Louisiana’s largest industries tired of waiting for renewable energy

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Frustrated with the lack of renewable energy from utilities in Louisiana, some of the largest corporations doing business in the state have banded together to acquire their own solar power.

Their plan includes what is called a sleeved power purchase agreement (PPA) that lets a customer negotiate what it will pay for electricity from a non-utility source such as a community solar garden or private wind farm. The Louisiana Public Service Commission adopted a rule Wednesday that allows a sleeved PPA for the Louisiana Energy Users Group, a coalition of 26 companies.

LEUG’s membership roster includes Dow Chemical, Chevron, Air Products, Georgia-Pacific, ExxonMobil, Honeywell, Monsanto, Nucor Steel, Phillips 66, CF Industries and BASF, among other industrial giants. Collectively, the group employs about 35,000 people in Louisiana with a $2.5 billion annual payroll, according to LEUG attorney Randy Young, who testified at Wednesday’s meeting.

Young told commission members Louisiana’s various industrial companies have a serious and “pressing” need for renewable energy that utilities are not meeting.

“You hear a lot of stories about projects looking to come to Louisiana, and that’s very true,” Young said. “But the reality is a lot of those projects are still needing and trying to find paths to renewable power to help make those projects work.”

LEUG has not yet identified potential renewable energy providers. Wednesday’s decision was the first step in allowing them to seek out and negotiate power purchases.

The Public Service Commission’s move marks a pivotal point for utility regulation in a state that has long enabled a single company — Entergy Louisiana — to dominate most of the market for supply and transmission of electricity. The state’s largest consumers of energy now get to choose where they will purchase some of that power.

Understandably, virtually every utility company and electric cooperative in the state strenuously opposed the plan, which LEUG first brought to the commission in 2019. Since then, it has been tied up with administrative filings from various parties and stakeholders.

When Commissioner Eric Skrmetta, R-Metairie, a staunch ally of utility companies, argued for another delay Wednesday, Young pushed back.

“To be very candid about this, industries have been asking for renewable power and the need to access renewable power for more than four years,” Young said. “We opened this docket in 2019 … Four years fast forward [and] still today, Entergy still has only 50 megawatts of solar on the ground. That’s all they have.”

LEUG’s proposal will benefit the environment and allow industrial users to meet corporate carbon reduction goals, attracting more companies and more jobs to the state, Young said.

Siding with LEUG were two nonprofits that advocate for residential customers: Together Louisiana and the Alliance for Affordable Energy.

“Louisiana is so far behind and has so little actual renewable energy available it makes it harder and harder for these industrials to meet those requirements,” said Logan Burke, executive director of the Alliance for Affordable Energy.

While the two organizations don’t typically side with industry on many issues, a sleeved PPA for industry could help weaken the monopoly utility companies have on the energy market, which ultimately benefits all customers, Burke said.

“If the industrials should be allowed to do this, then residential and commercial customers should be allowed to do it,” she said.

Entergy Louisiana Vice President Larry Hand refuted any suggestions his company is dragging its feet on the transition to renewable energy.

“It was very frustrating to hear earlier that the thought is that we need sleeved PPAs because Entergy’s procurement of solar has been too slow,” Hand said.

According to Hand, Entergy has been working for years to get approval for additional “green tariffs,” which gives its customers an option to pay an extra fee if they want their electricity to come from cleaner energy sources.

Cost is a major issue with green tariffs, however. On average, solar and onshore wind power are the cheapest forms of electricity available, so customers are generally reluctant to pay extra for something that should cost them less.

To Hand’s other point, Entergy has tried to acquire renewable energy sources for the past few years, but the Public Service Commission is a very slow-moving bureaucracy that often delays even some of its seemingly easier decisions. Just this year, the commission finally adopted a set of energy efficiency rules that a consultant worked on for 13 years at a cost of more than $500,000.

The primary benefit of a sleeved PPA is the speed at which a new source of power can come online. Allowing a customer to negotiate directly with a power source cuts out a lot of the red tape that comes with requesting something from state regulators.

Lane Sisung, the consultant who analyzed LEUG’s proposal for the commission, said a sleeved PPA serves to meet a “need for speed.”

But it’s hardly a circumvention of the utilities because short of scrapping the idea entirely, the Public Service Commission agreed to almost all of Entergy’s demands to amend LEUG’s proposal to benefit it and other legacy power providers.

The utilities will remain the “middle man” in any PPA deal negotiated between an industrial facility and a power source. A solar farm can supply the power for the facilities, but it will go through Entergy’s transmission lines and be capped at 500 megawatts, ensuring they remain dependent on the utilities.

Perhaps most notably, the Public Service Commission gave the utility companies the right to approve or deny an agreement within 60 days of one being proposed. If they deny it, the parties can appeal to the commission, which then has 60 days to issue a ruling. In total, a deal could be struck in 120 days.

In the utility regulatory world, four months is lightning fast. The way a utility typically buys electricity is a much more extensive process that involves many different parties and seemingly endless red tape, Burke said.

While Skrmetta initially said he would vote against the rule, he ended up approving it with the rest of his colleagues, but not because he supports the idea.

“I am going to enter a vote of ‘yes’ but only for the purposes of bringing it up later when it all goes wrong,” he said.

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