Update: Sept. 24, 2021: The New Orleans City Council on Thursday voted unanimously to launch an investigation into Entergy New Orlean's response to Hurricane Ida. That investigation is expected to take 60-90 days, according to local media.

The council also passed a resolution asking the Federal Energy Regulatory Commission to investigate the cause of Entergy Louisiana's transmission system failure during the storm, as well as whether the company's "investment in transmission has allowed adequate access to competition and new technologies to enhance reliability and cost savings for customers." The council asked the state Public Service Commission to investigate Entergy Louisiana's "Ida-related failures."

Dive Brief:

• Entergy Corp. on Tuesday said it is considering "four preliminary options for the future operation and ownership" of its New Orleans electric subsidiary, including merging with an affiliate. That approach would shift utility oversight from local leaders to the Louisiana Public Service Commission (PSC).
• Entergy has faced criticism for its response to Hurricane Ida in August, which knocked out power to almost a million customers across Louisiana and left thousands of New Orleans residents in the dark for weeks. Entergy New Orleans is regulated by the city, and City Council President Helena Moreno, chair of the utilities' committee, has called for an investigation into its performance and possible alternative ownership approaches.
• "It is obvious that we have reached a critical juncture in our relationship with the City Council," Rod West, utility group president of Entergy Corp., said in a Tuesday statement addressing the potential merger. 

Dive Insight:

Entergy's proposals have angered critics ahead of a City Council meeting Wednesday that will address Ida recovery, costs, and whether New Orleans should consider owning its own utility.

"The utility does not get to pick its regulator. That say belongs in the hands of the people," Logan Atkinson Burke, executive director of the Alliance for Affordable Energy (AAE), said in an email. The watchdog group has been critical of Entergy's performance and investments, including its reliance on natural gas.

The utility, however, says it must take action as the city council is considering steps that could keep it from recovering critical storm restoration costs and freezing funding mechanisms.

Moreno plans to introduce a resolution calling for an investigation at the city council meeting Wednesday, including looking at alternatives such as municipalization or introducing competition into the city's electric market.

"We need to know the answers to important questions about how Entergy's system truly performed and further, what reforms we must make to create a more sustainable, affordable future for New Orleanians," Moreno said in a Sept. 14 press statement.

Entergy responded a week later. "While we believe that the actions of Entergy New Orleans have always been in the best interest of our New Orleans customers, some members of the council have publicly expressed a different opinion," West said.

"Preliminary options" Entergy says it is considering include four approaches. The utility did not outline potential drawbacks for the affiliate merger, though it did for the others.

• Entergy New Orleans could merge with Entergy Louisiana, establishing one utility to serve the entire state. This would shift regulation of the city's service from local leaders to the PSC, and according to Entergy could also mean lower rates because the larger company would be more financially stable.
• A second option includes a potential sale of Entergy New Orleans to another public or private utility company. This option would mean City Council retains oversight, but Entergy warned "such a transaction could lead to benefits or drawbacks."
• Another option includes spinning off Entergy New Orleans into a standalone company without Entergy Corp. ownership. This option "would likely create significant credit risk, which in turn would raise financing costs and could challenge the ability to fund ongoing business operations and secure funds for storm restoration," the company warned.
• A fourth option includes municipalization of Entergy's assets leading to a city-run utility. That would allow the city "maximum control," the company said, "however, it could result in higher financing costs and additional operational expenses."

"The council’s expected resolution will require it to make an important choice: will the city continue with Entergy as its energy partner or pursue another alternative?” West said.

Entergy said in a separate Tuesday statement that it has now restored power to 98% of customers across the state that were impacted by Ida. About 30,500 distribution poles were damaged by the Category 4 storm — more than were impacted by hurricanes Katrina, Ike, Delta and Zeta combined. 

Still, the recovery has stretched on for weeks and utility critics say more scrutiny is needed.

Entergy's proposals are "a stark admission of failure," Rábago Energy Principal and former Texas electric utilities regulator Karl Rábago said in a tweet. "I suggest a management audit of both" Entergy New Orleans and Entergy Louisiana.

Entergy's bid to switch regulators will not work, said AAE's Atkinson Burke, because of New Orleans' system of home rule which grants the city and parishes certain authorities.

"Even if Entergy Louisiana absorbed Entergy New Orleans," said Atkinson Burke, "that would have to be approved by both regulators ... and the council would still regulate Entergy Louisiana within Orleans Parish unless the majority of New Orleanians voted to send the authority to the [PSC]." 

City Council President Moreno said she was not surprised by Entergy's proposals.

"I guess I don’t blame them because we have been really tough on them and holding them accountable when they don’t do right," she told a local FOX affiliate.

Moreno shared documents outlining the messaging of Entergy's proposal on Tuesday:

Dear @EntergyNOLA and @Entergy. When you’re coming at your regulatory body with a media ploy to change up regulators, don’t accidentally send me your whole messaging and media plan with your news release. ????‍♀️ pic.twitter.com/91HyePtmq3

— Helena Moreno (@HelenaMorenoLA) September 21, 2021

Moreno also said she has no current preference on the future of Entergy, but wants a system that is reliable and fair to the city's residents. The utility made similar comments, according to the documents Moreno shared.

"Our preference at this point is to do what is ultimately in the best and most financially responsible interest of our customers and other stakeholders," according to the Entergy document.