Private power push returns in Louisiana, setting up fight over who pays

(The Center Square) — A proposal to reshape how some of Louisiana’s largest electricity users obtain power failed to pass the Legislature this spring, but the idea is now resurfacing at the Louisiana Public Service Commission.Senate Bill 490 never really secured the attention its potential impact demanded, quietly dying in the Senate despite proposing a significant break from Louisiana’s traditional utility model.If a large scale energy user, for example, Meta, obtained electricity from its own private power generation, instead of Entergy, the utility provider would no longer need to build as much new infrastructure to serve Meta, potentially shielding existing customers from some of those costs.The commission has been considering the change since June, and if adopted, it would represent a major regulatory shift in how Louisiana treats electricity generation and large industrial customers.“I have always been open to this concept,” Commissioner Davante Lewis told The Center Square, adding that the proposal will evolve as utilities and industry weigh in.“It’s a balancing act. It’s a balance that I think opens us up to an evolution of different generation sources and being able to protect ratepayers,” Lewis said.The proposed rule is still in its early stages, and one provision is likely to become a major point of contention as the process moves forward. As written, existing factories and data centers already served by Entergy or other utilities could not leave the regulated system for a private power network.Were factories and data centers allowed to leave one of the major utilities, the costs of power generation and infrastructure built to serve them could instead be shouldered more broadly by the utility’s remaining ratepayers.“The more they become less of generation users, the costs of those assets now have to go somewhere,” Lewis said.Industrial customers are expected to push back on that restriction, arguing they should have the option to secure their own electricity if doing so would lower costs without shifting expenses onto other ratepayers.The Louisiana Energy Users Group argues regulators should instead determine the financial consequences case by case, saying “just because an existing large load leaves utility service” does not necessarily mean other customers will be stuck with stranded costs.In some cases, the group argues, other ratepayers could actually benefit if a departing factory allows Entergy to avoid building billions of dollars of new generation.The group represents dozens of companies across the state, including ExxonMobil, Shell, CF Industries, Dow and Chevron.The rule now before the commission traces back to the Legislature this spring, where the concept emerged from the Senate Task Force on Energy Infrastructure and Modernization, led by Senate President Cameron Henry, a Metairie Republican, with Sen. Bob Hensgens, an Abbeville Republican, playing a central role in developing the proposal.That bill never made it very far, though it drew support from major industry lobbying groups, including the state’s chemical and oil and gas associations.The Public Service Commission contended that the bill infringed on the commission’s constitutional authority and that its own staff was better suited to address the proposal’s goals through regulation.The major utilities, however, raised more specific concerns that the commission’s proposed rule now attempts to address. The legislative bill did not prevent existing industrial customers from leaving a major utility, potentially leaving other ratepayers responsible for costs tied to infrastructure built to serve those customers.Perhaps more consequentially, the bill allowed private power networks to continue relying on Entergy, Cleco or another utility for backup power.In other words, industrial customers want the freedom to build or finance their own power supply while retaining access to public utilities for backup when their private systems cannot meet their needs.Allowing that “could impose significant reliability and cost shifts to all customers in Louisiana,” Entergy regulatory affairs director Larry Hand told the Senate task force.In an interview with The Center Square, Hensgens disputed concerns that private networks would expose ratepayers to greater financial risk, arguing the opposite: privately financed generation would leave investors, rather than utility customers, holding the loss if a data center failed or departed.He said he is more concerned about utilities building power plants with useful lives that extend years beyond the contracts signed by the data centers they were built to serve.Hensgens pointed to Meta’s data center in Richland Parish. Meta has promised to cover the costs of its needed power generation and transmission, but only for a set period. Hensgens worries about the “tail” of that cost.“If a data center comes in and promises to pay the first 25 years of a generator, what if the generators last 35?” Hensgens wondered.It is a concern similar to those raised by the major utilities, but in reverse. Utilities worry that allowing existing customers to leave could strand costs already incurred to serve them.Hensgens worries utilities could spend billions building infrastructure for data centers, only for those customers to leave — or for their payment agreements to expire — before the investments are fully paid off, potentially leaving other ratepayers to cover the remaining costs.In drafting his bill, Hensgens and other task force members conferred with legislators and regulators from across the country, including Maryland, Virginia, West Virginia, North Carolina and Georgia.He added that he is “close friends” with Commissioner Jean-Paul P. Coussan and expects to work closely with him as the docket advances and evolves.