’s June report.
Even with the cuts, the consultants’ work in securing the El Dorado power plant deal drew much praise Friday. That deal will let Entergy New Orleans buy a power block that will generate 500 megawatts of power, said Clint Vince, of Dentons, the council’s longtime chief adviser on utility issues.
He said it supersedes a previously announced deal to let Entergy Gulf States purchase a power block and then pass on only 200 megawatts to Entergy New Orleans. This deal is better, Vince said, because it lets Entergy New Orleans directly buy more power.
That extra power will come at a lower cost: $250 million, or about half the usual cost of a new power block. The reduction is due to a bankruptcy, Vince said. The low purchase price and the plant’s overall energy efficiency will result in an estimated $170 million savings to the city’s ratepayers, he said.
It also “will go a long way to replacing the generation capacity that (Entergy New Orleans) will lose due to the scheduled deactivation of the Michoud facility in 2016,” Williams said. That plant, which consultants said has long been inefficient, is slated for closure in the summer.
Follow Jessica Williams on Twitter, @jwilliamsNOLA.