Alexandria’s settlement with Cleco: “a bird in hand is worth two in bush”

By Bill Sumrall
The Light

Alexandria’s City Council agreed with Mayor Jacques Roy that a bird in the hand is worth two in the bush.
On motion by Council members Chuck Fowler, seconded by Harry Silver, the City Council approved settling its lawsuit against Cleco in a 5-2 vote following an hour and 20 minute public hearing on Tuesday, Dec. 30.
Council members Jonathan Goins and Edward Larvadain voted no.
The motion read as follows: “To consider final adoption of an ordinance authorizing the Mayor to execute Power Supply Agreement and all ancillary contracts and documents necessary to implement the Council approved Memorandum of Understanding between the City and Cleco Corporation in furtherance of the complete settlement of all claims and disputes in the litigation styled City of Alexandria vs. Cleco Corporation No. 05-1121-A.”
“It makes economic sense,” Silver said, prior to the vote, and described the Power Supply Agreement as “sound.”
In his remarks prior to the vote, Larvadain said that, in his heart, he couldn’t vote in favor of the proposal.
Larvadain said he’s only been on the City Council one month and has heard conflicting statements concerning the wisdom of the proposal.
“We’re getting into bed with Cleco again,” Larvadain said, contending the company had previously failed to “do right” by its Alexandria customers.
“In my opinion, people will be hurt,” Larvadain said,
Larvadain cited customers in his district with $600 to $700 utility bills.
“If we accept it now, the game’s over,” Larvadain said. “If we settle, it’s a wrap.”
Roy said that “to settle or not to settle, that’s the first question.”
In response to a public question, Roy said that “we looked at alternatives long and hard” for power sources other than Cleco, yet even if the city, for example, upgraded its D.G. Hunter power plant, which had been suggested, that would not be sufficient to meet the city’s power needs.
Roy summed the matter up by saying that the proposal represented the bird in the hand or that the City Council could risk going after the two birds in the bush.
Either way, the city administration was prepared to fight in court should the City Council decide to pursue the litigation or settle, Roy said.
At one point during the hearing and before the vote, Goins asked City Attorney Chuck Johnson if they settled tonight, what about rebates?
Johnson said a separate hearing could be called to determine the when, where and who of the rebate question, however “there is nothing to rebate” if there is not a contract.
At-Large Council member Roosevelt Johnson asked if a settlement were approved, when could utility customers expect a break on their bills?
Assistant Director of Utilities Michael Marcotte said it takes six months once the city enters into the new contract, then there is a lag time of two months.
For example, should the agreement go into effect May 1, Marcotte said the effect should be evident on the July 1 bill.
Public questions included one from Mike Redding on whether D.G. Hunter plant was being turned over to Cleco.
Marcotte answered that the City would continue to operate it and still staffs the facility.
Another citizen, Michael Goins, contended during his question period that “the citizens deserve due process of law.”
Michael Goins said he didn’t see the need to decide now since the dispute has been going on for four years.
“Are you here to do the right thing?” Michael Goins asked. “What about the old lady who can’t pay her bill?”
The Rev. Joe Green, pastor of St. Matthew Baptist Church in Boyce and executive director of Rapides Stations Community Ministries housed at 1429 Third St., asked was this the only offer Cleco made to the city?
City Attorney Chuck Johnson answered that there was never a number of offers but “always a give and take process” that rendered the 81-page agreement.
Green also asked was this agreement the best the city could do?
Johnson responded, “In my personal opinion, this is an excellent agreement.”
Questions about the proposed City-Cleco settlement followed a lengthy overview of the proposal during the Dec. 23 public hearing.
The city administration’s overview by Marcotte included a document prepared by R.W. Beck that went into more technical detail.
At the Dec. 23 meeting, former Alexandria Mayor Carroll Lanier asked the first question.
“I guess the biggest question is, when does Cleco return the rebate to the City of Alexandria? Will it be returned to the customers who paid it to start with?” Lanier asked.
“I know my personal bill, it was $500-plus some months, and I know in some lower income areas … they were $800 and $900. I certainly think all these people need their money back,” Lanier said.
Next, Patrick Lacour addressed his concerns to know the underlying details supporting the “bullet-points” in the presentation.
“For people to say this is a ‘transmission constrained’ area, I don’t know what that means, because you have plenty of transmission to get power from other places in here … because Cleco imports more power than it generates,” Lacour said.
“Even after they finish building Rodemacher 3, they’re going to have to keep bringing more power in here, so if they’re already bringing power in here, it doesn’t make a difference if it’s Cleco bringing it in or a third-party that you would hire besides Cleco to bring it in,” Lacour said.
Lacour said he favored direct competition through the bidding process.
Lacour contended that, though Cleco does not admit fault or fraud, the power company took advantage of the city before and may do so again.
During the Dec. 30 hearing, Marcotte addressed the “transmission constraints” question.
“The City of Alexandria is situated in the approximate center of Cleco’s transmission system,” Marcotte said, reading a prepared statement projected in a Power Point presentation for the audience.
“The regional transmission grid, especially the Entergy system, is currently taxed and in need of significant capital improvement. Moving power, on a firm (uninterruptable) basis, through the Entergy system is a formidable challenge … the City could need to move as much as 120 mega-watts. To secure power from a source other than Cleco, the City would be required to purchase both the power and firm transmission rights,” Marcotte read.
“Firm power, with an acceptable reliability of delivery, would be available only after completion of a System Impact Study and a Facilities Study followed by the execution of a NITS Agreement. Yes, through OATT, the markets are accessible but the power purchaser must absorb the cost of transmission upgrades,” Marcotte read.
NITS stands for Network Integration Transmission Service. OATT stands for Open Access Transmission Tariff.
“Cleco recently sold $100 million in bonds to begin construction of transmission improvements in South Central Louisiana, the ‘Acadiana Load Pocket.’ Should the City exhaust a substantial portion of its bonding capacity improving a third parties’ electric system, most likely out of state, or would these dollars be better invested inside our corporate limits?” Marcotte concluded.
Lacour, who was also at the Dec. 30 meeting, said the city of Abbeville did better buying power from Entergy at 5 cents than the City of Alexandria at 9 cents, after seeking competitive bids, according to his calculations; however Marcotte showed using fuel cost calculations for Dec. 30 that the City of Alexandria bought power at 5 cents today even under the existing contract with Cleco.
Earlier, Marcotte had read under “fuel cost calculation” in his presentation that the proposed Power Supply Agreement “breaks the mold of standard wholesale power agreements. Industry standards charge wholesale customers at the highest incremental cost of the utility’s generation portfolio. The proposed PSA provides the City a system average fuel costing.”
“Under the Proposed PSA, the City is charged Cleco’s AVERAGE system cost,” Marcotte said, the statement he read emphasizing the word “average.”
“This approach allows the City to take advantage of all of Cleco’s generation portfolio as well as economy market purchases. The approach also reduces the City’s dependence on natural gas units,” Marcotte read.
At the Dec. 23 meeting, Alexandria City Council President Myron Lawson responded that he wouldn’t try to address specifics but agreed that “the devil is in the details” and that there’s “a whole lot of detail in the R.W. Beck report” that could address these concerns.
However, Lawson assured that the proposal guarantees access so that the city can check and audit the agreement.
Roy assured Lawson that the supporting documentation to the R.W. Beck report will be provided to Lacour and anyone asking for it.
Lawson also assured those present that a court reporter would transcribe the record of the Dec. 23rd hearing to be available for the public so concerns could be answered in detail.
After the Dec. 30 meeting, City Clerk Nancy Thiels said that both public hearings would be included in the transcript, which should be available soon into the new year.
At the Dec. 23 hearing, Sybil Holt, a resident of the Lower Third area, asked about the range of possible rebates to the community, what companies other than Cleco could provide for the city’s power needs, and the need for negotiations with Cleco to reimburse the city over attorney fees spent to date.
“We need to get our money back, and the city does too,” Holt said.
Sandra Bright asked for clarification on the presentation concerning D.G. Hunter as an asset worth $29 million.
“Is this tangible or just on paper?” Bright asked, adding that if the city were to sell this asset for $29 million, would that amount go back into the city’s general fund or used to help customers with high utility bills?
Marcotte said the city is not selling the physical D.G. Hunter plant itself but the right to use it, and the allocation of the funds, should the city choose this option, would be discussed later by the City Council.
Thiels said the City Council’s next meeting is set for Jan. 13.

One Response

  1. Last month my utility bill was $236.00 for 29 days, this month it’s $435.00 for 34 days. Something is not right!

    Are they actually checking our meters or are they guesstimating? I sure can not guesstimate how much I would like to pay them. If so I’d be cut off for lack of payment. LOL!

    My family and I practice energy conservation in our home, we do not waste our energy and yet I’m stuck with this! I have several of my associates whose utility bills are astronomical!

    The city is lying when they say that many of the older homes are not energy efficient, many of these homes are more solidly built than the newer ones.

    This excuse for these outrageous charges is nothing more than justification to overcharge the citizens of this city.

    The United States Department of Justice needs to look into this matter and I guarantee you they will find corruption committed by this city and Cleco.

    Forget the tax base, the over charged citizens of Alexandria are the ones who keep this city in the “black” in more ways than one.

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