People Power

A look back to the time New Orleans almost owned its own energy

During Hurricane Ida, Entergy’s transmission lines bringing electricity into New Orleans failed, leaving power out across the city for days. The outages amid stifling late summer heat were more than an inconvenience: They were reportedly a factor in at least a dozen deaths within the city.

City councilmembers and candidates quickly floated ideas for addressing problems at the utility, which has been plagued by other controversies in recent years, including unnecessary rolling blackouts on a cold Mardi Gras night in 2021, a general rise in outages that year, and the surreptitious hiring of actors to simulate citizen support for a new power plant in New Orleans East.

Among the possibilities suggested, and even acknowledged by Entergy itself as a potential option, was the municipal takeover of the local utility system. Since then, the New Orleans Chapter of the Democratic Socialists of America launched its own campaign for municipalizing the utility.

“The end goal would be a fully publicly owned utility where representatives of the residents are in direct control of it,” said Jack Reno Sweeney, chair of DSA New Orleans’ Municipal Action Committee and a campaign lead for the municipalization effort, though he said the exact details would remain to be hammered out. “We’re in a really early stage of the campaign and [are] kind of ideating what we want municipalization to look like.”

It’s one of several DSA chapters calling for local governments to take over their power utilities, often amid outages linked to climate change and shoddy maintenance. The idea is far from unheard of: Millions of residents and businesses in cities like Los Angeles, Seattle, Austin, Chattanooga—and cities including Lafayette and Alexandria here in Louisiana—already buy electric power from a public utility. Some are run as city departments, on par with other agencies like the New Orleans Department of Public Works; some are quasi-independent agencies like the Sewerage and Water Board; and some are run independently from municipal government with their own elected boards, similar to many school districts.

But what makes New Orleans unusual is that, a little more than 30 years ago, City officials came within a hair’s breadth of acquiring Entergy’s local operations. The move, after outrage at massive cost overruns at a nuclear power plant the company built in Mississippi, was supported by a City-convened task force, clean energy advocates, and groups like the League of Women Voters. And after Entergy and the City had collectively spent millions of dollars on consultants and attorneys, the utility had even reluctantly agreed to a sale. So why, in the end, did the City Council vote to leave the local power system in the hands of Entergy?

Today, Orleans Parish residents and businesses buy their electricity from Entergy New Orleans, part of a larger Entergy Corporation that owns utilities in Arkansas, Louisiana, Mississippi, and Texas. Throughout much of the 20th century, the East Bank bought power from New Orleans Public Service Inc., known as NOPSI, while Algiers residents were served by Louisiana Power & Light. Both were part of Middle South Utilities Inc., which would take the name Entergy in 1989, but the different divisions of the company were seen as fairly autonomous, with NOPSI often heavily identified with New Orleans.

Entergy, like many power companies, is a for-profit business. It’s based in New Orleans, where Middle South moved headquarters from New York in the 1970s, but it’s owned by investors around the country—mostly so-called institutional investors like hedge funds, pensions, and mutual funds, but also individuals buying a few shares hoping to collect dividends, the portions of its earnings the company regularly doles out to stockholders.

Grand Gulf Grievances

As early as 1972, Middle South announced plans to build a nuclear power plant, to be called the Grand Gulf Nuclear Station, a little more than 30 miles outside of Vicksburg. The plant was then estimated to cost about $400 million and was slated to be finished by 1978. Both these projections turned out to be wildly optimistic.

The plan wasn’t nearly as controversial a proposal as it would be today: While there was already some opposition to nuclear power, the disasters at Three Mile Island, Chernobyl, and Fukushima were still years in the future. The Times-Picayune report of the announcement didn’t mention any protests or criticism at all.

By 1974, the company said the plant would cost more than $1 billion; and in early 1975, the Times-Picayune was reporting the facility would be the largest construction project in Mississippi history, scheduled to finish in 1981. By 1978, the project included two generating units that would cost a total of $2.1 billion. But in the coming years, the price would continue to soar, and only one of those units would ever be completed.

At the time, Grand Gulf was still supposed to be a blessing to consumers. A NOPSI rep told the Times-Picayune that the local utility would buy power from the plant at a cost no more than what it then paid for fossil fuel power. And as of 1980, when the plant was supposed to come online by 1982, NOPSI officials told the City Council it would even save New Orleans customers a total of $1.9 billion from 1982 through 1989.

The first hint that things might not be so simple came in September of 1980, roughly 18 months after the Three Mile Island disaster stirred up sentiment against nuclear power. That’s when the City Council learned that agreements between NOPSI and other Middle South units could leave customers on the hook for $400 million in construction costs if changing federal rules ultimately meant the plant could never come online. And if it did operate, officials would come to discover, the agreements would leave customers paying for Grand Gulf power, even if it turned out that cheaper energy was available through existing facilities, with NOPSI on the hook to buy 29.8% of the plant’s output.

By November 1982, the power plant still wasn’t up and running: Middle South estimated its first generating unit, called Grand Gulf I, would be online by the end of 1983, according to the Times-Picayune. And, the utility warned, its still-rising cost could increase New Orleans customer bills by up to 35%. Middle South claimed it would in the long run still be cheaper than fossil fuel power, but the savings estimate was cut to a maximum of $325 million over 30 years, compared to the earlier projection of $1.9 billion in less than a decade. And, the Times-Picayune reported, the utility told federal regulators there was a more than 40% chance the plant wouldn’t ever save customers a dime.

Soon, critics were urging the City Council to take action to prevent another agreement like the one binding New Orleans to Grand Gulf. And activist Gary Groesch suggested the City simply take over NOPSI and pull it from the power-purchase pact.

By early 1983, customer bills were expected to soar an astonishing 40% to 70% in Grand Gulf’s first year of operation, according to the Times-Picayune. The City Council created a task force to study municipalizing the utility, which a Tulane law professor advised the city would end the obligations to buy Grand Gulf power. It also, along with various other agencies, asked the Federal Energy Regulatory Commission (FERC) to consider overturning the pact that bound some Middle South-owned local utilities to buy certain amounts of power from Grand Gulf while its Arkansas Power & Light unit was exempt.

Since 1981, NOPSI had been chiefly regulated by the state Public Service Commission rather than the City Council, which had previously supervised the utility and approved rate changes. It was a change supported by the utility, approved by voters in a low-turnout election, and even backed by some councilmembers who thought the PSC was better suited to the job, though positions would soon change. “I was ignorant of the facts,” said Councilmember James Singleton in June 1983, announcing a plan to regain authority over NOPSI as the Council searched for ways to keep electric bills down. “I got sold a bill of goods.”

But, like the Grand Gulf construction itself, the Council’s actions would prove slow and sometimes costly. A few months into its existence, the municipalization task force issued a unanimous report—recommending further study. As councilmembers awaited a ruling from FERC and voter approval to “get NOPSI back” from the PSC, Singleton and fellow Councilmember Joseph Giarrusso suggested residents demonstrate their own power over the electric company—by not using electricity for two hours on the afternoon of July 4. Media reports at the time suggest the utility was unimpressed by the protest’s impact. In October, voters narrowly defeated the proposal to give the City Council renewed authority over NOPSI. 

By March 1984, when the cost estimate for Grand Gulf I had hit $3 billion, the City sued NOPSI, saying it shouldn’t have entered the power-purchase pact without Council approval.

“Not the corporate citizen it once was”

In June, the municipalization task force issued another report, again saying it was too soon to decide whether to take over the utility. This time, the task force argued the decision would depend on how FERC ruled on NOPSI’s obligation to buy Grand Gulf electricity. Citing a report from hired consultants, the task force suggested that if that deal was upheld, municipalization could save New Orleans customers $1 billion over 10 years, in part by getting them off the hook to buy the pricey power.

By January 1985, as officials still awaited a final ruling from FERC, NOPSI and LP&L suggested they’d collectively buy 48% of Grand Gulf’s output, a percentage high enough that the city task force recommended pursuing municipalization. Public sentiment seemed to continue to turn against the utility companies, and councilmembers again pushed to retake their regulatory power, scheduling a new referendum for that May. They also created a legal entity called the New Orleans Public Power Authority, designed to take over the utility. And though it may seem naive now after decades of reports of beloved local institutions dismantled by their parent corporations, politicians and others seemed genuinely dismayed that NOPSI officials acted more loyal to Mid South than to New Orleans.

“NOPSI is not the corporate citizen it once was in New Orleans,” Councilmember Mike Early said, according to the Times-Picayune. “Its image now is that of a subsidiary of a mammoth, multistage corporation that acts for the benefit, not of New Orleans and Louisiana, but for [the] system as a whole.”

Though every member of the City Council at that point favored the Council retaking regulatory control, the Council narrowly voted not to spend public money promoting the referendum, leading to an odd scenario where councilmembers raised funds by selling novelty merchandise, like Band-Aid containers labeled “Bandages won’t cure the hurt of Grand Gulf,” and holding an “antique rug auction,” according to the Times-Picayune. Voters approved the referendum by a nearly 2-to-1 margin.

But the Council was soon faced with a June 1985 FERC ruling on Grand Gulf cost distribution that officials said could cause a typical NOPSI customer’s rates to jump by 38%. “Municipalization has to be given serious consideration,” Giarrusso said at the time. In July, Grand Gulf I—deemed the nation’s largest nuclear power plant—finally began operations, after incurring over $3 billion in expenses. (Grand Gulf II was never completed, despite roughly $1 billion in costs).

By September, as regulators across the region resisted the Middle South companies’ pleas for rate increases to cover the Grand Gulf costs, the company made national headlines by failing to pay shareholders a dividend for the first time since its creation in the 1940s. And in November, the division that technically owned Grand Gulf successfully negotiated an extension on a $125 million loan payment, citing the lack of cash flow from its sister companies.

When regulators faced with angry consumers allowed only minimal rate increases, the utility companies filed lawsuits, including at least three unsuccessful federal cases, challenging the City Council’s authority. The lawsuits, at least one of which NOPSI attempted to take all the way to the U.S. Supreme Court, hardly endeared the company to councilmembers, with Singleton saying he was “disgusted” by the utility.

“If you need more revenue, we’re asking that you come see us and not the Fifth Circuit Court of Appeals,” Councilmember Bryan Wagner said at one point.

By the time of municipal elections in 1986, a number of incumbents and new candidates seemed open to considering a utility takeover, with activists like Alliance for Affordable Energy founder Gary Groesch energetically pushing the issue. Councilmembers in March did agree to a settlement with NOPSI phasing in some Grand Gulf costs over a 12-year period, with a portion also covered by utility shareholders, though at least some indicated they’d continue to explore municipalization.

Advocates argued the benefits would go beyond just getting out of the bill for the expensive nuclear plant. At various points in the discussion, officials of the American Public Power Association told the City Council of general potential benefits of public utilities: Greater public control and local decision-making, no need to allocate a portion of rates to pay dividends to shareholders, and an often-greater focus on conservation.

“Municipal ownership of the system will allow the local utility to concentrate solely on the interests of its customer owners,” APPA executive director Larry Hobart would tell the council in 1990. “When push comes to shove, shareholders win because they own the system. The manager of public power systems have only one master, the consumer, who’s also the owner.”

And for a few years in the late 1980s, municipalization consultants to the City Council and the Middle South companies would periodically issue sets of dueling reports. City consultants pointed to potential savings and other benefits to power consumers, while utility consultants highlighted potential losses, corruption risks, and general uncertainties. Questions also remained about exactly what structure a municipal utility would take, what price it would legally have to pay for Middle South assets, and whether it could actually get out of NOPSI’s agreement to buy Grand Gulf power.

City officials seemed well aware of the risks of protracted litigation if they couldn’t negotiate to cleanly buy the utility from Middle South. “The City must assume, for planning purposes, that NOPSI and Middle South would, in the absence of a settlement, vigorously resist the establishment of a municipal utility in New Orleans,” reads one report. And a 1987 report from NOPSI consultants referred repeatedly to the threat of lengthy legal battles, perhaps as a warning to the City Council.

“Municipalization is a gamble where the only sure winners are those who will benefit from the considerable litigation, and the sure losers are the consumers,” according to the report, which also cautioned that municipalization could leave NOPSI with no means to pay its debts and a prolonged case in bankruptcy court. “Because of the complexity of the issues and the competing interests of the many parties involved, years could pass before a final confirmation by the Bankruptcy Court of [NOPSI]’s plan of reorganization.”

Advertising tableau at New Orleans Public Service Inc. (NOPSI) headquarters, 317 Baronne Street, urging customers to use fans for summer cooling (circa 1950). The Charles L. Franck Studio Collection at The Historic New Orleans Collection, 1979.325.66.

A Tentative Settlement

But starting in 1988, negotiators for the City Council and what would soon be known as Entergy began discussing a “friendly buyout” of the NOPSI system and the LP&L lines in Algiers. After about two years of discussions, the Entergy companies reluctantly agreed to a deal, with a target closing date of December 31, 1990.

Attorneys Doug Adler and Clint Vince, who represented the City, presented the buyout plan, which would see the New Orleans Public Power Authority (NOPPA) take over distribution lines immediately at closing and acquire NOPSI’s generation equipment after five-and-a-half years. Workers would be guaranteed the ability to transfer to NOPPA without a pay cut, and NOPPA would have a deal to purchase power at a reasonable price from Entergy for 15 years. Bonds, essentially backed by the payments people would make on their electric bills, would be issued to finance the deal, but the City’s attorneys and consultants said rates should still be lower for consumers even with the interest payments involved.

“Absent buyout, we do not have an antidote to NOPSI’s yearly rate increases,” said Vince. “In our view, the buyout would save an additional $750 to $800 million for the consumers of this city and possibly as much as $1.2 billion depending on the outcome of pending lawsuits between the company and the city.”

Groups like the Louisiana Consumers’ League, the Alliance for Affordable Energy, churches, public housing advocates, and seniors’ organizations spoke of the projected savings, especially significant for poor people and those on a fixed income. A representative of the local Sierra Club chapter celebrated that the deal would loosen New Orleans’ ties to the nuclear plant. A supporter of the Delta Greens suggested a public utility would be more likely to promote conservation and solar power—NOPSI, on the other hand, had historically promoted the use of electrical appliances—and would simply be more likely to listen to the public. “A private monopoly has not the slightest vestige of democratic character and is inherently manipulative in that it uses a portion of the rates paid to indoctrinate the public into the view that it acts in their interests,” she said.

Greg Palast, perhaps now best known as the author of the George W. Bush-era polemic The Best Democracy Money Can Buy but then an economist expert in utility matters, testified in favor of the deal, though he advocated cutting ties with Entergy even more quickly. By its very nature, he argued, the sprawling utility company would always pursue its own interests over local needs.

“It’s an institutional problem, that you’re always going to be swamped by the bigger system, that you’re always going to have very little to say and you’re always going to be left cleaning up their problems,” he told the City Council. “If they have excess power, you’re going to be hit with it. If they’re ever short with power, you’re going to have to pay for building more power. You’re always going to be the flea at the end of the tail, and you’re going to be wagged around, and I just don’t see how you get around that.”

Some residents also testified in favor of the deal, with one woman suggesting that Entergy’s long resistance to a public takeover indicated the company must have “something pretty good going for them” with New Orleans helping to pay for “the ego trip over there in Mississippi” at Grand Gulf. “If you’re crooked, you’re crooked—I can’t help that,” she quipped. “But why should we pay for that?”

Another resident said that his opinion of NOPSI had been “completely changed” after the Grand Gulf debacle. “NOPSI was such a good company for so long, I was reluctant—didn’t even want to think of allowing our City Council and our, quote, ‘politicians’ to take over,” he said. “But I have found that NOPSI has been 100 times more irresponsible by their actions in recent years than our City Councils could have ever been.”

But in terms familiar from political debates today, several questioned whether the City Council wasn’t better off focusing on other issues like potholes and crime. Pointing to the Sewerage and Water Board and Regional Transit Authority, they questioned whether a government-run utility would be run well enough to keep rates low and the lights on.

“History has proven time and again that you should stick with which you know best, and for the City of New Orleans to jump into the utility business at this time would be a big mistake,” one resident said. “I believe the officials of our city should spend more time in encouraging and developing economic growth and providing better city services for the people.”

Buyout supporters focused on both democratic control and lower rates, and opponents similarly discussed their views of the proper role of government and pragmatic concerns about costs and reliability. “The movement in this country and indeed in the entire world is to private ownership and not government ownership and control,” said one resident, while another declared police and fire response the “only legitimate functions of government.” A central committee member from the Libertarian Party of Louisiana invoked John Galt, the capitalist hero of Ayn Rand’s Atlas Shrugged, though the official record captured the fictional inventor’s name as the more topical “John Volt.” But several others expressed more moderate concerns about the City’s ability to control rates and make basic repairs.

Organized opposition to the deal came from groups like the Business Council and Chamber of Commerce, which presented their own numbers questioning the City Council’s projected rate increases. Jim Bob Moffett, a mining tycoon, appeared on behalf of the Business Council to compare municipalization to the failed private leveraged buyouts of the 1980s and evoke the “revolution around the world” against government ownership. And Chamber of Commerce representatives warned higher rate payments from small businesses could be needed to make up for overoptimistic projections.

While NOPSI and Entergy didn’t officially oppose the deal, they seemed to have unofficially passed that mantle to the business groups. Adler, one of the City Council’s attorneys, pointedly told the public that the Chamber of Commerce lawyer who spoke had previously represented NOPSI, and suggested that the Business Council projections omitted Grand Gulf from calculations entirely.

“I think many of you remember the television commercial that asked the question, where is the beef?” he said. “Well, the [City] consultants asked, where is Grand Gulf?” 

Councilmembers lamented that they and the public would struggle to digest the competing sets of financial figures. And a representative for the League of Women Voters—which staunchly supported municipalization—castigated the City Council for taking so many years to consider the matter, only to give the public less than a month to digest the proposal.

“If you think the public should simply trust you, then the statistics on voter registration and turnout of the polls should reveal just how little the public think their vote matters, how little faith they have in you,” said Karen Wimpelberg, co-chair of the league’s energy committee. “You are not serving the public when you present to them a very complex proposal all at once and expect them to comment on it in two to three weeks time.”

Since the negotiations focused on the buyout itself, the City Council also offered little concrete information about how a public utility would actually be run, though members were adamant they didn’t want to be involved in its day-to-day operations. And ultimately, they decided they didn’t want to boost their involvement in the utility at all, voting 5-2 on May 17, 1990 against municipalization. Only councilmembers Dorothy Mae Taylor and Johnny Jackson voted in support, with Taylor holding up eight one-dollar bills to represent a household’s estimated monthly savings under the buyout.

“To some… an $8 per month savings doesn’t mean much,” she said, according to the Times-Picayune. “But to… others who live on fixed incomes, the $8 per month savings can mean the difference in not having to choose between food, medicine, and electricity.”

While it’s hard to know decades later exactly what motivated each member’s vote, several spoke at the time of concern about the risk involved. Public and legislative anger at the utilities over Grand Gulf also appears to have subsided after the City limited bill increases through a mix of negotiations, rate regulation, and litigation. Additionally, as the Times-Picayune pointed out, the municipalization debate had dragged on so long that some of the biggest advocates had left the Council, and at least one new member, Jackie Clarkson, had openly campaigned against the buyout.

Clarkson was said to have quipped that things might have been better off if the utility bought the city rather than the other way around, and as public comments indicated, the municipalization push was seen by some New Orleanians as opposing the tide of history after a decade of worldwide privatizations under leaders like Reagan and Thatcher.

It also wasn’t an optimistic decade for New Orleans, and that may have left the City Council less inclined to flex its legislative muscles. The city lost more than 10% of its population between 1980 and 1990, weathered an oil market crash that put thousands out of work, watched the indictment and trial of governor Edwin Edwards, saw the closure of symbolically important downtown retail emporiums, and even suffered the embarrassment of a World’s Fair gone bankrupt.

“This city is not Palm Springs; we are a poor city,” said Giarrusso, an early advocate for pursuing municipalization options, as the Council rejected the plan. “We can ill afford the luxury of making a wrong choice.”

And while advocates like Groesch vowed to continue to push municipalization, citing the multiple votes needed to restore regulatory authority to the Council, public power in New Orleans never came to be.

Whether that will change in the future is still an open question: Supporters like the DSA haven’t yet presented a detailed proposal for how municipalization could work, nor has the City Council taken serious steps toward considering such an option.

“There are huge advantages in public ownership and control,” Palast said in an interview. “The question, of course, in the end, are the terms.”

And consumer advocates say that while cities like Lafayette and Austin have taken steps to build sustainable public utilities, it’s essential to get the details right to ensure that power consumers don’t just become another source of money for the city’s general coffers.

“I think it is evident that the people in New Orleans are paying for more than we’re getting, and I think the profit motive is a dangerous one when it comes to something as important as electric power, especially as we’ve seen the loss of electric power as the lead driver of mortality in the last couple of years’ hurricanes,” said Logan Atkinson Burke, executive director of the Alliance for Affordable Energy. “I just think that the need for safe, reliable power means that human access to it has to be more important than profits, and so I think if New Orleans were to consider it, really it could be a benefit. But it would really require some protections for people.”


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