After a roughshod search, the Guillory administration appointed LUS Fiber’s first-ever independent director, moving forward with a hire against the advice of its expert consultant.
The gist: For the first time in its history, Lafayette’s publicly owned utility opened its doors to public involvement in how it plans for the city’s power needs, a process called an integrated resource plan, or IRP. A big decision before LUS and its customer-owners: what to do with its coal-fired power plant.
We own a coal plant? Yes, you do. Well, technically you co-own it with CLECO. The plant, called Rodemacher 2, is located in central Louisiana and accounts for 265 megawatts of the LUS power portfolio. The plant was built in the 1980s and has taken on millions in upgrades to keep pace with regulatory changes.
“I think the unit will be converted to natural gas or retired,” LUS Power Manager Jeff Stewart said at a Tuesday public hearing to a crowd of two dozen attendees, including several renewable energy and environmental advocates who have criticized the system’s lack of public involvement and continued investment in its coal plan.
Consultants estimate $43 million in new upgrades are needed. The investment would update the aging coal plant to comply with federal environmental regulations governing water discharges and emissions. Michael Borgstadt of Burns and McDonnell, the consulting engineer guiding the IRP process, said new revisions to those rules were released in early November, which could affect the price tag. How much, exactly, is unknown, though he said costs shouldn’t vary greatly from those currently anticipated.
LUS still owes $50 million on compliance investments made in 2012. The system issued bonds to pay for upgrades on Rodemacher needed to comply with emission standards issued by the Obama administration. At the time, critics called for the system to be retired or converted to cleaner-burning natural gas. LUS opted to stick with coal, but natural gas prices bottomed out in the fracking boom. The system now faces more costs to keep the unit in compliance while natural gas prices remain historically cheap.
“We have an opportunity to make decisions that have a positive impact,” said Laura McColm, a Lafayette resident and LUS customer, at the Tuesday hearing. McColm, like other attendees, urged LUS and its consultants to consider the costs associated with pollution and be wary of making big, risky investments that cost ratepayers for years. By and large, participants were upbeat about the chance to give feedback and engaged in a lively discussion with Stewart and the consultants on hand.
A 2016 IRP resulted in plans to build new power generation that was later scuttled. LUS then took criticism for a lack of transparency in conducting the power plan — also led by Burns and McDonnell — which ultimately resulted in a $120 million plan to build new power supply powered by natural gas. Rates were raised 9% to pay for a $250 million bond sale that included the new power plants, but the City-Parish Council voted not to go forward with the plan.
With power planning, LUS is shooting at a moving target. Market conditions in the power industry are in turmoil because of constant regulatory changes, new technologies and shifting fuel costs. The Obama- era Clean Power Plan likely would have forced the retirement of the coal plant, Stewart tells me, but current rules have eased the pressure on coal plants broadly. Still, coal is on its way out.
“We’ve known for years that coal would be a target,” Stewart says. “[Rodemacher] could be a good retirement in terms of economics.”
What to watch for: More opportunities for public input. Stewart expects another hearing by spring of next year. LUS has made available other channels to give feedback on the IRP. The plan is set to wrap up by summer of next year. It will be up to LUS and the City Council — which is replacing the Lafayette Public Utilities Authority as LUS’s regulator — to decide what to do with the results. Ratepayers can submit feedback by email to [email protected] The deadline for public comment on this phase is December 15, 2019.
The gist: LUS will contract Burns & McDonnell to run its integrated resource plan, the process the utility uses to determine its future energy needs and how it will power them. The choice of consultant met immediate criticism among local green energy advocates. The contract is worth $500,000 and was approved Tuesday by the professional services committee.
Burns & Mac guided LUS on two controversial decisions. In 2011, the company recommended LUS continue burning coal in central Louisiana, instead of switching to natural gas, a decision critics maintain was a costly mistake in hindsight. And in 2016, LUS developed a $100 million plan to build new natural gas generators, at the consultant’s suggestion, even raising electric rates to finance the plan. That decision triggered a backlash that ultimately shelved the plan and in part led to last year’s privatization controversy.
“Half a million dollars is a lot of money,” renewable energy advocate Simon Mahan tells me. Mahan developed a lengthy document criticizing the 2016 plan but has since departed Lafayette. “To use the same firm that got it wrong twice before is eyebrow raising.”
Interim Director Jeff Stewart says this contract is different. The 2011 and 2016 plans did not involve robust public engagement, and Stewart says that engagement is baked into this upcoming process.
“That’s why we shelved [the 2016 plan],” Stewart tells me. “I want as many people who want to get involved to get involved.” He expects to time the public facing process to PlanLafayette activities, with outreach beginning in September.
LUS’s open approach seems to be working. Mahan tells me he believes that Burns & Mac is capable of delivering. And he gives a lot of credit to Stewart’s leadership style.
“Frankly, I’ve been really impressed with what he’s been saying and the actions he’s taken. There’s a new wind at LUS to listen to the public a little bit more,” Mahan says. “That makes me feel good.”