It's just good business sense

Last week the city council's utilities committee passed a resolution aimed at re-setting Entergy's rates for the first time in a decade. In the era of privatized utilities, New Orleans is one of very few places where the city council at least retains some regulatory authority over the private monopoly that sells everybody electricity. So every now and then, the council gets a say in how much you can be charged.

The resolution that passed is actually the result of a compromise brokered by the Cantrell administration. Council wanted to give east bank residents a $4 a month rate reduction. Entergy wanted to raise those rates by $4.46.  Cantrell stepped in with a plan to give average ratepayers a $3.42 break in exchange for making things a bit cheaper for S&WB and other "large energy users"

Meanwhile, the Cantrell administration, the Sewerage & Water Board and several private businesses that are large energy users proposed to reduce typical customers' monthly bills by $3.42 and allow Entergy a 9.35% return, saying that is comparable to what is allowed for other utilities.

The administration intervened "to make sure we're getting the best deal possible for the people of New Orleans and a fair share for the city," Cantrell said in a recent statement.

 Always looking out for you.

Anyway, the full city council still has to vote on this. It's scheduled to happen on November 7. But Entergy's CEO is still pushing for higher rates.

The council's utility committee members said they believe that Entergy's funding is sufficient to allow for lower energy rates and to cover its investment needs, while not harming its credit rating.

Denault said the company doesn't agree with that assessment.

"In New Orleans, the council utility committee issued a resolution that, if adopted, would set a revenue requirement that is below what we believe to be just and reasonable," the Entergy chief said on a conference call Wednesday to discuss its third-quarter results. "We continue to work with council members to reach a fair outcome when the council takes up the matter in early November."

Denault didn't say — and company officials didn't comment — on whether Entergy would challenge the council's rate decision in the courts, which is a course of action open to the company.

Entergy says it needs higher rates in order to  "invest in infrastructure projects."  But one would think that there's plenty of cash on hand after reading this.

Entergy said in its Wednesday earnings statement that it expects profits this year to be higher than previously forecast. The company said it now expects to make about $10 million more in profit this year than it previously expected, which would put full-year profit at just above $1 billion.

And therein lies the problem with private for-profit utilities.  You can't automatically reinvest your surplus into capital improvements when you've got promises to shareholders to think about.

Entergy's shares have been on a long run up, gaining about 65% since early last year to stand at about $121 a share, largely on promises to investors that it will get out of the wholesale business and invest heavily in more efficient plant and infrastructure to increase profitability.

The company has been increasing its dividend payments to shareholders annually at a rate of about 2% to 3%, but has promised to increase that to track earnings, which would mean increases closer to 5% to 7%.