Mid-City uproar over soaring energy bills

June 21, 2008

Entergy customers confused about doubling ‘fuel adjustment charge’

By Jonathan Edwards

Confused Mid-City residents “fell to floor” over the “sticker shock” after receiving the most recent wave of Entergy bills and vowed to take action, according to a multi-thread discussion created earlier this week on the Mid-City Neighborhood Organization’s E-mail group.

“I know that everyone in Orleans Parish is experiencing the same thing, my question is why? I have spoken to people who live in surrounding parishes and they are not getting the HUGE fuel adjustment on their electric bills,” wrote April Allen.

“My fee for actual electric use last month was $141,” Allen continued, “the fuel adjustment was $164, more than my actual electric use. Same with gas!….Between gas, fuel adjustments, car insurance and home owners insurance it’s getting really hard to live here!!”

Natural gas prices have skyrocketed 120 percent in the last year and will lead to higher bills if customers do not take steps to minimize their energy consumption, Entergy announced Thursday on the eve of summer.

Amy Rini has taken a number of steps to conserve energy and reduce her energy bill by weatherizing her house, but the “bills are so high even when our actual fuel and/or gas usage is UNDER $100. The fuel adjustment fees more than double our bill just about every month,” Rini wrote.

Both Allen and Rini mistakenly think that their “energy charge” represents the cost of energy they consumed, and the “fuel adjustment charge” is somehow separate from that said Councilmember Shelley Midura. Many people make this mistake.

People are confused when they say that their fuel adjustment charge is more than what Entergy charged them for the energy they used. The fuel adjustment charge is their energy use, said Midura.

Entergy bills are divided into two main categories: (1) the “energy charge” or base rate, and (2) a fuel adjustment charge, said Morgan Stewart, Entergy New Orleans’s communications manager.

The base rate is the cost of providing and maintaining the infrastructure required to generate, transmit, and distribute energy. These costs include employee salaries, Entergy trucks, power plants, power lines, power poles, Stewart said.

The fuel adjustment charge is based on the cost of raw materials used to generate power—coal and natural gas. Entergy passes these rises and drops in material costs directly to the consumer. Entergy’s profit margin remains the same, said Stewart.

Midura largely agrees with Stewart’s explanation but elaborates on his explanation.

Before Hurricane Katrina hit New Orleans in August 2005, Entergy included the cost of nuclear energy generated at their Grand Gulf nuclear station, located in western Mississippi, in the base rate. Grand Gulf’s nuclear-generated electricity is always Entergy’s first power option for New Orleans because it is the least expensive, cheaper than coal and natural gas.

After Katrina, however, a largely emptied New Orleans required little power. With no customers paying money for energy while Entergy still covered their financial costs, the power company suffered massive losses and started selling their nuclear power to other utility companies, Midura said. Cash-strapped Entergy declared Chapter 11 bankruptcy in October 2006, according to the power company’s Web site.

Demand spiked in the hot summer months of 2006 after residents returned to the city, said Midura. In a stopgap effort to provide low-cost nuclear energy to customers, Entergy started including Grand Gulf-generated electricity in the fuel adjustment charge, making it slightly higher than it would be otherwise.

The bills have remained high since Katrina, but for different reason, said Midura. Companies selling energy were wary of doing business with a company in bankruptcy, so the ones that did charged high prices.

“Nobody would do business with Entergy. The ones that did charged them an arm and a leg, so they passed that along to the consumer,” said Councilmember Midura.

Entergy stabilized as energy-using, bill-paying customers returned to the city, and the New Orleans power company exited bankruptcy in May 2007, according to an Entergy newsletter. Re-establishing themselves allowed the power company to buy energy at a cheaper rate, said Midura.

Record-high energy costs—like the 120 percent increase in natural gas prices over the last year—have kept bills high for New Orleans customers.

“The most effective way, however, that customers can manage their electricity bills is to manage their electricity usage,” said Melonie Hall, customer service director for Entergy New Orleans.

Entergy’s Thursday press release “encourages wiser energy use this summer,” including raising the temperature on your air-conditioner, turning off electronic equipment when you are not using it, and weatherizing leaky doors and windows.