Entergy New Orleans is threatening the New Orleans City Council with “expensive litigation” if councilmembers move forward with plans to collect a $1 million fine over frequent power outages, a company executive wrote in a letter last month.
The council, which serves as the regulator of the power utility, originally imposed the fine in 2019 after an investigation confirmed there had been sharp increase in power outages in recent years, and that the problem followed the company’s 2013 decision to pull $1 million out of a maintenance fund and later reduced its capital spending on projects meant to improve power distribution by millions more.
But Entergy successfully sued the council to block the penalty. About a year ago, a judge in Orleans Parish Civil District Court vacated the fine because the council didn’t have any minimum reliability standards in place when it was imposed.
Immediately following the ruling, councilmembers said they would continue to fight to collect the fine anyway. And last month, the council voted to officially revive the process.
Entergy New Orleans sent the letter threatening legal action to the council one day before that vote took place. In the letter, Courtney Nicholson, the company’s vice president of regulatory and public affairs, warned that the effort would “impose … further expensive litigation” for the council, “particularly if [the council’s utility consultants] continue to bill hundreds of thousands of dollars” for their work on the issue, much of which is paid for by the company and passed along to ratepayers.
The letter said Entergy itself would have to spend significant funds on the ligation, and that “ultimately, those costs will be borne by our customers.”
Councilwoman Helena Moreno’s office, however, told Verite that the council would still move forward with the fine despite Entergy’s foreboding message.
“They earned this landmark $1m fine and the Council is committed to continuing to use every tool available to hold them accountable to the people of New Orleans,” Moreno’s chief of staff Andrew Tuozzolo told Verite in a text message. “[Entergy’s own report] definitively revealed their self-inflicted reliability issues which put customers in the dark again and again without good reason.”
It appears that Entergy has not yet filed suit against the council, nor has it submitted new filings in the previous suit. A company spokesperson told Verite that “our hope would be to find a constructive resolution, working with the Council,” but declined to comment further.
Councilman and council utility committee chair JP Morrell told Verite that the company is welcome to do that through the regulatory process.
“There is an ongoing procedural schedule to address this matter,” Morrell said. “Entergy has the choice whether they’d like to participate or not.”
‘Concerns about the legal viability of a retroactive fine’
The council started work on its plans to re-impose the $1 million fine almost immediately after it was vacated in court. Councilman JP Morrell told The Times-Picayune that the council would appeal the decision to a higher court. The council maintained that it had the authority to fine Entergy without clear, pre-existing standards.
But instead of appealing, the council took another route. In February, the council passed a new set of reliability standards for Entergy with potential fines up to $3.7 million a year if the company fails to meet them.
Under the new fine schedule, Entergy’s poor reliability in 2016 and 2017 — for which the council originally levied a $1 million fine — would have resulted in a fine of almost the exact same amount — $1,005,000.
The hope, councilmembers said, was that the rules would address the central reason the judge overturned the $1 million fine — the lack of preset reliability standards and fining procedures.
The council’s vote last month reopens the regulatory process that led to the 2019 fine and allows more evidence to be submitted, with the ultimate goal of re-imposing the fine. That process is scheduled to come to a close before the end of the year.
“The court ruled that the matter of the penalty was remanded to the Council for further consideration consistent with the Court’s ruling,” the council’s resolution said.
“Accountability absolutely matters and the Council will continue to use every tool in every docket to make entergy more reliably keep the lights on for the people of New Orleans,” Moreno said in a text message.
But in the letter, Nicholson argued that the council’s actions are not at all consistent with the court’s decision.
“Any actions or proceedings by the Council to re-impose the penalty would violate the Court’s ruling,” the letter said.
Entergy argued that the judge’s ruling was based on the fact that there were no established reliability standards in 2016 and 2017, the years for which the fine was imposed, and that the new standards can’t be enforced retroactively. The letter points out that the council itself acknowledged that the rules are forward looking because the law says they don’t become effective until 2024.
Entergy’s letter said that the council’s interpretation of the recent court decision “seems unfortunately calculated to obscure the Court’s actual ruling and its reasons for doing so.”
One of the council’s utility consultants, attorney Basile Uddo, said at a meeting last month that the council and Entergy had different interpretations of the court ruling in part because the oral decision delivered by Judge Rachael Johnson at the hearing seemed to differ from the written rationale she provided for the ruling, which was filed in the court record about two months later.
“There’s a lot of back and forth between what was said in the hearing and what was said in the ruling,” Uddo said. “In June, the Civil District Court concluded that the penalty needed further consideration.”
The “reasons for judgment” document seems to lend more support to Entergy’s argument, although the judge did deny a request from Entergy for the court to prohibit the council from ever making future attempts to collect the original $1 million fine.
The Alliance for Affordable Energy, a local watchdog group, told Verite that they had some skepticism that the council would be able to successfully re-impose the fine.
“The Alliance has concerns about the legal viability of a retroactive fine. Instead, as we have urged in the past, the Council should focus on strengthening and enforcing the existing rules,” Jesse George, the Alliance’s policy director, told Verite.
When the new reliability standards were passed, George and the Alliance argued that while they were a good start, they needed to be much stricter. He pointed out that under the new rules, Entergy would have been in compliance every single year since 2013 except in 2016 and 2017. George said that most Entergy customers would not rate the company’s current reliability as adequate.
“We have experienced multiple fair weather outages already this year,” George said.
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