The gist: Flattening energy demand has taken a toll on LUS sales. While electric revenues are growing, they are falling short of budgeted projections each year. For the upcoming fiscal year, LUS cut $10 million from last year’s projected revenue, a belt-tightening figure when compared to historic estimates.
Electrical demand has been sluggish. And that accounts for most of the diminished outlook. In the proposed 2019/2020 budget, LUS projects $101 million in base rate revenue — retail sales, excluding fuel — on $253 million in revenues for the entire utilities system, including wastewater and water services. This year’s adopted budget, reflecting fiscal year 2019, projected $108 million in electric sales on $241 million in total utilities operating revenue.
LUS revenues missed on budget projections each of the last three years. While electric sales have increased year-over-year, they’ve fallen as much as $10 million short of estimated revenues in each of the last three budgets. To an extent, next year’s diminished projections hew closer to the system’s actual performance but still reflect an expectation of growth, albeit slower:
|Year||Total Projected||Total Actual||Elec. Sales Proj.||Elec. Sales Act.|
|2016||$240 million||$220 million||$92 million||$84 million|
|2017||$244 million||$225 million||$97 million||$87 million|
|2018||$246 million||$232 million||$107 million||$95 million|
|2019*||$253 million||n/a||$108 million||n/a|
|2020*||$241 million||n/a||$101 million||n/a|
*Only projected revenues are available.
Interim LUS Director Jeff Stewart says the trend is concerning, but notes the system is still adding customers. But these new customers, he says, are using less energy per person. That means diminishing returns as LUS grows its customer base through city annexations, franchise agreements with Broussard and Youngsville, and an acquisition deal with Slemco.
“We’re adding customers, but they’re more efficient customers,” Stewart tells me.
LUS raised electric rates in 2016. A 9% total increase was phased in over the last few years to pay for a $240 million bond package that included $120 million for a new natural gas power generator. The plan was scuttled after public pushback, and LUS reduced its bond request to $70 million, throwing out plans for the new generator. The rate increases have remained in place. LUS moved forward with work on new wastewater treatment facilities, sewer line upgrades in the urban core, and has submitted work orders to outfit 18,000 city lights with LEDs, a $7 million project.
Energy efficient appliances and consumer habits have taken a bite out of power company revenues nationwide. The U.S. Energy Information Agency forecasts that trend to continue, projecting flattened electricity demand decades into the foreseeable future
If you can’t sell more of it, what do you do? Stewart tells me LUS is exploring EV charging as a potential revenue stream. Air conditioners, he says, were the 20th century innovation that drove electric revenues. Some 10 million electric vehicles are expected to hit American streets by 2025, offering one consumer sector that could increase electric demand and, in turn, drive sales for power companies.
Why this matters: LUS has major upgrades in the not-so-distant future. Remember that whole business with Jim Bernhard? Paying for those upgrades was a big part of his sales pitch. Most of Lafayette’s power capacity comes from a coal plant, which is routinely on the cusp of regulatory shutdown, depending on who occupies the White House. (Most of the time, LUS buys the power you use in your house from a grid market.) Outside of the looming need for investing in power generation, the system is a capital-intensive enterprise. Historically, the electric system has subsidized water and wastewater operation. A budget crunch on the electric side presents a major challenge for the system’s long-term financial health and could even put its contribution to the city’s budget, roughly $23 million every year, at risk.
If the public doesn’t have all the facts, it’s in part because he’s not providing them. The bottom line is Robideaux’s account raises some red flags. Here are a few of the big ones.
Bernhard Capital Partners appears ready to make its pitch to the Lafayette Public Utilities Authority on Oct. 9.
A look into Jim Bernhard’s foray into nuclear energy raises questions about his qualifications to run LUS.
Some have raised concern that extracting only LUS’s electric division for private management could destabilize the system’s other utilities: wastewater and water. The three systems have entangled debt and rate structures that are messy and risky to pull apart.
As part of its plan to take over management of LUS’s electric division, Bernhard Capital Partners is presenting a vision of creating a Fortune 500 company headquartered in Lafayette.
Robideaux administration considering sale of LUS’s electric division Mayor in ongoing discussions with private equity firm to purchase or manage the division
Talks between the Robideaux administration and Bernhard Capital Partners over the potential purchase of Lafayette Utilities System have been ongoing since at least the beginning of the year.