Company blames rising natural gas costs, damage from storms
A message signed by Yovanka Daniel, Entergy Louisiana’s customer service vice president, outlines two rate increase categories for June bills: a fuel adjustment to compensate for the natural gas cost spike, and a fee to offset restoration costs for extensive storm damage from hurricanes Laura, Delta, Zeta and Ida the last two years and Winter Storm Uri in February 2021.
For natural gas prices, rates would jump by about $25 for a home that consumes 1,000 kilowatt hours in a month, the average for a residential Entergy customer. However, Daniel said Entergy will push part of that cost to future bills to ease the burden on customers. That would be a $10 deferral for the average customer, leading to a $15 fuel adjustment increase on June bills.
Utility companies routinely charge adjustment fees when faced with higher costs for their fuels, including natural gas.
Daniel noted natural gas prices in April were twice as high as the same month last year and triple the rate from April 2020. The global supply of natural gas is in flux as countries around the world attempt to wean themselves off Russian energy because of the country’s war in Ukraine.
Henry Hub, the U.S. benchmark for natural gas prices, shot up to an average of $6.60 per million British thermal units, or MMBtu, in April and $8.14 in May, according to the U.S. Energy Information Administration. The price was as low as $2.43 in April 2021 and $1.50 in April 2020 as production and consumption cratered amid mild winter weather and the COVID-19 pandemic.
“We will continue to work with the Louisiana Public Service Commission to spread out natural gas costs over several months, rather than placing them all on one bill,” Daniel said.
For storm restoration costs, the average customer could see an increase of $9 to $10. That spike is part of a $3.2 billion “securitization” plan the Louisiana Public Service Commission approved in late February to finance Entergy’s storm restoration expenses.
Coupled with the fuel adjustment, that adds up to a $25 surcharge for the standard Entergy Louisiana customer.
“It is important to note that Entergy does not profit off either natural gas price increases collected through the fuel adjustment or storm recovery costs,” Daniel wrote. “We will continue to do everything we can to assist those who are burdened by these increases along with the LPSC and our community partners.”
PSC regulators in May peppered Entergy’s top executive, Leo Denault, with questions about whether the company would pitch in its own funds to help cover its estimated $5 billion hurricane expenses. Denault — who recently received a $1 million raise — said no.
Entergy New Orleans submitted a request for a similar plan with the New Orleans City Council in February. The company expects a decision on that plan later this year, according to a federal regulatory filing. Unlike Entergy Louisiana, Entergy New Orleans is regulated by the city council and not the PSC.
Whether the natural gas adjustment will persist on future bills remains to be seen, Entergy Louisiana spokesman David Freese said. He noted that natural gas prices are set by the global market and can be tough to predict.
An Entergy New Orleans spokeswoman was unavailable for comment Friday on the potential effect of natural gas prices on Orleans Parish customers’ bills.
The storm surcharge is slated to last for 15 years, according to Entergy Louisiana’s PSC-approved plan.
“Spreading it out over a number of years keeps bills affordable,” Freese said.
Daniel said similar charges for hurricanes Katrina and Rita rolled off the books in 2018, and surcharges from hurricanes Gustav and Ike will expire later this year.
Daniel said some storm damage the last two years “required an entire rebuild of our electrical infrastructure.”
She said the PSC-approved plan is expected to save $2 billion “relative to traditional utility financing” despite the customer rate increases.
“Severe storms like those seen in 2020 and 2021 are an unfortunate reality to our portion of the country and like many of you, we also must do what is necessary to recover, rebuild and harden our system ahead of the next weather event,” she wrote.
Daniel said customers with financial hardships can contact Entergy for potential payment deferrals or deadline extensions.
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