Lafayette leaders have a big decision before them concerning whether to place the stewardship of its government-owned energy utility under private management. It’s a business decision that Lafayette officials should carefully assess, and that takes time. Simply cutting off the debate at this point won’t serve taxpayers
That’s why we oppose a resolution floated by Councilman William Theriot that would put the City-Parish Council on record opposing to any sale, lease or private management agreement for the Lafayette Utility System. While the outright sale of LUS is probably a bridge too far for the city, the idea of a management contract should not be off the table so long as it is in the long-term best interests of Lafayette, LUS and its 66,000 customers.
Jeff Baudier, a NextGen director, told editors and reporters of The Advocate that he doubts the resolution would legally prohibit the city from proceeding with the 40-year deal the company is proposing, but noted that any future contract would need City-Parish Council approval.
The council's reaction to this comes from one of the oldest political mistakes in the book: a lack of transparency. Word of Mayor-President Joel Robideaux's early talks with NextGen leaked and caused a backlash against privatization, still something of a dirty word. The mayor had reached out to potential competitors to NextGen, investor-owned utilities like Cleco and Entergy, but thought they were not interested, so proceeded without drawing in council members and others interested in such a far-reaching decision.
A re-set button is in order. The council is slated to consider another resolution from Councilman Kenneth Boudreaux declaring the council will not consider any privatization arrangement without a seeking competing proposals from other companies. That makes sense, enabling officials to shop around for the best deal.
We’re not ready to endorse the NextGen proposal, and the council shouldn’t embrace it without a great deal of study, either.
Why consider this at all? NextGen officials believe they can improve efficiency and invest in the city-owned facilities to improve LUS -- enough to make money for their company and ensure continued good service to customers. NextGen is proposing to pay a $140 million lump sum to the city-parish along with annual payments of about $23 million for the right to manage the utility.
There is a national trend toward either sale or management contracts of public utilities. Part of this is driven by demographics: The regular earnings of utilities are prized in an era in which hundreds of millions of people across the globe are retiring and want safe income streams from their investments.
Whether this is a good option for Lafayette is not proven, but it ought to be looked at more dispassionately. LUS is not a deeply troubled system, but one that’s has a good reputation and solid management under longtime director Terry Huval, now retired and not a fan of a new arrangement.
NextGen wants to focus its business on similar utility agreements across the South, and have its headquarters and its jobs in Lafayette. Good luck to it, but the company still has to make its case. The council should give NextGen — and other interested parties — the chance to do just that.