WHAT IS THE VALUE OF POWER?

Kandee Denise Coates
February 16, 2007
Ruthie Mae “Betty” Smith
February 22, 2007
Kandee Denise Coates
February 16, 2007
Ruthie Mae “Betty” Smith
February 22, 2007

The Terrebonne Parish Council is seeking an assessment of the value of the parish’s consolidated government utilities for possible sale.

The council directed utilities director Tom Bourg to provide the estimated value within 45 days at last Monday’s council meeting.


According to Bourg, the estimate is expected to be used in a solicitation for proposals to either buy or lease the Terrebonne Electrical Utility.


“Basically, the parish is requesting that Tom Bourg prepare a package for bid to see if SLECA or Entergy would be interested in leasing or purchasing our utility company,” said Councilman Harold Lapeyre, who sponsored the resolution seeking the assessment.

When asked what was behind the push to sell the electric utility, Lapeyre responded, “We are trying to look out for the best interest of the end user. The City of Houma went through a period where prices were very high. We are exploring various ways to lower rates and ensure reliable service.”


Lapeyre is asking Bourg to include profit and loss statements over five years, an inventory of the physical assets and customer base.


Bourg said late last week that the process of gathering data was under way, but expressed his concerns about the possibility of selling the parish’s electrical utility.

“There are a number of methods of valuation of this utility,” he said. “My concern is are the nuances and complexities going to be addressed? I mean, what exactly are we proposing to sell? I just don’t want to enter into this helter skelter.”


Bourg faces a difficult challenge determining the worth of just the electrical utility because the electrical and parish gas utilities are treated as one business entity.


An advisory committee, which the Parish Council appointed a year earlier, was aware of the complexity of creating an economically viable estimate but was not heard from before the council voted last Monday night.

Electrical Utility Advisory Committee Chairman Charles Theriot said the committee was not consulted prior to the council’s vote approving the resolution last Monday.


“I have no idea why Mr. Lapeyre sponsored this resolution,” Theriot said in a telephone interview Friday. “I have not read the resolution nor have I been asked to read the resolution. How can you have knowledgeable people who have studied the electrical utility for over a year and not even consult them?


“I don’t know why the council is trying to sell the electrical utility,” said Theriot. “This committee was formed to advise the council on all options regarding the electrical utility. Our mission is to explore every option that is most beneficial for Terrebonne Parish.”

Although Monday’s action may have blindsighted committee members, the move to sell the utility has been bantered about for the last year. A concern voiced by many customers is the fluctuating price of electricity, Lapeyre said.


The problem, utility department insiders argue, can be traced to one of the potential buyers: Entergy.


Periodic price spikes have occurred because of a problem with the interface between the Terrebonne Parish Electric Utility and the Entergy transmission lines. Theriot said the interface is critical to the utility using outside power sources, as it modulates electrical flow from higher capacity circuits, such as those owned and operated by Entergy, to lower capacity circuits like those used by the Terrebonne Electric utility.

The advisory committee has recommended upgrading the interface.

But the very lines Lapeyre proposes selling are currently owned by Entergy.

“The main problem is the transmission lines controlled by Entergy,” said Council Chairman Peter Rhodes. “Entergy is saying they have only the capacity to serve their customers with these transmission lines. If the utility is sold, customers will be completely dependent on whoever they sell it to.”

Rhodes said preparing an assessment is only the first step. The council has yet to make a final recommendation, he noted.

“It is not my intention to sidestep the committee. Those people, at great sacrifice, have learned a great deal about the electrical utility in Terrebonne Parish,” Rhodes said. “I certainly will listen to their recommendations, which like this proposal due in 45 days, hasn’t been compiled. We are going to weigh all the facts. We are not just looking for a price.”

On at least one point, both sides agree. The improved interface could add value to the municipal Terrebonne Electrical Utility.

Terrebonne Parish is among the state’s holdouts, retaining its own electrical service.

“There are 20 municipal electric utilities in Louisiana,” according to Bourg. “There are advantages and disadvantages to municipal electrical utilities. The primary benefit is that the profits that would go to shareholders with a private utility company goes to municipal residents as payments in lieu of tax. These funds are put into a general fund.”

The utilities director explained that Houma’s fire and police services are the greatest beneficiaries. Over $3 million is paid annually to the parish’s general fund, which supports those services, Bourg said.

“If a private company took over the utility, would it cause a tax increase? It has got to come from somewhere,” he said.

On the down side of maintaining a utility service, Bourg said smaller municipal utilities do not have the buying power in the market. “Also local politics may govern decision making instead of sound business reasoning,” he said.

The timing of an electrical utility deal is questionable, according to Bourg. “I find it ironic to request power supply proposals at the same time soliciting proposals to sell the electrical utility,” he said.

Until a final decision is made as to a possible sale, Bourg said the electrical utility’s biggest challenge is to increase interconnection capacity in order to purchase electricity.

The utility can buy power cheaper than it can produce it, largely because power production in Terrebonne Parish is dependant on natural gas.

Bourg sees the push to sell the electrical utility as being, “driven by the fact that in the recent past the utility has not been as competitive. This has been caused by natural gas prices and transmission capacity. This has also been a result of an obvious lobbying effort by Entergy,” he noted.

WHAT IS THE VALUE OF POWER?