Walter Pierce

RE: Engineering a Sale

by Walter Pierce

The council should invest in one of Lafayette’s best assets: LUS Terry Huval is an engineer by training, but the Lafayette Utilities System director is a pretty good salesman. He sold me on the wisdom of an LUS rate increase — a very modest increase by the best estimates, but one that will pay huge dividends in the future. In fact, with current low energy costs, the average LUS bill next year, even with a rate increase, will be lower than what we’re currently paying. The Lafayette Consolidated Council was supposed to vote on whether to grant LUS the increase Tuesday of this week. But sensing that it didn’t have the support on the council, the Durel administration pulled the vote from the agenda and is hoping to generate some public support before bringing the issue back before the council in a few weeks. Here’s my two cents toward that end.

Consider this, between the mid 1970s and the present, LUS has generated surplus power, which it sells to other communities. LUS reached an apex in wholesale utility sales in the mid ’80s — topping off at $34 million in 1986. That’s non-tax revenue for reinvestments and improvements. Lagniappe, as we say down here. Last year, LUS’ wholesale utility revenue plummeted to $2 million, due to an inability to get that surplus power to other customers because the utility grid, which LUS shares with Entergy and Cleco, simply doesn’t have the capacity. Improvements to the grid are upcoming — $215 million in improvements, $23 million of which LUS and we its shareholders must pony up.

I’m resisting the urge to get bogged down here in numbers, a pursuit better left for accountants and fantasy football geeks. But the fact is, most Louisiana residents pay more for their electricity than do LUS customers — 85 percent of state residents to be specific. Our utility rates have been amazingly consistent for the last 20 years, too. Currently, among sizeable cities in the state, Monroe, Shreveport and Lake Charles customers pay slightly less — about $5 less — per month than LUS customers. If living north of Opelousas or west of Crowley is the price one has to pay for lower utility rates, I’ll take the rate hike — and the food and festivals.

Because it’s a public utility, LUS doesn’t pay sales tax to consolidated government. But it does pump in-lieu-of-tax revenue right back into the LCG general fund — about $19 million in 2008, which is 80 percent of the base salaries of our police officers and fire fighters. By objective measures, LUS is a cost-effective, efficient utility provider.

This was borne out in the aftermath of Hurricane Gustav last year. The storm skirted across the basin, battering Lafayette and Baton Rouge in near-equal measure. But tens of thousands of residents in Baton Rouge, served by Entergy, were without power for weeks; LUS customers averaged no more than a few days, and most were in the dark for only a few hours. Why? Because unlike Entergy — a for-profit utility company — LUS routinely spends millions of dollars in replacing old transmission lines and utility poles, and, perhaps most importantly and forward-thinking, in tree trimming. It was the downed limbs that had BR in a weeks-long swelter.

I confess a corny pride in my public utility, of which I’m part owner. The question we must ask ourselves is, do we seek the short term gain of no rate hike, or do we make the tough and correct decision to invest now? If critical upgrades and investments in LUS aren’t made now, we’re deferring the burden to the next council and the next generation and risking even higher utility rates than those proposed. Because Lafayette is a great place to live, our population, unlike most other Louisiana cities, continues to grow, and with it the demand grows on LUS.

The old axiom “you have to spend money to make money” applies here. Let’s spend the money.