In a contentious meeting Tuesday night, a splintered Alexandria City Council approved a contract with John Kyte, a crisis communications consultant from Ruston, and Adam Terry, a D.C.-based lobbyist and sub-consultant, to assist with a proposed study of the City’s nonprofit municipal utility system and to subsequently lead a public persuasion campaign aimed at promoting the study’s recommendations.
Four members voted to approve the contract, and two opposed. Councilman Harry Silver abstained, after being made aware of additional documents in the public record that had not been provided to the Council. Silver first learned of the missing documents after a motion had already been made for a vote.
In our ongoing series “An Exercise in (f)Utility,” the Bayou Brief has been chronicling the behind-the-scenes effort to dismantle Alexandria’s nonprofit utility system and the public misrepresentations about the utility’s finances and its long-term viability.
According to a “confidential“ memo Kyte provided to Mayor Jeff Hall in October, it is anticipated those recommendations will include leasing, franchising, or selling the City’s “electric utility assets,” which are believed to be worth in excess of $500 million and which generate a substantial portion of its annual revenue. Kyte’s memo also outlines the need to confront potential legal and regulatory issues and prepare for the possibility of job losses.
Earlier in the day, during a discussion of the Council’s Finance Committee, three members justified the necessity for the contract by making factually inaccurate claims and assertions about the solvency and financial condition of the utility system and misrepresentations about the sources of its power supply. At times, it appeared as if some members, most notably Councilman Malcolm Larvadain, were unaware that the City Council is legally responsible for setting the City’s electric utility rates, which were criticized as “too high.”
Kyte personally addressed the Finance Committee but was not present during the full vote. Terry‘s name was not mentioned at all during either meeting, and it is unclear exactly what role he will play, though email records reveal he is partnering with Kyte on the project and that the two men traveled to Alexandria to meet with administration staffers in mid-December.
Although Mayor Hall and Kyte have both publicly asserted that the effort is still in its preliminary stages and that no determination has been made or affirmatively sought, they have each emphasized the need to evaluate “options” for Alexandria’s 126-year-old nonprofit utility system. Because the system is owned by the City, any alternative to the status quo would inherently involve privatization.
Louisiana’s electricity rates, on average, are consistently ranked as either the lowest or second-lowest in the nation, and with the exception of nonprofit energy cooperatives, Alexandria charges, on average, less for electricity than anywhere else in the state.
When city leaders first decided to form a municipal utility system in 1894, they specifically emphasized the importance of controlling their own assets and safeguarding residents against abusive practices by private-sector profiteers. In 2014, Alexandria’s 30-year, long-term “utility sustainability program” was praised by the Louisiana Municipal Association, receiving its top annual award.
For several years, however, City Council members have persistently struggled to address the complaints of residents who believe they are charged exponentially higher prices for electricity than those living elsewhere. In part, this is because Alexandria sends residents a single monthly bill for all of their services— electricity, gas, water, sewerage, and sanitation, whereas most Louisianians receive a separate bill for their electricity. This can create the misperception that Alexandria’s rates are higher than the rates charged by private utilities like Entergy and Cleco.
It is also the consequence of chronic poverty and Alexandria’s energy inefficient and outmoded housing stock. There are statutory and constitutional prohibitions that prevent the City from expanding its “weatherization” program, which provides public money to individuals who meet certain income criteria for the purpose of installing insulation and replacing windows in their homes.
According to the most recently available numbers, the utility provides electricity to 24,449 customers, water to 21,889 customers, gas to 15,732 customers, and wastewater services for 17,488 customers. While it is undeniably true that during four of the past five years, the utility has posted a loss, it is also true that the system remains “profitable” (for lack of a better term) because of its electric utility. Those losses, in other words, are illusory, because the overwhelming majority of the electric utility’s revenue is actually just a pass-through. Put another way, because the price of natural gas has been lower than market expectations, the utility anticipated having to charge more for electricity than it needed to. Ultimately, though, the net result was negligible.
That said, the ancillary services, as Councilman Jim Villard noted, are essentially loss leaders. That is, the revenue generated from the electric utility ensures that water, wastewater, and sanitation services can be provided at a loss.
This is critical to note, because while the mayor has pointed to recommendations made by his transition team to justify the need to consider privatization, those recommendations were specifically related to those ancillary services and infrastructure, not to the electric utility.
Yet both Mayor Hall and his allies on the City Council have nearly exclusively focused on the electric utility. Indeed, Kyte’s ”confidential” memo also emphasizes the privatization of “electric utility assets.” Why? Because it’s the only asset that would be marketable and valuable to a private operator.
Councilman Gerber M. Porter, a former employee of the Big Oil corporation Mobil (which merged with Exxon in 1999), was easily the most mendacious. Claiming to have conducted additional “research,” Porter explained that Alexandria spends on average around 11 cents per kilowatt hour for its electricity. He then claimed to have located an operator that would charge only 7 cents per kilowatt hour, lambasting the City for previously investing in an ownership stake of Bayou Cove, a natural gas plant in Jennings, Louisiana, and for upgrading its existing power plant, D.G. Hunter.
Later, under questioning from Councilman Chuck Fowler, Porter was forced to reluctantly admit that he was referring to a news story about a California start-up. Presumably, it was about a company that owns a solar panel and lithium battery complex, which recently signed an agreement with the City of Los Angeles. All told, it is anticipated to generate around 7.7% of L.A.’s power supply, and contrary to what Porter claimed, it would be logistically impossible to transmit power generated in California to Alexandria, Louisiana.
Incidentally, California, on average, pays more than any other state for electricity.
Before introducing Kyte to the Finance Committee, the mayor claimed some were “confused” by the “deliverables” he would perform for the City and emphasized that Kyte would not be responsible for actually conducting “any study or analysis.”
“I do not claim to be an expert in assessing the value, integrity, and fiscal sustainability of utility systems,” Kyte said, immediately after providing a lengthy summary of his work in energy policy and utility-related litigation. “But I do believe I can help identify and evaluate qualified candidates to perform that kind of work for the City.”
In my previous reporting, I repeatedly and consistently noted that Kyte would help study the utility system and that he would guide the selection of a third-party to conduct the analysis, a characterization that was confirmed and not contradicted during Tuesday’s meeting. The individual responsible for identifying and evaluating the qualifications of other outside consultants plays a significant and often determinative role in shaping the parameters and the contours of the finished work product, and as Kyte had already made implicitly obvious in his “confidential” memo, analyzing the potential privatization of the system appears to be the primary objective.
“My interest here is really relatively simple,” Kyte said. “It’s to support the City of Alexandria with communication services regarding that evaluation of the City’s current utility system that would identify options, if there are any, of the best path forward to ensure an adequate, reliable and abundant and affordable electricity for the City of Alexandria. That may or may not involve changes to the current system. Until an independent, third-party study is conducted, no one knows what those options could be for the City. I have no preconceived notion, plan, or preferred options, and no one I have spoken to at any point in the limited, frankly, conversations that I’ve had has expressed to me in any way, shape, or form there are preconceived notions, plans, or preferred options.”
Notwithstanding Kyte’s earnestness, while it may be true that no recommendations or options have yet been made, the only reason to conduct to ever “study” “options” is because of a desire to entertain offers or bids from private operators, a fact that didn’t escape Council members.
It is also the only reason to hire a “crisis communications” consultant to lead an outreach effort and public persuasion campaign.
What is most ironic about the discussion on Tuesday is that Alexandria’s electric utility has only posted a loss because electricity was cheaper than expected.
While claiming to be concerned about high prices, both the mayor and four members of the city council are justifying their rush to entertain privatization of the electric utility because Alexandria residents benefitted from less expensive power, not because of poor performance.