At the beginning of 2018, Lafayette Utilities System had an executive director and a $240 million plan to invest in upgrades. But its governing body, the Lafayette Public Utilities Authority, deferred till a later date $170 million of that plan. Then LUS’s longtime executive director, Terry Huval, retired early. And all along, unbeknownst to the council and public, the mayor-president had been exploring a deal since 2016 with an investment-backed utility startup for the right to manage LUS.
On Monday, that series of events culminated. NextGEN Utility Systems retracted its initial offer hours before the City-Parish Council voted unanimously against even entertaining the possibility of any deal like the one NextGEN proposed.
So where does that leave us? “To me, we’re starting over,” Mayor-President Joel Robideaux told The Advertiser after Monday’s vote. In a sense, he’s right.
Lost in all the political turmoil — the premature revelation of Robideaux’s discussion with NextGEN, the City-Parish Council’s punt on the mayor-president’s plan to split LUS and LUS Fiber — has been any serious discussion about what Lafayette wants LUS to be.
We’ve spent all our energy arguing whether we should use a hammer or a screwdriver, a third party or a new director, when we haven’t decided what kind of a house we want to build first. And saying we want to “modernize it” or “make it better” doesn’t cut it. This is a serious decision.
The NextGEN saga surfaced critiques about LUS that were already floating around. Moving forward from here requires answering them.
LUS policy has privileged cost and reliability above all else. If we need to build more local power generation, do we want to prioritize whatever’s cheapest to build, cheapest to operate or pollutes the least?
On that note, how much do we really care about striving to become a utility of the future? NextGEN argued that a state-of-the-art utility system was necessary for the city’s economic future. But adopting innovation comes with inherent risk. Do we want to take on those risks, or are we satisfied with incremental improvements of the status quo?
Should LUS more aggressively expand its footprint, the system’s only available option for revenue growth, or should we stay focused on providing great service to our existing customers?
There’s a well-documented shortage of sewer capacity in the city’s urban core. Should LUS be proactive in increasing capacity to facilitate future growth in areas like Downtown? That could take major investment, some of which is underway but years off from completion.
How much will any of these new ideas or new aspirations actually cost to pursue? How much will those costs affect the rates we pay? How much can our economy and our ratepayers afford? And how much value will we realize by making these new investments?
Only with priorities established can we then decide the best path forward for making the obvious next decision: picking the right leadership for LUS and LUS Fiber.
With the Council declaring its opposition to any offer to sell, lease or turn over management control to a third-party, the only option left is to get serious about finding a replacement for former longtime Director Terry Huval. Huval ran LUS for nearly three decades. His successor will have a tremendous impact on the system’s culture. Change is going to be natural.
A first step in that conversation would be finally setting a director’s salary. When Robideaux split the top post at LUS and LUS Fiber into two jobs — the right move, in my estimation — he budgeted $150,000 for a utilities director and $100,000 for a Fiber director. Council discussion determined that a top-flight utilities director could demand a lot more, anywhere from $225,000 to north of $300,000.
As of now there’s no clear sense of if, when, or how a search for Huval’s replacement will commence, but expect LPUA to take that issue up at its next meeting. For all we know, we could start the new year with another attempt to evaluate an alternative to simply hiring a new director, or we could be embarking on a nationwide search. Or we could make interim Director Jeff Stewart permanent. Or we could just rehire Terry Huval (NextGEN, after all, tried to hire him four times to run LUS after its planned takeover of the municipal utility).
But regardless of how we decide to move forward, we must recognize the hazards inherent in this debate. Whatever we do, we can’t afford anything that risks the reliability or affordability of the network, and we must be very careful about putting the tens of millions of dollars LUS contributes to the city’s general fund every year at risk.
Lafayette has a long history of wanting to lead rather than follow. And it’s inarguable that the power market is evolving rapidly. On the production side, this evolution is driven by the rise of cost-competitive alternative energy and cheap natural gas. Meanwhile, demand for electricity has downward pressure from more efficient appliances alongside potential upward pressure from the growing prevalence of electric vehicles. So it seems like the status quo will likely be insufficient, and change is coming one way or the other.
Whatever path we pick in terms of finding new leadership for LUS, the reality is that our utilities system will require tens, if not hundreds, of millions of dollars in investments over the next few years. Here’s how Mayor-President Joel Robideaux framed it during this year’s Robideaux Report:
“We must operate and manage our utility and fiber systems in innovative ways that maximize our return on these assets. The production of energy is a constantly changing industry. Regulations, technology, politics, all contribute to the demand for nimble responses. We own a coal plant and an economically obsolete gas plant. It is imperative that we engage in frank discussions about how to continue providing the most reliable utility service, find the money to invest in upgrades to our aging utility infrastructure, and take advantage of 21st century energy technologies.”
The picture he paints is pretty accurate. LUS is at an inflection point, due in part to forces beyond its control and decisions made in the duress of a disrupted industry. Robideaux was right to call for a discussion about LUS’s future. But moving forward with a new director, now the only path supported by the current LPUA and council, must be informed by a vision for the utility. We need to decide where we want to go before we decide how to get there.