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Hurricane Ida power grid failure forces a reckoning over Entergy's monopoly in the South

Entergy says it's committed to storm-hardening and clean power. Critics say it works against those goals.
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Like many ravaging storms that came before it, Hurricane Ida exposed the fragility of Louisiana’s power grid, knocking out electricity to hundreds of thousands of people and businesses, including nearly all of New Orleans. It also laid bare growing doubts about the ability of the state’s largest energy provider to protect against the effects of climate change, including the increasingly destructive weather it causes.

The company, Entergy Corp., has told regulators and shareholders that it is committed to protecting the grid against extreme weather, having spent billions of dollars to upgrade towers, poles and lines.

But Entergy also has a history of resisting changes that would have made the electric grid more resilient, from developing new transmission lines to expanding solar power, according to an examination of regulatory filings and other public documents and interviews with industry researchers and clean-power proponents.

These actions show that while Entergy isn’t opposed to renewable power, it fights projects it doesn’t control and doesn’t want competition from other companies or homeowners trying to generate their own power from the sun. That has angered local elected officials and environmental advocates, who say Entergy is blocking needed change to maintain its dominance of the local energy market.

The New Orleans City Council, which regulates a local Entergy subsidiary, is using the Ida outages to force a reckoning on Entergy. The council announced an investigation of the failures that led to the citywide blackout and asked state and federal regulators to review the company’s planning for long-range power lines. Fourteen deaths have been attributed to Hurricane Ida in New Orleans, 10 of which were caused by excessive heat during the outage, according to the Louisiana Health Department.

The council fined Entergy $5 million in 2018 for hiring actors to pose as proponents of a new power plant and $1 million more in 2019 for failing to maintain poles and lines (Entergy is suing to appeal the latter fine). In March, the council launched a management audit of the company following outages during an extreme cold snap.

“It comes down to credibility,” said council member Joe Giarrusso, a member of the Utility, Cable, Telecommunications and Technology Committee. His message to Entergy: “You are providing one of the city’s most crucial resources, and the people who live here have a right to know what has happened.”

Entergy, which reported $1.4 billion in profits last year, said in a statement that claims that it delays expanding of transmission lines “are without merit and have no basis in fact.” The company said that it is “actively working toward a carbon-free future,” and that its system has become more reliable in recent years.

Image: Damaged power lines and homes in Grand Isle, La.
Damaged power lines and homes days after Hurricane Ida ripped through Grand Isle, La., on Sept. 2.Leah Millis / Reuters file

The frustration in New Orleans reflects wider problems with America’s fractured energy system and President Joe Biden’s hopes to transform it into a seamless network able to harness new sources of solar, wind and other clean power. Biden’s $1.2 trillion infrastructure plan calls for billions of dollars for new transmission lines and the creation of a federal agency that would remove bureaucratic obstacles to developing them.

That kind of overhaul would be a challenge for regional monopolies like Entergy, an investor-owned utility whose business model relies on control of its network of fossil fuel-burning power plants and transmission lines.

Entergy says it supports a transition to renewable energy and a stronger grid. But it has acted against that goal while preserving its dominance over a power market that stretches across Texas, Louisiana, Mississippi and Arkansas, according to researchers and clean-power advocates.

The results, critics say, are missed opportunities to better withstand extreme weather, draw electricity from more sources and restore power after storms more quickly.

During Ida, all eight of Entergy’s high-voltage transmission lines into New Orleans failed. Seven months earlier, when a February storm disabled many power plants in Entergy’s region, there weren’t enough transmission lines to deliver necessary power from other parts of the country, leading to widespread outages, according to a report on the storm from the Midcontinent Independent System Operator, or MISO, which oversees the grid.

John Norris, a former member of the Federal Energy Regulatory Commission who advocates for renewable energy, said the two events illustrate the consequences of Entergy’s hindering the development of a larger and more resilient grid.

“Our frustration with what’s going on precedes Ida, precedes the freeze last February,” Norris said. “But it’s just a chance for us to draw people’s attention to the fact that this is still not moving forward.”

Protecting a monopoly

Entergy, formerly known as Middle South Utilities, has existed in various forms for more than a century, wielding considerable political power in the states where it operates. Its headquarters are in New Orleans, where it is the city’s only Fortune 500 company.

Like almost all investor-owned utilities, Entergy operates as a state-sanctioned monopoly, allowed to act as the sole electricity provider in its region while subject to strict oversight by government regulators, including of the rates it charges customers. In recent decades, the federal government has tried to bring competition to power markets by forcing utilities to give up control of their transmission systems so other power companies can use them to move electricity, as well.

Entergy ran into that more than a decade ago, when it came under investigation by the Justice Department’s Antitrust Division. The division said it was examining allegations that Entergy was using its control of its regional transmission network to keep competitors from selling power produced at plants that were more efficient and cheaper than its own.

In 2012, the Antitrust Division announced that Entergy had satisfied its concerns by taking steps that would allow rivals into its market. One of those steps involved transferring its transmission lines to an independent company.

But that never happened. Entergy and a proposed buyer called off the deal in 2013 after state regulators rejected it, saying it would cost consumers too much.

When Hurricane Ida knocked out power to New Orleans, thousands sweltered in the heat. Matt Slocum / AP file

Entergy held on to its transmission lines. The company said in a statement that the Justice Department had taken no action on the matter since the investigation “became inactive” in 2012 and that it wasn’t aware of any concerns that the federal agency had about the ownership of its transmission lines.

The second piece of Entergy’s deal with the Justice Department did occur. Entergy joined MISO, which oversees a power grid across 15 states in the Midwest and the South.

Entergy said in a statement that the steps were voluntary and not the result of a deal with the Department of Justice. A Department of Justice spokesperson declined to comment.

Entergy joining MISO was supposed to loosen the utility company's grip on the local power market.

But Entergy remains the dominant player in the group’s Southern region, where it has obstructed plans to build high-voltage transmission lines that could bring in more power from other parts of the country — and other companies — according to industry researchers and former state regulators. Entergy and its consultants slow approvals by raising frequent objections, asking for new studies and accusing MISO of doing something wrong, according to Norris and others. That, they say, has allowed Entergy to protect and expand its fleet of power plants, giving it more control and profits.

“MISO says it needs to move more power from north to south or within a region, like in Louisiana. Those are the types of projects that Entergy wants to block,” said Daniel Tait, a researcher for the Energy and Policy Institute, an industry watchdog that advocates for the development of renewable energy in response to climate change.

Ari Peskoe, the director of the Electricity Law Initiative at Harvard Law School, said Entergy is “an extreme example” among old-school utilities that stand to lose from the building of regional transmission lines.

“There is an incentive mismatch between what’s good for the public versus what a utility might want to do, which is to protect its legacy power plants that it can still make money off of,” Peskoe said.

A demonstration of that, Entergy critics say, is a recent effort to build transmission lines in East Texas.

In 2018, a Florida company won a competitive bid from MISO to build the lines, which would allow cheaper energy to flow to customers in a three-county area.

But Entergy and other utilities urged Texas lawmakers to protect them from competition by passing a "right of first refusal" law that prevents outside power companies from building transmission lines in the utilities' territories. The Justice Department warned that the law would stifle competition and lead to higher rates. But the law passed.

The project, which has become mired in litigation, hasn’t begun.

Entergy said in a statement that the law “did not relate” to whether the East Texas project would be built. “So for critics to suggest it illustrates Entergy’s purported work to stall transmission development is simply wrong as a matter of fact,” the company said.

At a recent meeting of MISO’s board of directors, Norris and other Entergy critics said the organization was allowing Entergy to exert too much influence.

The result, critics say, is that during disasters like Hurricane Ida, Entergy’s grid is more vulnerable to wind-driven outages and less able to move power around to places that need it.

Downed power lines in the aftermath of Hurricane Ida in Reserve, La.Matt Slocum / AP file

Brandon Morris, a MISO spokesman, responded with a statement saying the organization’s transmission planning was “a collaborative planning process with our utility regulators, member companies and other stakeholders to determine where transmission is needed to ensure the delivery of reliable, cost-effective electricity to consumers.”

Entergy said in a statement that it advocated for its interests with MISO just like any other stakeholder and that it didn’t “have the power or authority” to stall MISO’s plans. The company said it has invested over $6 billion in new transmission projects since it joined MISO in December 2013.

“The stakeholders who have been accusing Entergy of delay and obstruction, in actuality, appear to dispute Entergy’s right to have a voice in the process or are simply angered by the fact that Entergy’s view on certain issues differs from theirs,” the company said.

Battle over solar

Entergy says it supports developing solar power and other clean energy sources. But some of its policies have done the opposite, critics say.

An example, they say, was Entergy’s work to persuade Louisiana regulators to reduce how much it paid people who installed solar panels on their roofs and contributed excess power to the company’s grid.

Entergy argued that it was paying too high a rate and that it was unfair for its other customers to essentially subsidize the cost of solar power. The company supported a rule, adopted by the state Public Service Commission in 2019, that cut the savings for homeowners who installed solar panels by hundreds of dollars per year, according to the Gulf States Renewable Energy Industry Association.

Opponents argued that the change would curb interest in rooftop solar installations. Two years later, they say their predictions have come true.

Since the vote in September 2019, sales have dropped by about 90 percent for the biggest solar companies in Louisiana, said Stephen Wright, executive director of the Gulf States Renewable Energy Industry Association.

“That’s a market killer,” Wright said.

Image: Downed power lines in Waggaman, La.
Downed power lines in Waggaman, La.Steve Helber / AP file

Entergy has also blocked the more widespread adoption of solar power by fighting new transmission lines that would carry renewable energy into the company’s territory, said Simon Mahan, executive director of the Southern Renewable Energy Association.

“If we had a more robust large-scale transmission of solar across Louisiana and into Texas, you’d just have another tool to prevent major power outages,” Mahan said. “You could have had more lines serving New Orleans.”

Entergy said that it has opposed a small fraction of proposed transmission projects in the region and that it is adding solar projects to the network it controls, including three plants in Louisiana.

‘You are the goliath’

New Orleans has become the starkest example of growing public frustration with Entergy.

Much of that has to do with a shift in the political landscape. The City Council has almost completely turned over since 2018, when members voted over community objections to allow Entergy to build a gas-fired power plant in New Orleans.

Entergy said the plant was needed to provide power during storms and high-demand periods. Opponents said the plant would contribute to carbon emissions and advocated investing in solar options, instead.

Since then, all but one of the members who supported the power plant have left office. The new council has taken a more aggressive approach to the company, observers say.

In addition to the recent fines and the management audit, the council has required Entergy to agree to eliminate carbon emissions by 2050. And in Ida’s wake, it is considering ways to bring more competition to the local energy market.

After City Council President Helena Moreno announced plans to evaluate Entergy’s future in New Orleans, Entergy responded with a news release saying it was willing to explore several options, including selling or spinning off its New Orleans subsidiary or turning its local assets over to the city.

“It is obvious that we have reached a critical juncture in our relationship with the City Council,” Rod West, Entergy’s utility group president, said in the statement.

On Wednesday, the council’s utilities committee voted to investigate Entergy’s transmission failures during Ida and to ask state and federal regulators to review its local transmission planning.

At the meeting, which Entergy executives attended, Moreno accused the company of using “threats and PR spins” in response to questions about its service.

“Please stop acting like you are the victim. You are the goliath. You are a powerful Fortune 500 company with all the resources in the world and record profits last year of $1.4 billion,” Moreno said. “We are not the bullies, and we are not trying to run anyone out of town. We just want you to do your job for the ratepayers.”

EDITOR’S NOTE (Sept. 29, 2021, 1:34 p.m. ET): This article has been updated to include a statement from Entergy saying that its membership in MISO and an unsuccessful effort to sell its transmission lines were voluntary, and not the result of a deal with the Department of Justice.