Lafayette Mayor-President Josh Guillory has been previewing a proposal to consolidate LUS and LUS Fiber’s IT departments into LCG’s, which he says will save $500,000 in the first year by eliminating redundant software and employees.
Since entering office, Guillory’s been on a mission to find ways for LCG to do more with less. And given the troubled state of both city and parish finances, that’s an admirable endeavor.
But on this particular issue, an overabundance of caution is needed. Not only because we rely on LUS and Fiber to deliver essential utilities, but also because both are more vulnerable than ever, operating without permanent directors under a cloud of audits and accusations.
Raising the stakes further, this proposal wouldn’t just consolidate three IT departments; it also requires changing the operations of a highly regulated utility and competitive telecom. If consolidating IT departments goes wrong, we could be facing millions of dollars in fines for bad audits, rate increases from bad credit scores, and losses from bad business decisions, not to mention the economic costs we incur if there are any disruptions of services.
That doesn’t mean the reorganization is a bad idea altogether.
But if we want to seriously consider the merits and the risks of this proposal, and be in a position to effectively implement these changes, we need experienced permanent leadership in place first.
The risks this proposal faces
Consolidating LUS’s and Fiber’s IT departments into LCG’s isn’t just about combining multiple call centers and help desks into one.
LUS’s IT department in particular handles a lot more responsibility than just billing and customer complaints, everything from managing power plant software, to metering software, to SCADA systems, to GIS systems. These are all systems critical to the reliable delivery of utilities that also have requirements unique to maintaining stable utility operations.
Any changes we make to LUS’s operations also warrant serious scrutiny because of how heavily regulated utilities are. For example, LUS is subjected to an annual audit from NERC — the North American Electric Reliability Corporation — a not-for-profit international regulatory authority whose mission is to assure the reduction of risks to the reliability and security of the electric grid. If we fail that audit, LUS could incur millions of dollars in fines, according to Andrew Duhon, former LUS executive.
Fiber’s IT department faces its own unique challenge because while it may be a government agency that’s a part of LCG, it’s also a telecom competing against the private sector. Fiber needs to operate at the speed of business rather than government, and it also needs to be on the lookout for where technology is headed so as not to get left behind. If Fiber can’t react to the market and/or chooses the wrong technologies or services to invest in, it could face millions of dollars of lost revenue or wasted capital expenditure.
On top of all this we also have to worry about how the bond credit rating agencies perceive any moves we make. Because if they see us as taking too many risks with LUS or Fiber’s operations, especially when both are without permanent directors, they could decide to lower our credit score. If that happens, the next time we have to sell bonds to fund a new power plant or an expansion of any of these utilities, it could increase our borrowing costs by millions of dollars.
And speaking of debt, while LUS and Fiber may be the city’s greatest assets, they also carry the city’s largest liabilities. Together they represent more than $300 million in debt. Efforts to save hundreds of thousands of dollars are beneficial, but we can’t ignore that making any substantial changes to LUS’s or Fiber’s operations means having to manage the risk of potentially incurring millions in additional costs.
We don’t have experienced leadership in place
Even in an ideal situation, altering LUS’s and Fiber’s operations to this degree is no small task. But the risks are heightened greatly by the fact that we don’t currently have any experienced leadership in place to help navigate these risks.
That’s because as LCG’s leadership team stands today, none of the major decision makers at the table have any direct experience managing IT operations for a utility or a telecom:
|Mayor-President||Josh Guillory||Military, Legal|
|LCG CAO||Cydra Wingertner||Operations, Communications|
|LCG IT Director||Randy Gray||IT Sales|
|LUS Interim Director||Lowell Duhon||Finance, Management|
|Fiber Interim Director||Kayla Miles||PR, Business|
And the same can be said about the city and parish council members. None of these decision makers have ever personally been responsible for maintaining high quality IT services at a utility or a telecom.
That doesn’t mean these aren’t all smart, hard-working people, just that none of them fully understands the ramifications of these decisions. And no one at this table has direct experience managing the implementation of a plan like this.
And don’t just take my word for it. Last year, NewGen Strategies — the consulting engineer hired to protect the interests of LUS’s and Fiber’s bond holders — sent a letter to former Mayor-President Joel Robideaux expressing its concerns that LUS’s and Fiber’s new interim directors Duhon and Miles weren’t qualified to do their jobs.
And that’s without considering making major changes to the two entities’ operations, and without factoring in the recent development that some of their top managers are among the employees put on administrative leave in connection with an investigation into allegedly deleted public records.
We have to realize that these aren’t arbitrary complaints. If NewGen continues to sound the alarm about the lack of qualifications of LUS’s and Fiber’s interim leadership and we continue to plow forward with making major changes to their operations anyway, it risks bond rating agencies lowering our credit scores, thereby increasing our borrowing costs.
And we have more borrowing around the corner. This year, LUS is in the middle of planning the future of how it powers our community, and that could mean replacing a coal-fueled power plant at a cost of tens of millions of dollars or more.
And this is all before we consider the added risk of trying to implement major changes to LUS’s and Fiber’s operations without experienced, permanent directors in place.
We also haven’t even started to untangle how budgeting is going to work for consolidated services with the newly split councils, and this initiative would actually make this even more complicated by giving the parish council partial control over budgets for LUS and Fiber, which are city-owned assets.
When you look at all these issues, it’s hard not to feel like we have much bigger fish to fry.
That doesn’t mean we need to hold off on exploring this idea indefinitely. But to properly evaluate making changes of this magnitude and to be able to implement them effectively, we need experienced leadership in place first. On our current trajectory, we’re doing it backwards. That’s why we need to table this discussion until we have new permanent directors for both LUS and Fiber.
With those pieces in place, we can be in a stronger, less risky position to give this proposal to consolidate IT departments the serious consideration it deserves.
While waiting may cost us most of the $500,000 in savings projected for the first year, it will protect us from potentially putting millions of dollars at risk by making the wrong decisions.