Zurik: Was maintenance sacrificed in Entergy’s record-profit year?
In its record year, Entergy said it cut $150 Million in operations and maintenance expenses
NEW ORLEANS (WVUE) - Energy companies across the state are expected to ask state regulators for permission to charge fees for damages from last year’s hurricane season. But customers and a watchdog group want the state’s largest power provider, Entergy, to answer more questions about cost-saving moves and record profits during a year that saw three hurricanes and a global pandemic.
In a report to its shareholders, Entergy reported making a record $1.4 Billion across the companies five subsidiaries across four states -- Texas, Arkansas, Mississippi and Louisiana. The profits for the Entergy Corporation include Entergy Louisiana and Entergy New Orleans which make up more than half of the Entergy Corporation’s customers.
One of those customers is Katherine Prevost, a neighborhood association president in the Bunny Friend area of New Orleans.
She has noticed her bills, and the bills of residents in her neighborhood have been steadily increasing.
“[It’s like] a double bill, when my bill was fifty dollars at one time, now it’s 200,” Prevost said.
She said for her neighborhood, when they experience rising costs, cuts have to be made elsewhere at home.
“You’re either going to take something off -- you’re either not going to have enough groceries in the house or you’re not going to have extra gas for your car,” Prevost said. “It is tough decisions. I think that they are, but those are choices that we have to make.”
She said customers should not have to make such choices at a time when the company is announcing record profits.
“When the utility made a profit, shouldn’t those customers find some relief?” Logan Atkinson Burke said.
Logan Atkinson-Burke, who heads the watchdog group Alliance for Affordable Energy, said what is more concerning is how Entergy arrived at such profits.
A document from an Entergy quarterly presentation spells out the cost-saving move. The company cut $150 Million in “O&M” -- or Operations and Maintenance -- Expenses.
“Typically operations and maintenance includes staff time, it includes travel, but it also includes like maintenance suggests -- things like poles and upkeep of substations,” Atkinson-Burke said.
In that quarterly presentation, Entergy said the O&M cost savings came from reducing employee expenses and also, the company said, delaying projects.
But to know exactly how much was cut by employees and how much was cut by maintenance -- the public is left in the dark all over again. Those answers, unless released voluntarily by Entergy, would come from regulators questioning the company for the information.
Eric Skrmetta serves on the Louisiana Public Service Commission for District 1, which includes the New Orleans region and the Northshore. The PSC is made up of five commissioners and regulate power companies in the state, including Entergy Louisiana.
“I am not anti-profit for any company,” Skrmetta said. “they’re in the business to make money and pay their shareholders.”
Skrmetta said the commission is currently in negotiations with Entergy on a new rate plan, one where he doesn’t expect any cuts in the future to impact customers. What remains unclear is if any of these O&M cuts made by Entergy Louisiana impacted customers last year.
We asked Entergy for that information, but the company declined our request for an interview. We then asked for an itemized list of where the $150 Million in cuts came from, but they did not hand that over. Instead, they sent the following statement:
“Many of these O&M reductions were one-time in nature such as deferring planned outages and reduced employee expenses as many employees are working from home as a result of COVID-19. Importantly, cost cutting did not involve customer service, reliability spending or Entergy staffing levels. These cost management measures were used to offset significant revenue losses as a result of the COVID-19 global pandemic. In general, these savings will be reflected in the rate-making process which determines customers’ rates.”
Records from 2020 show Entergy’s operating revenue dropped by approximately seven percent, but the company offset that by the reduction in expenses.
“We know that when Entergy has cut operations and maintenance costs before... we know that -- for example -- outages have increased,” Atkinson-Burke said.
The Alliance for Affordable Energy is concerned Entergy might fund projects with the new fee that should have already been covered under operation and maintenance costs that were cut in 2020.
“So on this side, operations and maintenance already paid for it, it’s baked into our rates, it’s built into the bills. and so we’ve already paid for it whether Entergy spent that money or not. The question is, are they also getting money on this side for storm restoration to do the work that we paid for over here,” Burke said.
And unless Entergy is more transparent -- or regulators push for more information -- customers like Katherine Prevost may never know.
“I think the books should be opened on Entergy,” Prevost said. “How are you going to ask us to pay more money when you’re sucking us dry like a vacuum cleaner?”
Entergy is not the only company seeking so-called storm securitization costs from the Public Service Commission. With last year’s hurricanes and this winter’s ice storm, energy companies are expected to ask the state for help.
Another power provider in the state, CLECO, has already filed their application before the PSC, saying that power restoration from last year’s three hurricanes cost them $235 Million.
In past major storm seasons, storm securitization fees lingered on power bills upwards of ten years. Entergy said this form of financing repairs over several years helps “ensure that the impact on customer bills remains minimal.”
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