Louisiana’s largest industries are tired of waiting for renewable energy

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

Their plan includes a so-called sleeved power purchase agreement (PPA), which allows a customer to negotiate the amount they will pay for electricity from a non-utility source, such as a community solar garden or private wind farm. The Louisiana Public Utilities Commission adopted a rule Wednesday authorizing a sleeved PPA for the Louisiana Energy Users Group, a coalition of 26 companies.

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

Young told committee members that various industrial companies in Louisiana have a serious and “urgent” need for renewable energy that is not being met by utilities.

“You hear a lot of stories about projects that are going to be done in Louisiana, and it’s true,” Young said. “But the reality is that many of these projects still need to find ways to use renewable energy to help make them happen.”

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

The move by the Public Utilities Commission marks a turning point in utility regulation in the state that has long allowed one company — Entergy Louisiana — to dominate much of the electricity supply and transmission market. The state’s largest energy consumers can now choose where they buy some of that energy.

Understandably, virtually all utilities and electric cooperatives in the state strongly opposed the plan, which LEUG first presented to the Commission in 2019. It has since been linked to administrative documents from various parties and stakeholders.

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

“Frankly, the industry has been clamoring for renewable energy and the need for access to it for over four years,” Young said. “We opened this registry in 2019… Fast forward four years (and) to this day, Entergy still only has 50 megawatts of solar on the ground. That’s all they have.”

Young said the LEUG proposal would benefit the environment and enable industrial users to meet corporate carbon reduction goals, attracting more companies and more jobs to the state.

Two non-profit organizations working on behalf of individual customers stood on LEUG’s side: Together Louisiana and Alliance for Affordable Energy.

“Louisiana is so far behind and has so little renewable energy available that it is becoming increasingly difficult for industrial sectors to meet these requirements,” said Logan Burke, executive director of the Alliance for Affordable Energy.

While the two organizations typically do not side with industry on many issues, an industry PPA could help weaken utilities’ monopoly in the energy market, which will ultimately benefit all customers, Burke said.

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

Entergy Louisiana Vice President Larry Hand dismissed any suggestion that his company is holding off on its transition to renewable energy.

“It was very frustrating to hear earlier that there was some thought that we needed sleeved PPAs because Entergy’s solar purchases were too slow,” Hand said.

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

However, in the case of green tariffs, the main concern is cost. Onshore solar and wind are, on average, the cheapest forms of electricity available, so customers are generally reluctant to pay extra for something that should cost them less.

As for Hand’s second point, Entergy has been trying to acquire renewable energy sources for the last few years, but the Public Utilities Commission is a very slow bureaucracy that often delays even some of the seemingly easier decisions. Just this year, the commission finally adopted a set of energy efficiency rules that the consultant spent 13 years developing at a cost of more than $500,000.

The primary advantage of sleeved PPA is the speed at which a new energy source can be turned on. Allowing the customer to negotiate directly with the power source eliminates a lot of the red tape involved in going to state regulators for something.

Lane Sisung, a consultant who analyzed LEUG’s proposal for the committee, said the sleeved PPA satisfies the “need for speed.”

It’s hardly a workaround for utilities, though, because the Public Utilities Commission, in addition to abandoning the idea altogether, has agreed to almost all of Entergy’s demands to change the LEUG proposal to benefit it and other legacy energy providers.

Utilities will remain the “middleman” in any PPA negotiated between an industrial facility and an energy source. The solar farm can provide power to the facilities, but it will run through Entergy transmission lines and will be limited to 500 megawatts, ensuring they remain utility-dependent.

Perhaps most importantly, the Public Utilities Commission gave utilities the right to approve or reject an agreement within 60 days of proposing it. If they refuse, the parties may appeal to the commission, which then has 60 days to issue a ruling. In total, the deal could be concluded within 120 days.

In the world of media regulation, four months is a snap. Burke said the way a utility purchases electricity is a much more complex process involving many different parties and a seemingly endless bureaucracy.

Although Skrmetta initially said he would vote against the rule, he ultimately approved it along with the rest of his colleagues, but not because he supports the idea.

“I’m going to vote yes, but only to bring it up later when everything goes wrong,” he said.