UNPLUGGING HOUMA?

The Terrebonne Parish Electric Utility System is on the market, and two electric power suppliers in Louisiana are examining the possibility of purchasing or leasing the parish-owned electrical generation and distribution system, which serves 26,185 customers in Houma.

The larger of the pair, Entergy Corporation, has been embroiled with the City of Houma for the past three years over which of the two electric-power suppliers must pay for upgrades to transmission lines running from Boyce, La., near Alexandria, to the City of Houma’s electrical-distribution system.

South Louisiana Electric Cooperative Association (SLECA), the Houma/Amelia-based electricity-distribution operation that serves over 17,000 accounts in Terrebonne, Assumption, Lafourche, St. Martin and St. Mary parishes, is “exploring every avenue possible” concerning a possible purchase or lease of Houma’s Electric Utility System, said General Manager Michael Guidry.

“We’re looking at it,” he said.

Entergy, which serves 644,912 customers in Louisiana, “had talked to the parish last year,” said Entergy Regional Customer Service Manager Becky Watson.

On April 20, 2007, Terrebonne Parish Utilities Director Tom Bourg sent an 80-plus page data packet to Entergy Services in Beaumont, Texas, detailing the assets of Houma’s Electric Utility System. The data indicated the “current book value of all assets” for the system is $26,322,835.

“We requested the data,” Watson said, but “all of the data has not been submitted.

“We have to evaluate the package sent to us,” she said. “We want to make sure it’s a good investment for our shareholders and for the city.”

She said, “If the numbers come out right, it could be a win/win for everyone.”

Entergy Louisiana serves 3,700-3,800 customers in Houma, according to Bourg.

But the value of Houma’s utilities could be a contentious point. Already, Watson called Houma’s three steam turbine electricity generators “inefficient.”

But Bourg said the generators “have the same efficiency as when they were installed.”

“They have the same efficiency as those constructed today-fairly standard,” he said. “I would like to refute that the system is outdated. [The generators] were put in in the mid-to-late 1960s. They’ve been maintained and recapitalized over the years.”

Bourg said that “the cost of the Houma plant is not so much its efficiency, but its fuel source,” which is mostly natural gas.

For distribution to its retail customers, Houma produces 15-25 percent of its own electricity with its three generators “because of restrictions on the amount of power we can import,” Bourg said.

The city buys a portion of its electrical power from the open market. Forty-percent is derived from the Rodemacher No. 2 generating facility in Boyce.

The power transmission lines running from Boyce to Houma are owned by Cleco Power of Pineville, La., and by Entergy Louisiana, Bourg said.

The Federal Energy Regulatory Commission (FERC), he said, “ordered utilities (like Entergy) to provide open access” to their power transmission lines.

“Access to the nation’s high voltage transmission grid is regulated by FERC,” Bourg said.

The Houma Electric Utility System distributes all the electricity it generates and purchases to its retail customers through power transmission lines the utility owns.

“We use Entergy as a source of transportation through which we receive power from Rodemacher into our system,” he said.

FERC issued the order to Entergy “to allow for a competitive market in wholesale power to develop,” he said.

Eventually, FERC’s oversight of transmission lines devolved to a Regional Transmission Organization (RTO).

“The RTO was intended to take privately-owned transmission lines, and operate them in an unbiased fashion,” Bourg said. Part of the RTO’s purpose was “to stop Entergy from strangling our access to the market, which was occurring despite regulations,” he said.

“Entergy did not support this active market,” battling the RTO until a “mini-version” emerged, called the Independent Coordinator of Transmission, Bourg said.

But Watson said that Entergy has treated Houma equitably.

“The only way to transmit” power to Houma from Boyce “is through Entergy lines,” she said.

“They want us to upgrade the lines so they can get more power into the city,” she said.

“We have asked them to pay for the upgrades.

“It’s not fair to Entergy to pay for the upgrades,” she said. “We asked the City of Houma to pay the cost.”

Bourg said the “upgrades will relieve capacity restrictions for Houma and Morgan City.”

After litigating with FERC for three years, he said, “The answer we got back was we needed to pay Entergy $138 million (as the) initial price tag to upgrade the transmission lines.”

However, Bourg said that Houma’s obligation to Entergy “was” determined to be “zero, after we requested further study.

“Last month, we concluded an arrangement after three years,” he said. “FERC said that Entergy has no greater right to transmission capacity than the city,” he said.

“The commitments are made, the contract is signed, the upgrades are moving forward,” he said.

“We anticipate those upgrades will be in for the peak (summer) season of 2008,” Bourg said. “As a result, we will have full import capacity, meaning we could replace the Houma plant with cheaper off-system purchases.”

There could be an “outside cost for us” to upgrade the lines, he said, of “$6.8 million,” but FERC’s decision “is unlikely to be reversed.”

“If it is” reversed, Houma “may not be” obligated for the “entire amount,” he said.

Watson said, “If you’re going to spend money” on the upgrades, “why not wait to see how this comes out, to see if you’re spending money you may not have to.”

SLECA’s Guidry said that the electricity cooperative, which generates none of the power it distributes to its retail customers, is hampered by its contract with its power supplier in trying to buy Houma’s Utility System.

“Our contract…prohibits us from owning power generation,” he said.

“We can’t bid alone on (Houma’s) power plant,” he said. “We’re in contact with our power supplier to see if they’re interested in a joint proposal.”

Profits produced by Houma’s Electric Utility System go back, partly, into the system, and to Terrebonne Parish’s general revenue fund, which pays for Houma’s police and fire protection, among other services not tied to a dedicated fund, said Terrebonne Parish Comptroller Jamie Elfert.

If Houma’s Electric Utility System is sold to an outside party, Terrebonne Parish could lose the revenue it receives from the profits produced by the utility system, said Parish President Don Schwab

“It’s a huge concern for us,” Schwab said. The money “pays for our police and fire departments.

“The (energy advisory) committee put together by myself, and the council decided to go another route,” he said. “If you sell this to another entity, you lose the power to negotiate.”

Concerning the prices charged by the Houma Utility System, he said, “Now we’re comparable to Entergy, (but) not to SLECA. SLECA is cheaper.”

For now, the issue remains in the Terrebonne Parish Council’s Public Services Committee. At its April 23 meeting, the committee agreed to allow Bourg four weeks to issue a report on the parish-owned natural gas supply system as part of the effort to sell or lease the parish’s electricity and gas supply operation.

UNPLUGGING HOUMA?