Entergy Corp. subsidiary Entergy New Orleans LLC is withdrawing a $30 million commitment to finance a new substation planned to keep drainage systems running during major storms.
Hurricane Ida struck Louisiana after the initial negotiations for the project and "before any definitive agreements" were made, the company said in a Jan. 26 statement to S&P Global Market Intelligence. The storm cost Entergy as much as much as $2.4 billion in damage, leaving the company unwilling to front the money for the project without further clarity on how it will recover Ida-related repair costs.
Entergy is working with regulators on storm cost recovery "before deploying any additional capital expenditures" in excess of its base capital plan, the company said. The substation decision does not affect other capital decisions or reflect any capital pullback or constraints across Entergy or its operating companies, the statement said.
Entergy New Orleans is still willing to help the city modernize its power infrastructure, the company said, including the substation "if another funding source is secured" or once Entergy knows more about its storm costs. The utility said discussions were ongoing to develop alternative funding plans for the substation project.
New Orleans Mayor LaToya Cantrell announced the city had secured funding commitments for the project in 2021. Entergy was expected to provide upfront financing for the substation, frequency changers and power integration as part of the $74 million West Power Complex at the Sewerage and Water Board's Carrollton Plant. The project was planned to boost reliability at the plant by fortifying the power supply to the drainage and water pumps — particularly during emergencies — instead of relying only on overhead power lines.
According to the initial news release from the city in June 2021, funding sources included an estimated $20 million from the city, $20 million from the state and $35 million from Entergy. The project was expected to be completed by the start of the 2023 hurricane season.
New Orleans City Council President Helena Moreno, a frequent critic of the utility, said in a statement Jan. 24 that the city didn't need to wait for Entergy to move forward.
"Entergy's inability to finance the [substation] doesn't stop this project because the big difference is the city now has American Rescue Plan dollars in hand," which represents "the most straightforward solution" to funding the project, Moreno said.
Moreno added that using federal funds will be less expensive for ratepayers than the initial plan, in which Entergy New Orleans would provide upfront funding for the project that the Sewerage and Water Board would repay with interest.
