Louisiana regulators approved lowering monthly electricity bills for Entergy customers now that expenses of getting the power back on after hurricanes Katrina and Rita have been paid.
“It’s coming at a great time,” said Phillip May, president and CEO of Entergy Louisiana. The summer months, when air conditioners are cranked to high, is usually when electric bills are the highest for Entergy’s 1 million Louisiana customers, roughly half the state.
Entergy customers have been repaying storm restoration costs over the past decade. The final payment was recently made, so the monthly bills will be going down immediately by about 4 percent for some, about 3 percent for others.
The five-elected members of the Louisiana Public Service Commission unanimously approved the change Wednesday at its monthly meeting and customers should begin seeing the reductions on their August bills.
Residential customers of the old Entergy Louisiana, which covers New Orleans suburbs up to Arkansas line, will see a reduction of about $4.35 for 1,000 kilowatt hours of electricity used. The monthly bill in July for 1,000 kWh of electricity was $99.98.
For legacy Entergy Gulf States, which covers much of Baton Rouge through Acadiana to Texas, a residential customer will pay about $2.57 less for 1,000 kWh on a bill that was $90.26 last month.
A typical residential customer in Louisiana buys about 1,300 kWh of electricity each month.
Since 2005, when the hurricane costs were incurred, the two legacy companies have consolidated into Entergy Louisiana. The City of New Orleans is serviced by Entergy New Orleans, which is overseen by the city council.
Monthly bills, generally, are made up of base rates, which includes the cost of making and transmitting electricity plus a profit for the investor-owned utilities; the cost of fuel to run electricity generating plants; and various fees, one of the largest being a surcharge to repay to costs of getting the lights back on after a storm.
The surcharge on most monthly bills will decrease by about 60 percent because Katrina and Rita costs have now been paid. But costs for hurricanes Gustav and Ike are still being repaid and will be until August 2022, so they remain in the storm surcharge. The cost of restoring power after Hurricane Isaac also will remain on the monthly bills until 2026.
But hurricanes Katrina and Rita accounted for most of the storm surcharges.
Flooding and high winds from back-to-back storms in 2005 crippled much of the state’s infrastructure and caused a massive diaspora of Louisiana residents to other states.
After Hurricane Katrina, utilities had been able to restore power to about three-quarters of their customers when 23 days later Hurricane Rita came ashore.
Entergy, alone, lost more than 21,000 poles, 12,600 distribution transformers and miles of wire.
The utility brought in about 13,000 workers from other states to do repairs after Katrina. It took 42 days for Entergy to restore all power to the customers that could accept it. Rita required three weeks of restoration by 17,000 workers.
The recovery cost was $966 million and legally Entergy’s customers had to pay.
Using the math of the traditional methods to repay storm restoration costs, the PSC and Entergy realized that monthly bills for customers would spike dramatically. They began looking for alternatives. They decided to sell bonds to pay off the bills all at once and then repay that loan using a surcharge on customer bills.
Because the bonds were secured by the surcharge, a state-created entity, called the Louisiana Utilities Restoration Corp., could sell them at far lower interest rates and financing costs.
Bonds, which is the usual way governments take out loans, were sold in 2008 and repaid in full last month.
“We came up with the least costly way,” May said. “We worked closely with the Louisiana Public Service Commission and other elected officials to put a mechanism in place to secure low-interest bonds that saved our customers hundreds of millions in financing costs.”
“Actually, we’ve had a series of rate decreases over the past year,” May added, referring to a refund spread over several summer months to cover the utility having to pay less taxes because of Congressional action in December. “Lower utility prices help attract new business to Louisiana.”