ROEDEL PARSONS KOCH BLACHE BALHOFF- A LAW CORPORATION roedelparsons.com November 4, 2019 Luke F. Piontek Partner Lpiontek@roedelparsons.com VIA EMAIL DELIVERY ONLY Council President Helena Moreno Councilmember-At-Large 1300 Perdido Street, Room 2W4o New Orleans, LA 70112 morenocouncil@nola.gov Councilmember Joseph I. Giarrusso District 1300 Perdido Street, Room 2W80 New Orleans, LA 70112 0seph.Giarrusso@nola.gov Councilmember Kristin Gisleson Palmer District 1300 Perdido Street, Room 2W7o New Orleans, LA 70112 Kristin.Palmer@nola.gov Councilmember Cyndi Nguyen District 1300 Perdido Street, Room 2W60 New Orleans, LA 70112 Cyndi.Nguyen@ nolagov Telephone: (225) 929-7033 Facsimile: (225) 928?4925 Council Vice?President Jason Rogers Williams Councilmember-At?Large 1300 Perdido Street, Room 2W50 New Orleans, LA 70112 jasonwilliarns@nola.gov Councilmember Jay H. Banks District 1300 Perdido Street, Room 2W10 New Orleans, LA 70112 Jay.Banks@nola.gov Councilmember Jared C. Brossett District 1300 Perdido Street, Room 2W2O New Orleans, LA 70112 jcbrossett@ nola. gov RE: Revised Application of Entergy New Orleans, LLC for a Change in Electric and Gas Rates Pursuant to Council Resolutions R-15- 194 and R-17-5o4 and for Related Relief;- City Council Docket No. Pr0posed Resolution No. 12-1 9- Dear Councilmembers: I represent the Crescent City Power Users? Group in the above- referenced matter. I am writing on behalf of CCPUG in response to the two letters Entergy New Orleans, LLC sent to the Council, each dated October 30, 2019, regarding 8440 Jefferson Highway, Suite 301 - Baton Rouge, LA 70809-7654 - 225-929-7033 - 225-928-4925 1515 Poydras Street, Suite 2330 - New Orleans. LA 70112-3720 0 504-566-1801 - 504-565-5626 CCPUG letter to Councilmembers (UD-18-07) November 4, 2019 the proposed resolution adopted by the Utility, Cable, Telecommunications, and Technology Committee on October 23, 2019 (?Resolution No. R-19- Resolution No. is scheduled to be considered by the full Council at its November 7, 2019 meeting. letters are essentially a rehash of the arguments it put forth in the underlying rate case. The letters provide no valid reason for this Council to divert from approval of Resolution No. R-19- and, instead offer speculative, unsupported, and, quite frankly, misleading arguments. For example, counsel?s letter dated October 30, 2019, at p. 4, purports to show the Return on Equity for each of 10 public utilities (with ROEs at 10.0% or above) that ENO argues are similar to it, but ENO neglects to mention that only one of these utilities (Duke Energy) was used by own ROE expert, Robert Hevert, in his Proxy Group of utilities that he compared to ENO in the rate case.1 The attached sheet from expert?s testimony extracts data from one of Mr. Hevert?s exhibits and shows that the highest ROE awarded to an electric public utility in the United States since January 2018 is 10.0%, the lowest is 8.69%, and the average is 9.57%.2 ENO also declined to inform the Council that all, or nearly all, of the ROEs in its counsel?s letter were awarded prior to 2018, being that all but one exceed 10.0%. Resolution No. R-19- as it stands, and while not providing everything that every party to the rate case requested, represents a balanced, reasonable, and well- supported resolution of this matter. Recall that decisions of the Council must be based on evidence in the record of the underlying matter. The evidentiary record in this proceeding fully supports Resolution No. . In particular, experts submitted voluminous and thorough testimony establishing that a 9.35% ROE is reasonable given the myriad factors considered and long-accepted ROE calculation methodologies. The 9.35% ROE recommended by expert witness is at the top end of his range of reasonable ROEs and was selected by him in large part in consideration of split credit rating. Meanwhile, the ROE requested by ENO (10.75%) would according to own ROE expert in this proceeding represent the second highest ROE awarded by any regulator to any electric public utility in the United States in the last 5 years (from 2014 through 2019)3 and the absolute highest in the last 18 months (through February 2019).4 experts, the Advisors? experts, and Air Product?s experts all agreed that the ROE requested by ENO is excessive and unnecessary to provide it with suf?cient capital for its operations and investments moving forward. It is worth noting that ROE expert 1 Compare Exh. END-26 (Hevert Revised Direct Testimony) (ENO), at Table 2: ?Proxy Group Screening Results?. 2 Exh. CCPUG-4 (Baudino Surrebuttal Testimony) at 6:1, Surrebuttai Table 2, entitled, ?2018 2019 Allowed ROEs, Rebuttal Exhibit listing the authorized ROEs across the country as selected by Mr. Hevert from January 2018 through February 2019. 3 Exh. (Hevert Revised Rebuttal Testimony) (ENO), at 6:3, Chart 2: ?Vertically Integrated Authorized ROEs (2014 2019)?. 4 Exh. CCPUG-4 (Baudino Surrebuttal Testimony) at 6:1, Surrebuttal Table 2, entitled, ?2018 2019 Allowed ROEs, Rebuttal Exhibit CCPUG letter to Councilmembers (UD-18-07) November 4, 2019 predicated his testimony supporting request for a 10.75% ROE, in part, on his expectation that interest rates would be rising. In truth, since Revised Application was ?led in September 2018, the Federal Reserve has reduced the benchmark federal funds rate three times from a range of 2.25 to 2.50% in December 2018 to 1.50 to 1.75% as of October 31, 2019.5 It is critical that base rates be set in this rate case as low as reasonably possible to ameliorate the effects of the looming rate increases that customers will experience when the New Orleans Power Station (assuming the approval of such project survives appeal) and the solar project become operational. The roughly $37 million overall electric revenue (rate) reduction and approximately $3.7 million overall gas revenue (rate) reduction embodied in Resolution No. will serve to soften the rate increases coming in the next several months and will put much needed dollars in the pockets of customers, including the City of New Orleans and the Sewerage and Water Board of New Orleans. In sum, CCPUG reiterates its support for Resolution No. R-19- because it strikes the proper balance between delivering bene?ts to all customers and keeping ENO healthy, while establishing an accountable and transparent regulatory review process going forward. Thank you for your consideration. Should you have any questions, please do not hesitate to contact me. Sincerely, mm Luke F. Piontek cc: Of?cial Service List (via email only) 5 See tables at Surrebuttal Table 2 2018 - 2019 Allowed ROEs Rebuttal Exhibit Date Return on Equity 1118118 9.70% 1131118 9.30% 212118 9.98% 2123118 9.90% 3112118 9.25% 3115118 9.00% 3129118 10.00% 4112118 9.90% 4113118 9.73% 4118118 9.25% 4118118 10.00% 4126118 9.50% 5130118 9.95% 5131118 9.50% 6114118 8.80% 6122118 9.50% 6122118 9.90% 6128118 9.35% 6129118 9.50% 818118 9.53% 8121118 9.70% 8124118 9.28% 915118 9.10% 9114118 10.00% 9120118 9.80% 9126118 9.77% 9126118 10.00% 9127118 9.30% 1014118 9.85% 10129118 9.60% 10131118 9.99% 1111118 8.69% 1214118 8.69% 12113118 9.30% 12114118 9.50% 12119118 9.84% 12120118 9.65% 12121118 9.30% 119119 10.00% 2127119 9.75% Average 9.57% Avg. From Last 6 Months 9.56% Highest ROE Award 10.00% Lowest ROE award 8.69% J. Kennedy and Associates, Inc. Page 6