The gist: Utility rates were hiked in the last two years to pay for rising operating costs and a $240 million bond package that never came to be. On Tuesday, Councilman Kenneth Boudreaux will present a pair of ordinances, one to reduce electric, water and wastewater rates and another to reclaim the revenues for a bond sale.
NextGEN Utility Systems put a spotlight on the rates by promising to lower them for three years. In council discussions over the course of the affair, council members Kenneth Boudreaux and Bruce Conque questioned whether the rates could be lowered, given the bonds were never issued. The idea is that the rates were raised unnecessarily, and thus some value ought to be returned to LUS customers.
Conque says he would support reductions on electric rates only.
Why were rates raised in the first place? In 2016, LUS sought — and received — approval to apply for $240 million in bonds to build a new power generating plant and other pricey capital improvements. Rates were raised 8 percent to finance the debt, but the LPUA, hearing pushback on plans for the new power plant, decided on a phase-in compromise and reduced the authorized amount to $70 million in February 2018. Mayor-President Joel Robideaux has said that event prompted him to reignite talks with Bernhard Capital Partners/NextGEN Utility Systems, despite that discussions had begun in 2016 and never stopped. In April, Robideaux pulled the bond request from the state bond commission agenda the day it was set to be heard, effectively orphaning the rate increase.
Boudreaux says the money ought to finance bonds, given that was the principle justification for raising it.
“We’re in essence taxing ratepayers,” Boudreaux tells me.
OK. Give me my money back. Hold on to your receipt, ratepayer. It’s more complicated than that. LUS interim Director Jeff Stewart says that while plans for the generating plant were shelved, the system needed the funds to rightsize revenue for the water and wastewater systems, and to finance about $100 million in other capital improvements:
- $48 million in electric system upgrades, including LED streetlights ($7M) and a new substation ($14M)
- $41 million in wastewater, including expansion of a sewer plant ($26M)
- $6.5 million in water system projects
These projects were included in the February resolution authorizing LUS to sell bonds. LUS faces flatlining electric revenue growth as customers use less energy and will spend millions to upgrade sewer capacity in Lafayette’s urban core and on an EPA mandated,10-year review and repair of the rest of its wastewater system. Stewart tells me reducing the rates is possible but requires a thorough review.
“The opportunity may exist, but we haven’t fully evaluated those options yet,” he says.
What to watch for: How else the NextGEN affair impacts decision-making around LUS. If there’s a silver lining in the acrimony that erupted over the privatization scheme, it’s that LUS has taken center stage in civic conversation. Major changes are already in play. LUS is set to cleave off Fiber, and both systems will need new directors. NextGEN’s proposal introduced into the public lexicon plenty of new concepts around energy and raised awareness about the disruptions LUS faces going forward.
Challengers are already mulling 2019. LUS could be the platform they need.
On Monday, NextGen withdrew their offer to manage LUS hours before the Council voted against considering any deal like it. So now what?
The decision was made “in response” to the ongoing discussions of the company’s proposal and the “importance” of the city’s decision whether to accept it.
The gist: Swimming upstream of public opinion, the firm making a play to manage LUS is widening the reach of its pitch. Bernhard Capital Partners/NextGEN Utility Systems hung up a banner, so-to-speak, with a temporary outreach center in Downtown Lafayette.
The outreach center puts boots on the ground for a growing PR campaign. This week, NextGEN also created a Facebook page and launched a phone campaign to go along with its digital billboards billing a $1.3 billion offer. Talking points from the phone campaign emphasize the $140 million in up front cash included in the deal, rate reductions and the company’s intention to site its headquarters in Lafayette. NextGEN is renting space in the Omni Center on Jefferson Street for the next two and half weeks, according to Omni Center owner Robert Guercio.
Could environmental progressives be a base of support? In a phone interview, Guercio, a Downtown entrepreneur and sustainability advocate affiliated with Bayou Electric Vehicles, bubbled with enthusiasm about the possibilities NextGEN offers, particularly in modernizing LUS. Guercio said he fought LUS for two years to get LED lighting Downtown and that the utility dragged its feet on renewable energy.
“Why is it so hard for us to do innovative things? Government is kind of clunky sometimes,” Guercio said. “This is their [NextGEN's] specialty. We’re in business to rent the facility, but I’m also supportive of an effort to modernize LUS.”
LUS announced a $7 million LED streetlight program in 2017. The city owns its 18,000 streetlights, and the Public Works Department pays LUS for electricity and maintenance (replacing bulbs and poles, etc.). In what could be argued was an innovative approach, LUS agreed to fund the program up front because Public Works could not afford to do so. Because LEDs are cheaper to run than the city's existing lamps, LUS will continue to charge Public Works the contract price for the more expensive conventional lighting until it recoups its $7 million investment.
Bayou Electric Vehicles team has twice unsuccessfully sought funding for Lafayette's first EV charging station via local pitch competition 24 Hour Citizen Project. Jeff LeBlanc, who made the pitch at the event this year, said that NextGEN will give $3,000 to an upcoming fundraiser, enough for BEV to finally get Lafayette's first EV charging station placed in front of The Wurst Biergarten on Jefferson St., another Guercio-owned operation.
LeBlanc said BEV's sole issue is proliferating electric vehicle infrastructure in Lafayette, and it won't be making any sort of formal statement on third party management of LUS. Speaking for himself, LeBlanc said he's skeptical of the terms of NextGEN's proposal, particularly the 40-year contract, though he shares some of Guercio's frustration.
"LUS had every opportunity to get [Lafayette's first EV charger] this done over the past two years," he said.
NextGEN’s critiques of LUS echo others from renewable energy advocates. And that could be why the company might find common ground there.
Who, what, when and how. It’s really unclear what NextGEN’s path to success is. Even if it successfully courts progressives, who else will carry water for the controversial proposal is yet to be seen. Mayor-President Joel Robideaux took an earful for suggesting that public opposition is uninformed, yet he has not voiced dedicated support for an offer he courted. What details a potential contract would include, beyond the exchange of money, are yet to be seen. When and how this moves past the hot air stage, either by vote of the public, vote of the council or a contract with the administration, is unknown.
What to watch for: Whether any part of Lafayette’s political class joins the campaign. Given the toxicity of the topic from the time NextGEN’s communications with the administration were revealed, there’s been no local political capital spent promoting it, outside of the mayor-president’s call to explore options.
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.
The gist: If the Bernhard Capital Partners/NextGEN proposal to take over operations of LUS has any council support at this point, it was hard to see it at Tuesday night’s council meeting. In an encore performance, this time before the whole council, NextGEN’s management team attempted to make the case for how a private company can do a better job than government running Lafayette’s 120-year-old municipal utility company.
Council to Robideaux: It’s time to state your intentions. Councilman Bruce Conque was insistent Mayor-President Joel Robideaux — who left the meeting long before it was over — state his position on the proposal and whether the effort to privatize LUS will be opened up to other potential suitors (Entergy and CLECO are both interested). Absent Robideaux’s willingness to put his own political capital behind this new direction for LUS’s future, Conque said the administration should move forward on hiring a top-notch director, one who should be attracted with a highly competitive salary.
Right now, LUS is run by an interim director, following the early retirement of longtime Director Terry Huval. Conque’s language was added to a resolution formalizing an agreement between the council and the administration that a new director not be named until the smoke clears on the idea of outside management of LUS.
William Theriot put a pressure cooker time limit on the deal. After NextGEN’s presentation — which Councilman Jared Bellard asked for but requested be abbreviated to less than 20 minutes from the LPUA version — Councilman William Theriot turned to City Attorney Paul Escott and directed him to draft a resolution that would effectively wash the council’s hands of the NextGEN proposal or any others like it for the time being. That resolution, also aimed at easing anxiety the NextGEN proposal has caused for LUS employees, will state that LUS is not for sale, for lease or open to any takeover of its operations and management.
While non-binding, the resolution would ice potential suitors with a clear statement of the council’s position on monetizing LUS. Council members have complained that public criticism has been trained on them, despite not initiating LCG’s flirtation with NextGEN.
Theriot, a staunch and vocal conservative, put his foot down to defend a government-owned monopoly. After months talking with “the owners and consumers of LUS,” he tells The Current he was ready to nip this deal in the bud.
“This is not what the people want,” he said. “Then why are we going through the motions?”
What happens now? We’ll know in two weeks where Theriot’s eight fellow council members really stand on NextGEN’s proposal. He only needs four more votes to effectively kill the deal.
The gist: At last week’s presentation to the Lafayette Public Utilities Authority, NextGEN officials indicated with confidence that LUS’s hundreds of employees need not worry about their civil service protection if NextGEN takes over management of the public utility.
“We don’t have any specific intention to replace civil service employees with non-civil service employees,” said Jeff Baudier, who joined NextGEN’s parent company, Bernhard Capital Partners, in April after almost two years with CLECO.
And to make the company’s position perfectly clear, BCP founder Jim Bernhard chimed in: “We don’t want to weasel around it that the civil service employees that do their functions today will remain. And with some attrition we’ll hire another civil service employee. That’s not going to change. It’s not our intent. It’s what we’re committed to.”
Not so fast, says Adam Marcantel, municipal civil service director. “From what I’ve seen, it’s just not going to be permissible,” he says of continued civil service protection, like job security and equitable pay, for LUS employees under the proposed management contract with NextGEN. “That’s not to say a way doesn’t exist out there that I haven’t considered or thought of. But from what I’ve looked at and the ideas I’ve tossed around in my mind in trying to figure out how can we make this work, I don’t see that there’s going to be a resolution as long as the management structure is that the [civil service] employees would answer to an employee of NextGEN.”
Marcantel says civil service employees are able to perform their duties without political pressure. “Civil service positions exist to serve Lafayette Consolidated Government and by extension serve the public. That’s what we do, and that’s why we enjoy the protections that we have,” he explains. “To have civil service employees serving the interests of a private company is not compatible with that.”
What’s next? Marcantel plans to attend Tuesday’s council meeting, where NextGEN will again make its pitch — though email records show that Councilman Jared Bellard asked that the company cut the lengthy presentation it made before the LPUA to a summary of 20 minutes or less. Marcantel is prepared to explain his position to the council.
If the NextGEN proposal moves forward, the director says the municipal civil service board would get involved and likely seek a legal opinion from its attorney, George Armbruster. “I’m waiting to see what happens,” Marcantel says.
File this in the “curious” category: The retention of civil service classification doesn’t appear in NextGEN’s 35-page proposal to manage LUS, a deal that would give LCG $140 million in cash and relieve $184 million in LUS debt, along with providing $920 million in continued in-lieu-of-tax payments and up to $64 million in conditional payouts.
I emailed Baudier late Monday afternoon for clarification on this issue and haven’t heard back.
What’s Jim Bernhard’s bid to run LUS really worth?
Chief among them: Can we get out of it?