You might think the findings would be easy to predict if consultants were hired to consider the wisdom of hiring consultants.
Besides, what would happen if the experts defied expectations by waltzing into town and proceeding to knock practitioners out of their own racket? There would be no way of telling who was right, and a fresh team of advisers would have to be brought in. The process might have to be repeated over and over until the supply ran out, which is not going to happen in our lifetimes.
Fortunately, we do not have to guess how this unlikely scenario would play out, thanks to New Orleans Inspector General Ed Quatrevaux, who hired TBG, of Pennsylvania, to help compile a report on utilities regulation. New Orleans is the only city in the country that does not entrust the chore to a state agency, unless you count Washington, D.C., which has a cast-iron excuse for not going the conventional route.
New Orleans is thus unique in exercising its right under the Home Rule Charter to set rates with the assistance of various consultants. Quatrevaux, lest wisenheimers detect irony in his methods, stresses in his report that it is perfectly jake to rely on consultants, so long as it is not overdone.
He concludes that is exactly what happens in New Orleans, and he would appear to have a point, since consultants eat up 96 percent of the $7.2 million utilities budget. Quatrevaux also points to a number of derelictions on the city’s part.
The city could relinquish its regulatory responsibilities, but confidence in the state Public Service Commission is not high enough for Quatrevaux to recommend that option.
The public will probably never trust the commission so long as its members rake in most of their campaign contributions from companies in their purview. City Council members, though hardly as hands-on as state commissioners, forswear moolah from utility companies. Although regulatory costs would be lower if control were switched to the state, rates might still rise for New Orleans customers.
Experience argues strongly for local regulation. Voters opted to cede control to the PSC in 1982, but regretted their decision when they were allocated a larger-than-expected share of the bill for cost overruns at the Grand Gulf No. 1 power plant. After another election a couple of years later, New Orleans reclaimed rate-setting authority.
Since then, consultants have ruled the roost, and it must be admitted that they could have done worse, utility rates in New Orleans being significantly lower than the national average.
The same team has been in place for as many years as anyone can remember, and certainly should by now know all the tricks of the trade. The city as a result had grown somewhat lethargic, leaving the same hired guns to fill both advisory and managerial roles. The whole setup is a mystery to the public.
In fact, it is evidently also something of a mystery to the executive branch, notwithstanding that the Home Rule Charter requires it to carry out investigations and recommend rates. It has, however, abandoned its regulatory duties and deferred to the council since the city’s Utilities Department was abolished in 2002.
The council has evidently not been fully engaged either, with no incentive to develop enough in-house expertise to second-guess the hired hotshots. Those hotshots also handle routine chores that elsewhere fall, at far less cost, to staffers. The council has two sets of lawyers — Dentons, of D.C., which cost New Orleans ratepayers about $3.2 million a year, and Wilkersons, of New Orleans, which comes in relatively cheaply at $807,000. Technical advisers Legend, of Denver, cost about $1.9 million.
All three firms, according to Quatrevaux and his consultants, charge fancy prices for work that would be well within the capacity of City Hall drudges. The report thus calls on the council to cut back on consultants’ fees and hire its own team of utilities specialists.
With the Mayor’s Office pulling its weight, too, utilities regulation would be not only cheaper but more transparent, with checks and balances to give consumers a better shot at an even break.
If consultants tell us we are paying through the nose for consultants, it might behoove us to listen.
James Gill’s email address is jgill@ theadvocate.com.