CIVIL DISTRICT COURT FOR THE PARISH OF ORLEANS STATE OF LOUISIANA ?ENTERGY NEW ORLEANS, LLC, Plaintiff VERSUS - THE COUNCIL OF THE CITY OF NEW ORLEANS, HELENA MORENO, JASON ROGERS WILLIAMS, JOSEPH I. GIARRUSSO, JAY H. BANKS, KRISTIN GISLESON PALMER, JARED C. BROSSETT, AND CYNDI NGUYEN Defendants FILED: DEPUTY CLERK VERIFIED PETITION OF ENTERGY NEW ORLEANS, LLC FOR APPEAL AND JUDICIAL REVIEW OF, AND FOR INJUNCTIVE RELIEF FROM, RESOLUTION 11-19?442 OF THE COUNCIL OF THE CITY OF NEW ORLEANS Entergy New Orleans, LLC or the ?Company?), through its undersigned counsel, respectfully submits this Veri?ed Petition for Appeal and Judicial Review of, and for Injunctive Relief from, Resolution 11-19?442 of the Council of the City of New Orleans (the ?Petition?), requesting that this Honorable Court set aside, reverse, and vacate Council Resolution and represents the following: Parties, Jurisdiction, and Summaryr of Relief Requested 1. EN0 is an electric and gas utility duly authorized and quali?ed to do and doing business in the State of Louisiana, with its general of?ce and principal place of business at 1600 Perdido Street, Building 505, New Orleans, Louisiana 70112. The Company iS engaged in the manufacture, production, transmission, distribution, and sale of electricity to residential, commercial, industrial, and governmental consumers throughout Orleans Parish. ENO is also engaged in the provision of natural gas service throughout Orleans Parish. 2. Defendants herein are the Council of the City of New Orleans (the ?Council?), the authority vested with the legislative power of the City of New Orleans and the power of supervision, regulation, and control over public utilities providing service within the City of New Orleans, and its seven (7) members, all persons of the full age of majority and domiciled within the Parish of Orleans, State of Louisiana, who are made defendants solely in their of?cial capacities as members of the Council: Hon. Helena Moreno, Hon. Jason Rogers Williams, Hon. Joseph I. Giarrusso, Hon. Jay H. Banks, Hon. Kristin Gisleson Palmer, Hon. Jared C. Brossett, and Hon. Cyndi Nguyen. 3. This Petition is filed pursuant to and in accordance with Article IV, Section 21, of the Louisiana Constitution of 1974, and Section 3-130(7) of the Home Rule Charter of the City of New Orleans. 4. Petitioner ENO appeals from and seeks judicial review of, and requests injunctive relief from, Council Resolution R-l 9-442, which Resolution is attached hereto as Exhibit A. This appeal is timely, as it has been ?led within thirty (30) days from the date of the order of the Council.1 The Council adopted Resolution R-19-442 on November 7, 2019. Background 5. On June 8, 2017, the Council submitted a letter to ENO voicing concerns over then-recent power outages and reliability issues. This letter was discussed at the June 28, 2017 Council Utility Cable Telecommunications and Technology Committee (?Utility Committee?) meeting, and ENO submitted a response on July 10, 2017, providing requested reliability statistics for distribution system. 6. On August 10, 2017, the Council established Docket No. UD-17-04 via Resolution 427, entitled ?Resolution Directing Entergy New Orleans, Inc. to Investigate and Remediate Electric Service Disruptions and Complaints and to Establish Minimum Electric Reliability Performance Standards and Financial Penalty Mechanisms.? That docket began as a rulemaking proceeding to consider the establishment of minimum reliability performance standards for ENO, Home Rule Charter of the City of New Orleans, at Section -2- including the establishment of ?nancial penalty mechanisms for failure to meet such minimum reliability performance standards. The Council noted in its Resolution that a signi?cant number of state utility regulators, including the Louisiana Public Service Commission have established minimum reliability performance standards and ?nancial penalty mechanisms for failure to meet those standards. Resolution R-17-427, at 4-5. 7. In conformity with the stated purpose of the docket, ENO and the Council?s Technical Advisors (the ?Advisors?) were directed to make certain ?lings to report and analyze outage data, followed by a ?ling by the Advisors by December 31, 2017, containing the ?Advisors? evaluation and recommendation of appropriate minimum reliability performance standards for ENO taking into consideration the urban nature of service territory within Orleans Parish, and recommending appropriate ?nancial penalties for non-compliance for consideration by the Council.? Resolution R-17-427, at 7. The procedural schedule was to culminate with a public hearing and the submittal of a formal recommendation to the Council for its consideration regarding the establishment of minimum reliability standards for EN0. 8. Instead of adhering to the established procedural schedule and original scope of the proceeding, the reliability rulemaking docket ultimately morphed into a ?prudence investigation? in which the Council improperly applied the legal standards that govern such inquiries under Louisiana law. As the ?rst step in that change of direction, on April 5, 2018, the Council categorically rejected a Reliability Plan that ENO had ?led to provide formal plans and budgets for improving reliability performance and reliability target goals, stating that it lacked suf?cient detail, and issued Resolution R-18-98, requiring ENO to ?show cause? why alleged ?inaction and omissions inimitigating and remediating electric service disruptions and complaints and unacceptable reliability performance should not be presumed imprudent.? See Resolution R- 18-98 (As Corrected), Docket No. In Re: Directing Entergy New Orleans, Inc. to Investigate and Remediate Electric Service Disruptions and Complaints and to Establish Minimum Electric Reliability Performance Standards and Financial Penalty Mechanisms (April 5, 2018) -3- (?Resolution at 8. By issuing Resolution R-18-98, the Council effectively abandoned the remaining procedural deadlines established in Resolution R-17-427. 9. The Council appointed a Hearing Of?cer, and new case deadlines were established. On June 6, 2018, ENO submitted a comprehensive show cause response that provided detailed information about reliability programs and actions taken by ENO to improve and maintain the reliability of its electric system, all in line with industry practices. ENO also submitted a Revised Reliability Plan on July 5, 2018, detailing its plan for reliability spending and providing a root cause analysis of certain outages on system. At the Council Utility Committee?s August 16, 2018, meeting, moreover, ENO advised that it would be engaging a national expert in distribution reliability to assist in addressing reliability concerns according to national best practice standards. Upon advising that it had engaged Quanta Technology, LLC (?Quanta?) to perform a reliability assessment, the Advisors ?led an unopposed motion that suspended the procedural schedule pending the ?ling of the Quanta report. 10. But the Council pivoted to a cash penalty before it ever saw the Quanta report. Indeed, on the same date that the Quanta report was due to be submitted, and despite that Council Docket No. UD-17-04 had been opened to establish minimum electric reliability performance standards and the mechanisms by which ?nancial penalties could or should be imposed should ENO fail to meet such minimum standards, the Council abruptly initiated, within that docket, a ?prudence investigation? via Resolution R-18-475. See Resolution R-18-475, Docket No. UD-17-04, In Re: Directing Entergy New Orleans, Inc. to Investigate and Remediate Electric Service Disruptions and Complaints and to Establish Minimum Electric Reliability Performance Standards and Financial Penalty Mechanisms (October 31, 2018) (?Resolution at 13. The remaining procedural deadlines established by Resolution R-18-98 were suspended, and Resolution R-18- 475 established new procedural deadlines in furtherance of the prudence investigation. Despite that the rulemaking docket was opened over two years ago, the Council has not adopted either minimum reliability performance standards for ENO or a reasonable enforcement mechanism for any such standards. 1 1. ENG ?led its response to Resolution R-l8?475 on January 10, 2019, and provided additional testimony and explanation of reliability programs, investments, and improvements, all as demonstrated in the extensive information that ENO ?led of record in Docket No. UD-17-O4. On April 25, 2019, the Advisors responded to ?ling with their Comments and the Direct Testimony of Joseph W. Rogers. Mr. Rogers has advised the Council for many years on ratemaking and power procurement issues, but this matter is his ?rst and only engagement to analyze an electric distribution system and opine on whether its design, Operation, and maintenance is consistent with industry standards. Mr. Rogers has never participated in the design or operation of an electric distribution system, nor has he performed any maintenance work on an electric distribution system; he has never inspected an electric distribution system in an investigative manner; he did not inspect any of feeders on its distribution system in the course of preparing his testimony; and he did not review reliability programs to determine whether they meet industry standards. In the testimony itself, moreover, Mr. Rogers did not raise serious doubt about the prudence of any ENO actions or decisions; did not identify any alternative decisions that ENO should have made based on the information available at the time; did not conclude that any of the costs that ENO incurred to operate, maintain, and improve its distribution system during the period of 2014 through 2017 were imprudent; and did not determine that ENO should have spent more money on any particular program or project during those years. Although he did not have the quali?cations or factual basis to opine on prudence, Mr. Rogers offered a conclusion that ENO may have acted imprudently. 12. Based on Mr. Rogers?s testimony, and glossing over that Mr. Rogers had not made an af?rmative ?nding of imprudence on the part of ENO, the Advisors recommended that the Council af?rmatively ??nd that ENO was imprudent? and that a ?nancial penalty of up to $2 million be assessed against ENO. Despite the clearly erroneous factual foundation and absence of evidence -5- that ENO deviated from industry standards, the Council followed the Advisors? recommendation that ENO be penalized ?nancially. On November 7, 2019, the Council adopted Resolution R-l9- 442, assessing a $1 million penalty against ENO and instructing that the penalty is to be ?applied/paid in accordance with further directions from the Council.? Resolution R?l9-442, at 57. Action for Judicial Review 13. ENG hereby appeals and seeks judicial review of Council Resolution R-19-442. The entirety of the Resolution is appealed in this Petition. ENO incorporates by reference all preceding allegations of this Petition. 14. In its review of the Council?s regulatory orders, this Court applies the same standard that the Louisiana Supreme Court has developed for orders of the LPSC, which regulates the investor- owned public utilities that provide service in Louisiana outside of New Orleans. Gordon v. Council of City of New Orleans, 9 So. 3d 63, 72 (La. 2009) (?As both the LPSC and the Council are regulators of public utilities and experts in their knowledge of that ?eld, we apply the same standard of review to the Council as we do to the Under that standard, a Council regulatory order is subject to judicial review on both the facts and the law, and it should be set aside if it is shown to be ?arbitrary, capricious, abusive of its authority, clearly erroneous, or unsupported by the evidence.? v. Louisiana Public Serv. Com 237 So. 2d 673, 675 (La. 1970); United Gas Pipe Line Co. v. Louisiana Public Serv. Com 130 So. 2d 652, 657 (La. 1961); Central La. Electric Co. v. Louisiana Public Serv. Com 508 So. 2d 1361, 1364 (La. 1987). A Council order and the factual ?ndings upon which it is based are deemed arbitrary and capricious when they are not reasonably based upon the evidence presented. Natural Gas Co. of Louisiana v. Louisiana Public Serv. Com 634 So. 2d 358 (La. 1994); Radiofone, Inc. v. Louisiana Public Serv. Com 573 So. 2d 460 (La. 1991); Mid-South Plumbing, L.L.C. v. Development Consortium-Shelly Arms, L.L.C., 12-1731 (La. App. 4th Cir. 10/23/13), 126 So. 3d 732, 739 (?An arbitrary conclusion is one resulting from a disregard of the evidence or its proper -6- weight; a capricious conclusion is one [that] is not supported by substantial evidence or that is contrary to substantiated competent evidence?). Similarly, a court onjudicial review must ensure that the Council engaged in reasoned decision-making by weighing the competing arguments and evidence presented to it and intelligibly explaining the reasons for its choices. FERC v. Electric Power Supply Ass ?11, 136 S. Ct. 760, 784 (2016); Burlington Truck Lines, Inc. v. United States, 371 US. 156, 167-168 (1962); accord Central La. Electric Co. v. Louisiana Public Service Com 437 So. 2d 278, 279 (La. 1983). Furthermore, the Council ?is not entitled to deference in its interpretation of statutes and judicial decisions.? Washington St. Tammany Electrical Coop, Inc. v. Louisiana Public Serv. Com 671 So. 2d 908, 912 (La. 1996). As such, on appeal of a Council order, courts ?have the power and it is undoubtedly [their] duty to set aside the rulings? of the Council when they are ?clearly wrong on the facts and/or the law.? Southern Bell Tel. v. Louisiana Public Serv. Com 1 18 So. 2d 372, 378 (La. 1960). 15. The $1 million penalty assessed against ENO in Resolution is arbitrary, capricious, excessive and unreasonable, and is not supported by the law or the record in the proceedings before the Council in Docket No. UD-17-O4 as illustrated by (but not limited to) the following: 1) the Council improperly, arbitrarily, and unlawfully imposed a $1 million penalty on ENO in the absence of a pre-existing penalty structure, or any regulatory criteria to assess reliability, in a manner that violates rights under the Louisiana and United States Constitutions; (2) the Council?s purported justi?cations for the imposition of a $1 million penalty, including the Council?s application of Louisiana Supreme Court cases governing the prudent investment rule and general commitment under its Service Regulations to use ?Prudent Utility Practice,? are legally erroneous and impair constitutional rights; and (3) the Council arbitrarily and capriciously concluded that ENO ?did not prove that it acted prudently in the maintenance and repair of its distribution reliability system during which conclusion is contrary to the evidence presented. 2 Resolution R?l9-442, at 56. 16. First, the Council improperly, arbitrarily, and unlawfully imposed a $1 million penalty on ENO in the absence of the very ?minimum reliability and performance standards? and ??nancial penalty mechanisms for failure to meet [such standards]? that Docket No. was designed to establish. See Resolution R-17-427, at 5. The Council has never completed a rulemaking process to put reliability standards in place for ENO despite that the Council has stated its desire to establish enforceable reliability standards since at least 2010. 17. Under Louisiana law, a utility regulator does not have unfettered discretion to penalize or impair property rights in the absence of articulated policies, standards, or guidelines.3 Yet, that is precisely what the Council has attempted to do in Resolution R-l9-442 in imposing a $1 million penalty. The Council purported to find that this excessive penalty was ?reasonable, appropriate and consistent with Code of the City of New Orleans, the Service Regulations Applicable to Electric and Gas Service by Entergy New Orleans, the precedent of the Maryland Public Service Commission in Re: Potomac Electric Power Co. (Case No. 9240, December 21, 2011) and other regulatory law.? Resolution R-19-442, at 56. However, none of the cited sources provide support for such a penalty: 0 The Code of the City of New Orleans does not allow for the imposition of million-dollar penalties; The Service Regulations Applicable to Electric and Gas Service by Entergy New Orleans (?Service Regulations?) provide no penalty provisions at all; 0 EN0 is not subject to regulation by the Maryland Public Service Commission (which does have a pre-existing penalty structure for utilities, which penalty structure was applied in the very case cited by the Council), particularly in a manner that violates Louisiana law; and 3 See Bowie v. Louisiana Public Serv. Com 627 So. 2d 164 (La. 1993). -3- No other ?regulatory law? allows a regulator to impose such extreme ?nancial penalties in the absence of de?ned standards and penalty mechanisms. l8. Substantive due process requires both certainty in the de?nition of what conduct could result in a penalty and ?that the penalty portion of a statute be de?nite.?4 And the ?Due Process Clause of the Fourteenth Amendment prohibits a State from imposing a ?grossly excessive? punishment . . . The Excessive Fines Clause of the Eighth Amendment likewise ?limits the government?s power to extract payments, whether in cash or in kind, as punishment for some offense.?6 ?Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.?7 Thus, because the $1 million penalty ordered by the Council in Resolution was imposed without any advance regulatory guidance or prior action by the Council to put reliability standards in place for ENO (and therefore no violation of any such existing regulatory standards took place) or any fair notice of the severity of any such penalty, and because the Council has no pre-existing ?nancial penalty mechanism in place to enforce, or otherwise establish de?ned penalties for failure to meet, any such reliability standards, Resolution R-19-442 violates due process rights and amounts to a constitutionally excessive punishment,8 and should be vacated and set aside. 4 See State v. Piazza, 596 So. 2d 817, 820 (La. 1992). 5 - BMW ofN. Am, Inc. v. Gore, 517 US. 559, 562 (1996). 6 Austin v. United States, 509 US. 602, 609-10 (1993) (internal quotation omitted); see also State v. LeCompte, 406 So. 2d 1300, 1304 (La. 1981) (holding a criminal statute was unconstitutional and an excessive punishment under La. Const. Ann. art. I, 20 insofar as it provided no maximum ?ne, but only a minimum ?ne) cannot upholda statute that permits an unlimited ?ne . . . 7 Gore, 517 US. at 574-75. 8 La. Const. Ami. art. I, 2, 20; US. Const. amend. V, XIV. -9- 19. Second, in the absence of established reliability standards, the Council erroneously interpreted and applied Louisiana Supreme Court cases governing the prudent investment rule9 to penalize ENO in Resolution R-19-442. See Resolution R-19-442, at 32. Utility regulators must apply the prudent investment rule when reviewing a utility?s decision-making process and determining how much of the costs incurred by a utility should be passed on to customers through the utility?s rates.10 But the rule is not a substitute for regulatory standards. Moreover, in applying that rule, the Council misconstrued the applicable burden of proof in a prudence review by failing to recognize that a utility?s actions and decisions are presumed to be prudent, and only after serious doubt is raised about the prudence of any utility action, decision, investment, or expenditure, does the burden shift to the utility to af?rmatively prove its prudence.? In other words, a utility has no initial burden to show that an investment or decision was prudent. ?2 The Council?s application of the prudent investment rule in Resolution R-19-442 in a manner that deprives ENO of the benefit of the presumption of prudence is therefore clearly erroneous as a matter of law. 20. To support its $1 million penalty, the Council in Resolution R-19-442 further claimed to be applying the Service Regulations? standard for ?Prudent Utility Practice,? which requires ENO ?to provide safe, adequate, and continuous service? but also ?to accomplish the desired result at the lowest reaSonable cost.? Resolution R-l9?442, at 34. The Council applied this standard inconsistently and arbitrarily, however, purporting to penalize ENO for providing ?adequate components? to address reliability rather than ?best practices.? 1d. at 32, 34. Regardless, the 9 ?[U]nder the prudent investment rule, a utility is compensated for all prudent investments at their cost when made, irrespective of whether they are deemed necessary or bene?cial in hindsight.? Gulf States Utils. Co. v. La. Pub. Serv. Com?n, 578 So. 2d 71, 85 (La. 1991) Considering the due process concerns inherent in determining whether to exclude from rate base a utility?s investment in a particular plant, the Louisiana Supreme Court has characterized the prudent investment rule as a ?constitutional touchstone? and held in no uncertain terms that ?a regulatory commission that does not take into account all prudently incurred investment has acted arbitrarily.? So. Cent. Bell Tel. Co. v. La. Pub. Serv. Com 594 So. 2d 357, 366 (La. 1992). '0 GSU (1991), 578 So. 2d at 84-85. Id. at 85. 12 Id. -10- Service Regulations? standard is no substitute for the Council?s responsibility (and acknowledged desire) to formulate, publish, and make available to ENO reliability standards that are suf?ciently de?nite and clear so that ENO can understand and abide by them before a penalty is imposed. Thus, the Council failed to apply any objective measure of prudence, but, instead, subjected ENO to a moving target, in violation of due process rights. Resolution R- 1 9-442 should therefore be set aside. 21. To the extent that the Council may have been relying on general negligence principles in support of its $1 million penalty, delictual actions are subject to a liberative prescription of one year under Article 3492 of the Louisiana Civil Code. In the light of the procedural history of Docket UD-17-O4, and uncertainty in the period under review by the Council, the Council?s imposition of any penalty or liability that is barred by prescription, peremption, laches, res judicata, prior orders of the Council, the ?led rate doctrine, the rule against retroactive ratemaking, and/or constitutional due process is unlawful, and any such penalty should therefore be vacated. 22. Third, in addition to the legal errors associated with the Council?s improper shi?ing of the burden of proof in a prudence review, the Council?s conclusion that did not act prudently in its reaction to the reliability crisis? is contrary to the evidence that was presented to the Council. Resolution R-19-442, at 56. In arriving at this conclusion, the Council disregarded the substantial amount of evidence presented by ENO that demonstrated that the Company acted reasonably, responsibly, and consistent with industry practice in its efforts to maintain and improve its distribution system, including efforts that ENO took prior to any involvement by the Council in mid-2017. Rather, the Council?s conclusion as to any imprudence on the part of ENO is grounded purely in hindsight and on the fact that ENO had unfavorable reliability results in 2016 and 2017. The Louisiana Supreme Court has made clear, however, that hindsight and the mere fact of unfavorable results do not justify a ?nding of imprudence.l3 Therefore, the Council?s hindsight- based ?nding that ENO did not act prudently is not only clearly wrong as a matter of law (in that '3 GSU (1991), 578 So. 2d at 84?85. -11- it is improper under the very prudence standard that the Council purports to apply), but it also is directly contrary to the record evidence, and thus arbitrary and capricious, and should be set aside. 23. If the Council relied on the opinions of Advisors? witness Joe Rogers to support its conclusion as to a lack of prudence on the part of ENO, it was clearly wrong in doing so. The record demonstrates that Mr. Rogers (1) has no relevant experience or expertise in the design, maintenance, or operation of an electric distribution system (and therefore offers no competent testimony or analysis that would support a ?nding by the Council of any imprudence on the part of ENO), and (2) essentially ignores, rather than provides a genuine review of, the wealth of information provided by ENO demonstrating that BNO invested in, maintained, and operated its distribution system prudently and in accordance with industry standards. In other words, in relying on Mr. Rogers?s factually-baseless conclusions and disregarding the weight of the evidence presented by ENO, and by failing to identify any evidence in the record that arguably could raise serious doubt about the prudence of actions and decisions, the Council?s conclusion supporting the $1 million penalty in Resolution R-19-442, namely, that ENO ?did not act prudently,? is both arbitrary and capricious, and should be vacated and set aside. Action for Iniunction 24. ENG incorporates by reference all preceding allegations of this Petition. 25. The Company hereby applies for and seeks injunctive relief prohibiting the Council from taking action to enforce and/or collect the unconstitutional penalty assessed against ENO in Resolution 26. To obtain injunctive relief under Louisiana law, the applicant ordinarily must establish that irreparable injury, loss, or damage may result if the requested relief is not granted. See La. Code Civ. P. art. 3601. Irreparable injury has been found to exist ?when the applicant cannot adequately be compensated in money damages for his injury or suffers injuries which cannot be measured by -12- pecuniary standards.? Mid-South Plumbing, 126 So. 3d at 739. Certain jurisprudential exceptions to this rule exist, however, which support the injunctive relief sought by ENO in this case. For example, the Louisiana Supreme Court has recognized that a petitioner is entitled to injunctive relief without the requisite showing of irreparable injury ?when the conduct sought to be restrained is unconstitutional or unlawful when the conduct sought to be enjoined constitutes a direct violation of a prohibitory law and/or a violation of a constitutional right).? Jurisich v. Jenkins, 99- 0076 (La. 10/19/99), 749 So. 2d 597, 599; S. Cent. Bell Tel. Co. v. Louisiana Public Serv. Com 555 So. 2d 1370, 1373 (La. 1990). Likewise, in cases where the applicant could not satisfy the requirement of showing irreparable harm because its damages could be measured in monetary terms, the Courts still have found injunctive relief to be proper where ?a monetary judgment is expected to be valueless due to the insolvency of thejudgment debtor, or for other reasons such as evidence that the judgment would not likely be paid? or that the party enjoined is ?pursuing a course of action reprobated by law.? Mid?South Plumbing, 126 So. 2d at 740. 27. ENG shows that it is entitled to a permanent injunction enjoining the Council from taking any action to enforce and/or collect the unconstitutional penalty assessed against ENO in Resolution R-l 9?442 for the following reasons: a) The Council?s assessment of a $1 million penalty against ENO violates the due process clause of the Louisiana Constitution and the Fifth and Fourteenth Amendments to the U.S. Constitution,? and is an excessive punishment under the Louisiana Constitution and the Eighth and Fourteenth Amendments to the U.S. Constitution.? The Resolution subjects ENO to a penalty in the absence of regulatory guidelines or standards, including any penalty structure limiting the amount of the penalty that may be imposed. b) A trial or hearing on the merits will establish that Resolution R-19-442 is arbitrary and capricious, the $1 million penalty assessed against ENO in the Resolution is excessive and unreasonable, the Council?s conclusions purportedly supporting the penalty are '4 La. Const. Ann. art. I, 2; U.S. Const. amend. U.S. Const. amend. XIV. '5 La. Const. Ann. art. I, 20; U.S. Const. amend. U.S. Const. amend. XIV. -13- contrary to the law and to the record in the proceedings before the Council in Docket No. UD-17-04, and Resolution R-19-442 would deprive END of its due process rights, all as discussed in this Petition. c) Even though the harm sustained by ENO may be quanti?able, considering the well- known challenges faced by creditors with State?court judgments against the City to secure payment, this case presents a special circumstance requiring a stay of any efforts by the Council to force payment of the $1 million penalty pending judicial review. 28. ENG reserves the right to further apply for preliminary injunctive relief should the Council take any action to enforce and/or collect the unconstitutional penalty assessed against ENO in Resolution WHEREFORE, ENO respectfully prays as follows: 1. That the Defendants be duly served with a certi?ed copy of this Veri?ed Petition for Appeal and Judicial Review of, and for Injunctive Relief from, Resolution R- 19-442 and be duly cited to appear'and answer in accordance with the law; That, after due proceedings are had, there be judgment rendered in favor of ENO and against the Defendants, said judgment setting aside, reversing, and vacating Resolution R-19-442 for the reasons set forth in this Petition, and for other reasons as will be shown at the trial or hearing of this matter; That the Court enjoin and prohibit the Defendants from taking action to enforce and/or collect the penalty assessed against ENO in Resolution That the Court issue a scheduling order, with a brie?ng schedule and hearing date to determine the merits of this appeal, including in that order directions to the Clerk of the Council of the City of New Orleans, Ms. Lora W. Johnson, to transmit to this Honorable Court the complete record relative to the Council?s adoption of Resolution and -14- 5. For all general and equitable relief that the law and the nature of the case may permit. PLEASE SERVE: The Council of the City of New Orleans, through City Attorney Sunni J. LeBeouf, Esq., 1300 Perdido Street Suite 5E03 New Orleans, Louisiana Respectfully submitted, MWMZ W. Raley Alford, 111, 27354 Alison N. Palermo, 31276 W. Munson, 35933 Stanley, Reuter, Ross, Thornton Alford, LLC. 909 Poydras Street, Suite 2500 New Orleans, Louisiana 70112 Telephone: (504) 523-1580 Fax: (504) 524-0069 -and- Timothy S. Cragin, 22313 Harry Barton, 29751 Courtney R. Nicholson, 32618 Entergy Services, LLC 639 Loyola Avenue, Mail Unit New Orleans, Louisiana 70113 Telephone: (504) 576-6523 Fax: (504) 576-5579 ATTORNEYS FOR ENTERGY NEW ORLEANS, LLC Council Members, Hon. Helena Moreno, Hon. Jason Rogers Williams, Hon. Joseph I. Giarrusso, Hon. Jay H. Banks, Hon. Kristin Gisleson Palmer, Hon. Jared C. Brossett, and Hon. Cyndi Nguyen, through City Attorney Sunni J. LeBeouf, Esq., 1300 Perdido Street Suite 5E03 New Orleans, Louisiana -15- CIVIL DISTRICT COURT FOR THE PARISH OF ORLEANS 7'33; STATE OF LOUISIANA NO- ENTERGY NEW ORLEANS, LLC, VERSUS THE COUNCIL OF THE CITY OF NEW ORLEANS, HELENA MORENO, JASON ROGERS WILLIAMS, JOSEPH I. GIARRUSSO, JAY H. BANKS, KRISTIN GISLESON PALMER, JARED C. BROSSETT, AND CYNDI NGUYEN Defendants FILED: DEPUTY CLERK VERIFICATION STATE OF LOUISIANA PARISH OF ORLEANS BEFORE ME, the undersigned authority, duly commissioned and quali?ed in and for the State and Parish aforesaid, personally came and appeared: W. RALEY ALFORD, who being ?rst duly sworn did depose and say that he is counsel for Entergy New Orleans, LLC, applicant in the above-captioned proceedings; that he has read the above and foregoing Veri?ed- Petition for Appeal and Judicial Review of, and for Injunctive Relief from, Resolution R-l9-442 in the above?referenced action; and that the allegations contained therein are true and correct to the best of his knowledge, information, and belief. w. RALEY ALFORD, Sworn to and subs ribed Before me, thile day of December, 2019. NOTARY PUBLIC a - ALISON N. PALERMO -16? Notary Public - Notary ID No. 87997 @123.? Orleans Parish. Louisiana RESOLUTION NO. CI LL: November7, 2019 79%? ll? ?we BY: COUNCILIVBWBERS BROSSETT, ORENO, ILL MerI RRUSSO, AND BANK IN RE: DIRECTING ENTERGY NEW ORLEANS, INC. TO INVESTIGATE AND REMEDIATE ELECTRIC SERVICE DISRUPTIONS AND COMPLAINTS AND TO ESTABLISH MINIMUM ELECTRIC RELIABILITY PERFORMANCE STANDARDS AND FINANCIAL PENALTY MECHANISMS DOCKET NO. RESOLUTION AND ORDER REGARDING PRUDENCE INVESTIGATION REGARDING ENTERGY NEW ORLEANS, LLC ELECTRIC SERVICE DISRUPTIONS AND COMPLAINTS WHEREAS, pursuant to the constitution of the State of Louisiana and the Home Rule Charter of the City of New Orleans (?Charter?), the Council of the City of New Orleans (?Council?) as the governmental body with power of supervision, regulation, and control over public utilities providing service within the City of New Orleans; and WHEREAS, Entergy New Orleans, LLC or ?Company?) provides electric service within the City of New Orleans; and June 8, 2017, Councilmember Jared Brossett sent a letter to ENO noting the Councilmember?s concerns regarding ongoing and increasing customer complaints related to electric outages and reliability issues ?during what appears to be normal electric system operations and during what I'would describe as lesser storm events.?' The letter directed ENO to provide See Council Resolution No. ads?475 at 1. Exhibit A detailed information explaining the Specific problems and causes of the outages for the previous 12 month period, in addition to other speci?c information; and WHEREAS, at the June 28, 2017 Council Utility, Cable, Telecommunications, and Technology Committee meeting, ENO made a presentation, that providedinformation regarding reliability performance, outage causes, and current reliability programs. At that meeting, the UCTTC strongly voiced its concerns regarding reliability issues, and posed numerous questions to ENO concerning such issues; and WHEREAS, on July 10, 2017, ENO responded to Councilmember Broslsett?s letter, providing detailed information on its outages occurring for the 12 month period of June 1, 2016 through May 31,2017. ENO also provided statistical information regarding its 2017 System Average Interruption Frequency Index and System Average Interruption Duration Index and the prevailing weather conditions for entire distribution systemfor the same time period;2 and August 10, 2017, the Council unanimously adopted Resolution R-l7?427 establishing Docket No. for the Council?s investigation into electric outages, and reliability issues in Orleans Parish in general, level of distribution Operations and Management staf?ng and scheduling, and to consider the establishment of minimum reliability performance standards for all of the utilities under the Council?s jurisdiction including the establishment of ?nancial penalty mechanisms for failure to meet such minimum reliability standards as established by the Council in this docket; and 3 Id. at 2. WHEREAS, among other things, Resolution No. R?l7?427 directed ENO to ?provide the Council with its fori?nal?plans, budgets, and schedules for improving the reliability performance of its distribution system and recommended minimum SAIFI and SAIDI standards to measure the reliability performance of its distribution system for monitoring and evaluation by the Council and its Technical Advisors;?3 and WHEREAS, on November 10, 2017, ENO filed its initial reliability plan (?Initial Plan? with the Council, which consisted of six major reliability?focused programs described as: the FOCUS Program, the Backbone Program, the Internal Program, the Pole Program, the Equipment Inspection Program, and the Cable Renewal Program. Each of these programs was generally described; and WHEREAS, the Technical Advisers performed a review of Initial Plan, and concluded that it lacked adequate detail concerning proposed projects, schedules, a comparison of capital and costs by years, and the location of each proposed project included in its Initial Plan?s Backbone, Internai, Equipment Inspection,land URD/Cable Renewal Programs, despite. the Council?s clear direction that the plan should have included more detailed information; and WHEREAS, the Technical Advisors found that the lack of significant details thwarted the Council?s ability to perform a ?thorough and comprehensive review of Reliability Plan and to constantly measure performance in accomplishing its Reliability Plan as proposed;4 and 316/. at 3. WHEREAS, the Technical Advisers concluded that the Initial Plan ?contained no information upon which the Council can measure any improvement in reliability and WHEREAS, after the Council?s adoption of Resolution R?l7-427, numerous distribution outages throughout system continued to occur with great frequency, and Councilniembers continued to receive numerous customer complaints regarding the occurrence of such outages, especially related to equipment failures during normal clear weather conditions; and WHEREAS, the Council became increasingly concerned about the continuation of pattern of frequent large?scale distribution outages and customer service interruptions, often for extended periods of time; and April 5, 2018, the Council unanimously adopted Resolution No. 11?18-98, which directed ENG ?to show inaction and omissions in mitigating and remediating electric service disruptions and complaints and unacceptable reliability performance should not be presumed imprudent.?6 In addition, the resolution directed ENO to file a revised reliability plan that would be required to include certain speci?ed and detailed information;7 and WHEREAS, the resolution also directed the Advisors to ?le a report with the Council regarding: their review and recommendations regarding revise-d reliability plan; (ii) prOpo?sed minimum reliability standards upon which future reliability performance can be evaluated; and proposing financial penalty mechanisms for nonCouncil Resolution No. at 8. 7 Id. at9. . ., US_Active\i compliance with such minimum reliability performance standards for the Council?s consideration and future actionf?3 and WHEREAS, on October 31, 2018, the Council unanimously adopted Resolution expressing the Council?s view that ?for nearly two years, the Council has been expressing its discontent with the unacceptable level of outages on distribution system and the Company?s overall poor, reliability performance,?9 and WHEREAS, the Council established a prudence investigation ?to determine whether inaction and?omissions in mitigating and remediating electric service disruptions and complaints and addressing the performance of the distribution system as discussed herein were imprudent and whether ?nancial and/or other penalties should be imposed by the and WHEREAS, the resolution established a procedural schedule that directed ENO to ?le ?such testimony,evaluations, analyses, workpapers, and other information, as the Company believes will be of assistance to the Council in this prudence investigation;?? and WHEREAS, the resolution provided for comments responsive to ?ling to be ?led by any participating intervenors and the Council?s Advisors, as well as providing for rebuttal testimony by and WHEREAS, although there were intervenors in the Docket, none submitted comments in response to ?ling; and 3 Id. 9 Council Resolution No. R-18-475 14. WHEREAS, the procedural schedule has been completed and the record has been certi?ed by the Hearing Of?cer; and BACKGROUND WHEREAS, this Council proceeding is in response to the significant customer complaints regarding declining d?ay-to?day distribution reliability on the ENO system; and I WHEREAS, the Initial Plan ?led by ENO was found by the Technical Advisors to be functionally useless and structured in a manner that would thwart the Council?s efforts to effectively ?perform?a thorough and comprehensive review of Reliability Plan and to constantly measure performance in accomplishing? the plan;'2 and WHEREAS, repeated failure to re?ect the sense of urgency expressed by Councilmember Brossett, the UCTTC and the Council, up to and including the ?ling of a functionally useless reliability plan, resulted in the Council unanimously adopting Resolution No. 11?18?98, which directed ENO to submit a revised remediation plan following specific details, and to show cause why it should not be found to have acted imprudently for its ?inaction and omission in [not] mitigating-and remediating electric service disruptions and complaints and unacceptable reliability performance;?F3 and WHEREAS, the rising concerns and frustrations of the UCTTC regarding reliability issues were strongly stated at subsequent meetings when members posed numerous questions to ENO concerning those issues; and '3 See Council Resolution No. 11-18-475 at 3. '3 See Council Resolution No. at 8. the June 28, 2018 UCTTC meeting, Councilmembers learned that ENO had cut distribution system funding just prior to the decline in reliability. Ms. Melonie Stewart, ENO Vice President of Customer Service, appeared at the meeting. Ms. Stewart admitted that we backed off on that funding we did see the reliability go in the wrong direction.?14 TheCouncil also learned at that meeting that the ?slight? reduction in funding was $1,000,000 in 2014 according to Ms. Stewart.l5 MS. STEWART: So, Councilmember Brossett, Madam Chair, members of the Utility Committee,'we? do have a plan, and we do recognize that our performance has not been up to par over the past several years. In 2013, we had outstanding distribution reliability, and we did back off on our funding because we didn?t want to spend money on a system that was performing extremely well. We wanted to ensure that we were spending our money in the right places, that we were balancing costs and reliability, and the reliability on the distribution system was outstanding in 2013. As we backed off on that funding we did see the reliability go in the wrong direction. . . .16 CQUNCILMEMBER WILLIAMS: What was the date that you said that you all - I think 1 am using your word correctly slacked off on the investment? What was the date of that? What year was that? ?4 Transcript, UCTTC Meeting June 28, 2018 (?June 28, 2018 Transcript?) at 75. ?5 Id. at 76-77. "31d. at 74?75. (Emphasis added.) MS. . In 2014. In 2014 we reduced our investment in the distribution system by about a million dollars;l7 and WHEREAS, Councilmember Jason Williams reflected the reaction of the Committee: I struggle with the fact that today you say you realize that you are not investing enough and you are falling short. You said that, but the reaction to that again seems delayed, and I am certain that shareholders of Entergy did not Suffer during those times. Businesses, people, citizens, ratepayers suffered during those times. Why wasn?t there a quicker reaction to reinvesting in that grid?18 In response Ms. Stewart replied: When we look at the performance of our distribution and transmission system, our entire system, it?s like a link in a chain. If there?s one weak link in that chain, then power is lost, whether the weak link is on the distribution system, within the substation, within the transmission system. We are always monitoring performance of our entire system to ensure that we are spending the dollars in the right places. We are always trying to balance cost and reliability. When we saw that our reliability on the distribution system was performing very well, we looked at the other links in the chain and said, ?Are there other areas that are vulnerable and should we shift some of that funding from the distribution system upstream to ensure that other potential challenges don?t cause outages?? 'SO?that?s what it was. It was really a shift in funding. We looked at all the links in the chain to make sure that they were all strong. *9 COUNCILMEMBER WILLIAMS: I think it?s also a matter of perspective. I would say that the system was performing better. I don?t know that I would say the system was performing well. I mean, you don?t have to ride very far in the City of New Orleans to realize that, you know, we don?t have the most modern grid in the world and its game; light? So right now I am just talking about equipment failures;20 and WHEREAS, the Council also learned from Ms. Stewart that the key reliability ?benchmarks followed by ENO at the time were clearly declining: '7 Id. at 76?77. (Emphasis added77-78. 30 Id. at 78-79. MS. STEWART: So most of your reliability - in this industry, reliability benchmark data is available on SAIFI, the frequency of outages, and SAIDI, the duration of outages. We will monitor our progress based on SAIF I and SAIDI and compare ourselves to peers in our industry and share that information with you to ensure that we are making improvements that are appropriate. COUNCILMEMBER MORENO: Let me have the advisors come in. Can you let us know what the SAIF I and SAIDI numbers have been doing over the past couple of years? MR. MOVISH: Yeah. reported information to the BIA shows that the are - the frequency of outages is getting longer and it shows that the duration of outages is getting longe1 COUNCILMEMBER MORENO: So Phil, what you are saying is that it 3 actually getting w01se?? MR Yes;2 and WHEREAS, ENO provided information on its outages occurring for the 12 month period of June 9, 2016 through May 31, 2017. ENO also provided statistical information regarding its 2017 System Average Interruption Frequency (SAIF I) and System Average Interruption Duration Index (SAIDI) and the prevailing weather conditions for entire distribution system for the same time period;22 and WHEREAS, according to data the Advisors were able-to determine that SAIDI results had declined significantly between 2013 and 2017 as did their SAIFI results. In addition, the information determined that 56% of the outages during the time period occurred during fair weather conditions. Further, the Advisors? preliminary analysis revealed that of the 2' Id. at 84~85. 23 The Technical Advisors? analysis of data was reported in the ?ling ofthe ?Technical Advisors? Review of Entergy New Orleans, Inc?s Outages and Reliability Performance Council Docket No. Initial Report to the Council ofthe City ofNew Orleans.? 9 total 2,599 outages from all causes that occurred in distribution system during the June 1, 2016 through May 51, ?2017 period, more than one-third were the result of equipment failures;23 and WHEREAS, the Technical Advisers? analysis indicated that a total of 2,599 outages from all causes occurred in distribution system during the June 1, 2016 through May 31, 2017 period taking into account all weather conditions, of which a total of 1,462 outages from all causes occurred during fair weather conditions, and the Technical Advisers noted that many of the outages reported by ENO were of signi?cantly longer duration; and WHEREAS, the Technical Advisors? analysis indicated that of the 2,599 total outages that occurred during June 1, 2016 through May 31, 2017, approximately 56% occurred during normal business hours between 8:00 am. and 5:00 put, and approximately 44% occurred outside of normal business hours starting at 5:00 pm. and ending 8:00 am; and WHEREAS, approximately 48% of all outages that occurred between 8:00 am. and 5:00 pm. were greater than 2 hours in duration, and approximately 31% of outages during this time period were greater than three hours in duration; and WHEREAS, 54% of all outages that occurred during 5 :00 pm. and 8:00 am. were greater than 2 hours in duration and 38% of outages during this time period were greater than 3/hours in duration; and WHEREAS, the END data and the Technical Advisors? analysis were suf?cient to con?rm the Council?s concern and to support additional investigation; and 33 Technical Advisors" Review initial Report to the Council ofthe City ofNew Orleans, dated October 3 l, 2017 (?Technical Advisors? Review oflnitial Report?), Table 1 at 3. 10 WHEREAS, after the Technical Advisers rejected Initial Plan, and'the Council directed ENO to ?le a. Revised Reliability Plan, which further delayed progress on analyzing, approving and implementing such a plan; and WHEREAS, the Council continued to express serious concerns about ongoing reliability problems and lethargic response. As Councilmember Brossett expressed it: You know, I don?t I am still dismayed at the level of urgency and action today. I mean, the level of lack of preparation for the Council, the Council?s Utility Committee, is plainly awful. You all have to present us with an action plan, as Mr. Vince stated, and treat it like a crisis because our ratepayers deserve better;24 and WHEREAS, at the July 19, 2018 UCTTC meeting, the Council expressed serious concerns about inability to answer basic questions regarding the status of its distribution equipment and the overall condition of its assets, which raised the concern that ENO was not giving the necessary attention to the reliability problems; and WHEREAS, presentation at that meeting raised doubts as to whether ENO even properly understood its own system. Chair Helena Moreno pointed out: is a serious matter, that weneed to understand just the overall condition of your assets, and I am not quite understanding your asset management process or if you really have one that's fully vetted out or that you know, you can't even come to the table and explain to us just the very basics of what your assets look like;25 and WHEREAS, Councilmember Giarrusso, addressing ENO executives said: .. .. So I added up based on your tOp ten outage causes equipment failures and I got 5,065 from If you divide that by six years, you get 845 per year, which means 2.3 times a day we are having an equipment failure right now;26 and 3? Transcript, July 19,2018 UCTTC Meeting (?July 19, 2018 Transcript?) at 54. (Emphasis added.) 351dWHEREAS, Chair Moreno summarized: ?Well, at the end of the day, you still have the majority of the outages for Entergy being caused by equipment failures. . . ;?27 and WHEREAS, as a result of the information provided by ENO and the concerns expressed by the Council, the Council unanimously adopted Resolution R-18-475 initiating a prudence investigation regarding decisions and actions relating to service disruptions and complaints. The resolution directed ENO specifically to testimony, evaluations, analyses, workpapers, and other information, as the Company believes will be of assistance to the Council in this prudence investigation.?23 RESPONSE WHEREAS, on January 10, 2019, ENO filed its ?Response to Prudence Investigation pursuant to Resolution No. (?Initial Response?), which included the Supplemental Direct Testimony of Tad S. Patella and Direct Testimony of William L. Sones; and WHEREAS, ENO argued in its Initial Response that Resolution No. R?l7-427 presupposed that there would be a consideration of establishing minimal reliability standards and ?nancial penalty? mechanisms as prerequisites to the imposition of any reliability related de?ciencies by and WHEREAS, ENO stated that ?if the purpose of this docket was to establish minimum reliability standards and associated financial penalties for failure to meet such standards, no such standards were in place at the inception of this docket. Moreover, to date, no such minimum reliability performance standards or financial penalty mechanisms have been proposed Council Resolution No. 11?13?475 at 14. USmActive\1134713OZ\V-i Advisers or any other party to this docket and, accordingly, the Council has neither established nor considered the establishment of any minimum reliability standards or associated ?nancial penalties. Because the Council has not established minimum reliability standards or any penalties associated with failure to meet any such standards if adopted, no ?nancial penalty should be imposed on ENO retroactively for failing to meet some standard established after the fact,?29 and WHEREAS, ENO asserted that without minimum reliability standards the cost associated with attaining and maintaining those standards cannot be determined: However, in order to gauge the level of investments ENO must make and the level of costs it must expend to meet or exceed a Council?imposed minimum reliability standard, it must know what that standard is. If the Council expects quartile performance, there will be a ceitain cost associated with achieving and maintaining that level of reliability. If the Council expects 2nd quartile performance, presumably there will be a somewhat lower level of cost associated with attaining and maintaining that level of reliability. . .. But if the Council is going to seek to penalize ENO for not attaining a certain level of reliability, it should ?rst enact the standards it plans to impose, so ENO can assess the level of financial commitment needed;30 and WHEREAS, ENO also argued that the Council imprOperly ?presumed? that ENO acted imprudently with respect to its distribution reliability and that the burden should be on the Council to establish imprudentconduct; and WHEREAS, ENO asserted that it ?has shown that it has reacted reasonably and prudently in the face of increased distribution?related outages in 2016 by significantly increasing its reliability?related investments and expenditures and by setting forth a detailed and reasonable plan for combating these increases?31 and 39 ENG Response to Prudence Investigation dated January 10, 2019 at 7-8. 301dUS_Active\1 13471302W-1 argued that in 2016 ENO ?ramped up its reliability spending by $10 million over its baseline reliability budget and committed to spending an additional $30 million on storm hardening projects,?32 and WHEREAS, ENO claimed that these efforts ?appear to be having a positive effect, with preliminary distribution line customer interruptions in 2018 declining by approximately 20% when compared to 2017 distribution line customer interruptions. Although these distribution line advances were offset in 2018 by a challenging year for transmission-related customer interruptions, it is clear that the hard work that is being done by our motivated reliability team is showing progress;?33 and WHEREAS, ENO relied upon the Supplemental Direct Testimony of Tad S. Patella, RE. who addressed actions taken by ENO in 2018 to address distribution reliability including (1) the establishment in 2018 of the dedicated ?Fix?lt-Now reliability crew and the success that the crew has had in identifying potential outages before they occur and ?xing the issue(s) that might have resulted in an outage; (2) our engagement of Quanta Technology, LLC to perform an independent review of our reliability programs and to provide recommendations for improving our reliability programs and procedures; and (3) the reliability work that was accomplished in 2018 ?34 and and the distribution line reliability improvements that we are seeing; WHEREAS, the balance of Mr. Patella?s testimony was an elaboration on actions taken with respect to the PIN program in 2018, the Quanta Report in 2018 and other general descriptions 14 of routine reliability'projects, and the approximately $16.5 million in storm hardening work ?that is also expected to provide long?term reliability benefits,?35 and WHEREAS, ENC) also relied upon the Direct Testimony of William Sones who described his testimony as helping to demonstrate that capital and investments in transmission reliability programs have been reasonable and prudent, and that the measures BNO has taken to address recent reliability challenges are also reasonable and prudent, and strike a reasonable balance between the need to make certain capital and transmission line and 3:36 substation investmentsand (ii) the cost to customers of making those investments; and WHEREAS, after describing a number of transmission and substation related projects, Mr. Sones concluded that ?[w]hile these projects do not specifically address the causes of outages recently experienced by ENO, they address reliability issues from a broader system perspective by increasing transmission capacity and ability to reliably serve customers. Without the construction of these projects, the system could have experienced additional reliability issues. Furthermore, while it is dif?cult to quantify, having newer assets can result in higher reliability, as these newer assets would be less prone to failure in comparison with older and WHEREAS, ENO also referred to the Direct Testimony of Tad S. Patella, PE. in its response to Resolution No. in which Mr. Patella referenced the testimony of Melonie Stewart and the ?description of the various reliability programs that are regularly used to maintain 35 Id. at 9. 3" Direct Testimony of William L. Sones at 3?4. -371?d. at 14?15 15 US_Active\1 13471302\v?1 and improve reliabilityin the-Metro Region and that are part of the Reliability Plan that ENO ?led with the Council in November 2017;?33 and WHEREAS, Mr. Patella attempted to explain why outages on the distribution system can occur on fair weather days by noting that: For example, 011 a fair weather day, it is still possible for animals to come into contact with electrical equipment and cause outages or for a vehicle to strike an BNO pole-resulting in power outages to an entire neighborhood. Or on a day that is fair, but windy, a cross arm that has been weakened by age or long?term exposure to weather may finally give way, resulting in outages. Or a child?s metallic balloon can come in contact with an overhead distribution wire causing a short and resulting in an outage. Even on days when it is neither windy nor raining, the extreme heat and humidity that often descends on New Orleans can place an increased level of stress on eduipment, leading to more equipment failures than would otherwise be the case in more moderate climates. In that example, even though the sun may be shining without a cloud in the sky, the temperature may be a significant factor in an outage. . .. It could be due to age, or to a defective part, or to an outside force such as wind, a tree, a car, an animal, or any number of other intrusions;39 and WHEREAS, Mr. Patella concluded that has stacked?up reasonably well against other U.S. utilities with respect to its SAIDI and SAIFI scores from 2013 through 2015.?40 However, in his explanation of SAIDI and SAIFI benchmarks, Mr. Patella acknowledged that those benchmarks declined between 2013 and 20l7 placing in the fourth quartile among U.S. utilities for those years,?41 and WHEREAS, ?Mr. Patella speculated on the potential causes of the declining reliability performance of the distribution system: ?However, as noted, and SAIDI results increased sharply in the past two years. Again, it is difficult to pinpoint the primary cause of such 33 Direct Testimony ofTad S. Pateila at 9. The Reliability Plan referenced by Mr. Patella is the plan that was rejected by the Technical Consultants and the Council, which led to a Revised Reliability Plan not referenced in Mr. Patella?s testimony. 391d. at 10fluctuations with certainty, but a look at the comparative weather data for those years seems to provide at least a partial explanation?? Mr. Patella goes on to testify that in 2016 the number of days in which the temperature reached 90 degrees or above was ?approximately 46% higher than the average for 2013 through 2015. Similarly, the average rainfall for 2015 through 2017 was approximately 20% higher than the average of the ?ve previous years.?43 Mr. Patella also notes an increase in lightning strikes in 2016 and 2017 without concluding that they are related to outages, but that ?[g]enerally speaking, the more extreme the weather, the more stress is placed on the distribution system and the more likely SAIFI and SAIDI results will be adversely affected??1L and Initial Response also referred to the Direct Testimony of Melanie P. Stewart provided in connection with Response to Resolution No. Ms. Stewart?s testimony is offered to ?help demonstrate that efforts to operate and maintain the ?43 and distribution system, in New Orleans have been reasonable; Stewart?s testimony was a broad and general description of annual reliability plans, which consists of eight major reliability programs. In addition to the primary reliability programs, Ms. Stewart also testi?ed with respect to ?frlecl Storm Hardening Plan; however, none of Ms. Stewart?s testimony directly addressed the issues raised by Resolution No. R-18-475, or the concerns expressed by the Council in connection with the distribution reliability prudence investigation for the stated time period; and ?IdDirect Testimony of Melonie 8. Stewart on behalf of Entergy New Orleans, LLC. in Response to Resolution l8?98 at 3, 17 US_Active\1 WHEREAS, Ms. Stewart?s references to the Storm Hardening Plan were characterized as ?certain programs and expenditures that would begin to assist in hardening the distribution system to allow it to better withstand the impact of major storms affecting New Orleans.?46 She described the program as ?hardening service up to ?critical customers.?47 Critical customers are de?ned as those whose services are most important in responding to major storm events and maintaining or restoring order after such an event and include facilities related to first responders, local and emergency preparedness centers, military facilities, airports, major land line and cell phone communications systems, and medical related POSITION Advisors are of the opinion that initial Response did not meet the burden of demonstrating that decisions related to maintaining and improving its distribution system were prudent. No regulator, including the Council, is responsible for directing a utility to operate in a speci?c manner with respect to distribution reliability. Every utility including ENO, is required to operate prudently in all aspects of its operations. ENO has an independent and indisputable responsibility to maintain and operate a reliable distribution system; and . WHEREAS, the responsibility of a utility has been well described in judicial opinions to the effect that ?oneof the most important duties of a public utility, inherent in its franchise to serve the public, is the duty to take the initiative in proposing reasonable rates and rendering adequate services, taking into account changing conditions; and the utility is not relieved from this duty 451d. at 10. 471d. 43 Id. at ll. 18 ,4 because its activities are subject to government regulation, for a regulatory commission is not 9 clothed with the responsibility or qualified to manage the utility?s business;?4 and WHEREAS, Resolution No. R-18-475 instituted a prudence investigation independent of the development of reliability performance standards and/or financial penalty mechanisms. As stated in the resolution, ?in addition to the establishment of ?nancial penalty mechanisms for failure to meet minimum reliability performance standards, the Council intends to conduct a prudence investigation to determine whether ENO's previous inactions and omissions in mitigating and remediating electric service disruptions and complaints and unacceptable reliability performance should not be presumed imprudent.?SO Similarly, the resolution states that "the Council reiterates its intention to establish minimum reliability performance standards and financial penalty mechanisms after receiving all relevant information in connection with this docket?51 and WHEREAS, the Council clearly stated in the ?rst ordering paragraph of the resolution that ?[t]he Council hereby establishes a prudence investigation to determine whether ENO's inaction and omissions in: mitigating and remediating electric service disruptions and complaints and addressing the performance of the distribution system as discussed herein were imprudent and whether financial and/or other penalties should be imposed by the Conncil;?52 and WHEREAS, in ordering paragraph four the Council clearly directed ENO to file ?such testimony, evaluations, analyses, workpapers, and other information, as the Company believes will 49 Water and Power Co. v. Consolidaled Ga, Elec. Light Power Ca, 184 F.2d 552, 567 (41" Cir: 1950) 5? Council Resolution No. R-18-475, dated October 31, 2018, at 9. (Emphasis addedS__Active\1 be of assistance to the Council in this prudence investigation,?53 which is a directive independent of the discrete process of gathering information to establish reliability standards and penalty mechanisms in the fame; and is consistent with the direction of the Council in Resolution No. R48- 98 in which the Council stated that ?in determining a method of ensuring that ENO provides acceptable levels of reliability to its customers prospectively, it is prudent for the Council to consider the establishment of minimum reliability performance standards for clearly indicating reliability?standards and penalty mechanisms were intended to be prospective and independent of the instant prudence investigation; and WHEREAS, it is instructive that argument was also rejected in a relevant ruling of the Maryland Ptiblic Service Commission which considered the utility?s argument that ?the Commission may only penalize a utility pursuant to a regulatory standard with an objective even though the MPSC was engaged in contemporaneous rulemaking related to establishing standards, as is the case with the Council; and WHEREAS, additionally, ENO has been on notice since at least 1999 that inadequate distribution system reliability could result in penalties under Section 3?1 30(7) of the Charter of the City of New Orleans. In 1999, the Council reacted comprehensively to a previous decline in reliability with Resolution No. The resolution placed ENO ?on notice? that failure to complete the remediation plans could result in the imposition of ??nancial penalties, which 53 Id. at 14. (Emphasis added.) 5? Council Resolution No. at 7. (Emphasis added.) . 55 In re: Potomac Electric Power Company, 102 408, 201 i WL 7164366 295 373 at 34. 20 penalties shall be in an amount the Council deems suf?cient to constitute reasonable penalties and which assures the ultimate achievement by END of a reliable electric distribution system.?56 Also, Section 3~130(7) of the Charter provides: ?The orders of the Council shall be enforced by the imposition of such reasonable penalties as the Council may provide. . and WHEREAS, despite the Council?s repeated concerns over the unacceptable number of fair weather outages of long duration, and the Council?s repeated directions to ENO with respect to its insistence on urgent action by ENO, as expressed in Councilmember Brossett?s June 8, 2017 letter to ENO voicing his concerns over ongoing customer complaints related to the mounting outages and reliability issues; (2) Resolution expressing the Council?s concern ?with the overall level of distribution system reliability throughout service territory;?57 and (3) the unanimous comments of concern and urgency by all Councilmembers at several meetings, ENO submitted an Initial Plan that was judged so de?cient by the Technical Advisors as to be essentially useless, requiring a speci?c directive by the Council to ?le a revised reliability plan with mandated speci?c information; and - WHEREAS, it is widely recognized that two of the most important indices utilized by electric utilities to measure their reliability performance are the System Average Interruption Frequency Index (SAIFI) and System Average Interruption Duration Index SAIFI measures the average number of interruptions of all customers over a de?ned period of time, usually a year. SAIEI is calculated by dividing the number of customer interruptions by the 5" Council Resolution No. at 6. 57 Council Resolution No. 11-17-4217 at 4. 21 US__Active\1 13471302?rV-1 number of customers served. An upward trend in SAIFI generally indicates a reduction in reliability;58 and WHEREAS, SAIDI is calculated by dividing the total hours of interruption by total customers served. .Lilge an upward trend in SAIDI generally indicates a reduction in reliability. The following table provided by ENO witness Tad S. Patella con?rms decline in reliability starting after 2013; Table 1:59 SAIDI and SAIFI (2013?2017) 2013 2014 2015 2016 2017 SAIDI 92 121.3 128 167.9 179.8 SAIFI 1.04 1.209 - 1.234 1.61 1.584 and WHEREAS, subsequent to Councilmember Brossett?s June 8, 2017 letter requesting detailed information on the specific problems and causes of outages, data was provided to the Council and Advisers detailing outages during the period June 1, 2016 through May 31, 2017; and Advisers review of that data provided by ENO determined that 56% of total outages occurred during fair weather conditions and that more than one?third of the outages 0 were a result of equipment failures;6 and 53 Direct Testimony ofJoseph W. Rogers, RE. dated April 25, 2019 (?Rogers Testimony") at 6. 59 Direct Testimony of Tad S. Patella, Docket June 6, 2018, at 14. 5" Technical Advisors? Review oflnitial Report at 3. 22 WHEREAS, at the July 19, 2018 UCTTC meeting, BNO pointed to its aging legacy distribution system as an explanation for some reliability issues; however, the Committee members were frustrated by inability to discuss its asset management plan, even in light of its legacy system: COUNCILMEMBER GIARRUSSO: . Do we know the condition of the transformers, how they are doing, which ones need to be replaced immediately, which ones are medium term? Do we have that data or are we going to get it at the next meeting?61 Councilmember Giarrusso asked for input from Mr. Movish, a Council Utility Technical Advisor: MR, MOVISH: I think the genesis of the question that you got is: How are you tracking the overall condition and making your decisions on replacement, repair, etcetera, to the life of your assets, your distribution infrastructure? You know, a modern asset management program allows one allows a utility to track the history of each class of equipment, each type of equipment, from nut, bolt, washer up through transformers, insulators, lightning arresters, sectionalized switches, fuses, what have you. And when you start seeing that, hey, we are determining that the fuse from this manufacturer is failing prematurely, a very high failure rate, this transformer is? failing at an inordinately high rate, perhaps we should pull those things out, replace them with equipment from another manufacturer or design in support of maintaining system reliability. . What you are promoting today or what you are discussing today is a very reactive approach and what your projects in field are. There also should be, in my opinion, a program in place that would allow you to follow your assets through their life and make very judicious decisions, which if you followed those or made those judicious decisions on a timely basis, you could potentially avoid some of the outages that are occurring??- The 2018 Quanta Technology, LLC assessment of Entergy New Orleans Distribution Reliability Improvement Initiatives (?Quanta Report?) described why the asset management of 6' Juiy I9, 2018 Transcript at 18. 53 Id. at 19?21. (Emphasis added.) infrastructure that was being questioned by the Council and the Council?s Technical Advisors could not be performed by ENO: Similar to many urban utility companies in the United States, ENO has a hiin population of aged equipment. In the utility industry, aged does not mean that equipment is no longer functioning as designed. In fact, some older equipment designs and manufacture are much more robust than new equipment. Older facilities do, however, represent increased risk of failure simply due to approaching end of normal service life. Entergy?s current asset information does not allow for an in-depth analysis of age of a class of equipment or other analysis often done in review of equipment failure situations. . ..63 Overall, distribution reliability practices are similar to the other utilities included in the survey. The primary difference is related to the failure rate analysis which is not possible at this time, but is expected to be available in the future as are implemented;64 and WHEREAS, the Quanta Report identi?ed asset management as an area in need of improvement: Improvement in overall asset management capability is an identi?ed need within Entergy at the Corporate level. Currently at Entergy, asset management is located organizationally as a corporate services function supporting all Entergy operating companies. In order to implement a comprehensive asset management capability, Entergy is in process of implementing an enterprise asset management solution. . Accordingly, ENO as an individual operating company, did not have adequate asset management procedures in place prior to the decline of the distribution system, which could have reduced the number of customer outages. Moreover, according to the Quanta Report ENO is only now, six Quanta Technology, LhC?s Assessment ofEntergy New Orleans, Distribution Reliability improvement initiatives, dated October 3 1, 2018, (?Quanta Report?) at 16. (Emphasis added.) 5" Id. at 51. (Emphasis added.) 651d. at 73. (Emphasis added.) 24 years after the beginning of the decline of reliability, starting to implement appropriate asset management systems; and Quanta Report noted that Customer Interrupted and Customer Minutes of Interruption are used as proxies for SAIFI and SAIDI and that ENO focuses on C1 and CMI as the primary operating metrics to track reliability internally. In reviewing ENO outage data from 2013 to 2017, with respect to the CI and CMI indices, Quanta observed: Analysis of ENO outage records indicates that 64% of the CI increase between 2013 and 2017 is due to three cause codes: equipment conductor and vegetation The same cause codes contributed 61% of the CMI increase between 2013 and 2017: equipment conductor and vegetation and 1 WHEREAS, in its Initial Response, ENO suggested that its ?now-aging infrastructure? ?present increasing reliability challenges?67 and asserted that ?Quanta also con?rmed our belief and strongly emphasized that, given our legacy distribution construction and in?'astructure, we will need grid modernization and distribution automation to see signi?cant improvements in distribution reliability.?68 As expert witness Rogers testified ?[t]hese comments appear to be 1:69 excuses rather than substantive responses or evidence ofprudent conduct; and WHEREAS, witness Rogers further testi?ed ?[l]egacy construction, no matter how aged, in and of itself is not unreliable if adequately maintained on an ongoing and prudent basis. Numerous electric utilities throughout the country operate systems that have aging legacy 5" Id. at 20. While Quanta noted some improper coding by ENO that could result in a ?higher number-of outage events than what actuaily occurred,? Quanta concluded that ?[t]he extent of the impact of this practice is not known and is not anticipated to be highly signi?cant, however, it does artificially in?ate the number of outage events that have occurred.? at 22. (Emphasis added.) 57 ENG Response to Prudence Investigation dated January 10, 20l9 at l. Supplemental Direct Testimony ofTad S. Patelia, RE. at 7. 69 Direct Testimony ofloseph W. Rogers, RE. dated April 25, 20i9 (?Rogers Testimony?) at 16. - 25 construction, but still achieve acceptable levels of reliability. assertion that its reliability problems stem from its legacy construction simply highlights failure to maintain and improve its system and WHEREAS, Quanta con?rmed that ENO never had in place an asset management system that could have more quickly recognized and stemmed the tide of dramatically increasing outages; and WHEREAS,.witness Rogers testi?ed that a table provided by BNO witness Tad S. Patella in June 2018 clearly shows decline in reliability since 2013. Table 17? SAIDI and SAIFI (2013?2017) 2013 2014 2015 2016 2017 SAIDI 92 121.3 128 167.9 179.8 SAIFI 1.04 1.209 1.234 1.61 1.584 Witness Rogers testi?ed that these SAIDI and SAIFI numbers, as presented to the U. S. Energy Information Administration can also be used to determine reliability performance compared with other utilities. Rogers testi?ed that: review of EIA data by separating the reporting utilities into quartiles shows that reliability, as measured by SAIFI and SAIDI in comparison with other utilities, has dropped from second quartile performance in 2013 to third and then fourth quartile performance in the following years.?citing Direct Testimony of Tad S. Patella, Docket 1113?17-04, June 6, 2018, page 14. 72 Id. at 7. 26 Table 273 2013-2017 (1) System Average Interruption Frequency Index Without Maj-or Event Days 2013(1) 2014 2015 2016 2017 is. Quartile Highest SAIFE .739 .690 .700 .677 .680 2nd Quartile Highest 1.045 1.076 1.077 1.073 1.069 3rd Quartiie Highest 1.653 1.503 1.580 1.560 1.519 Average of Utilities in Each 12! 132 142 154 164 Quartile Entergy New Orl?ans? LLC 1.032 1.222 1.413 1.816 1.796 ??0095 2nd Quartile Quartile 3rd Quartile Quartile Quartile (2) (1) Data sourced from US Energy Information Administration Form BIA-861 EIA began collecting and including SAIDI and SAIFI data in Form E1A~86lin 2013 73 Id. at 8. US_ACtive\1 27 Table 3M System Average Interruption Duration Index without Major Event Days 2013-2017 (1) 2013 (2) 2014 2015 2016 2017 Quartile Highest 146.000 46.280 53.419 54.830 54.130 2nd Quartile Highest 88.000 92.409 100.610 102.000 94.450 3rd Quartile Highest SAIDI 145.100 141.350 164.210 166.800 160.900 Average of Utilities in . Each Quartile 135 144 155 169 177 Entergy New ereans LLC 90.300 117.400 135.800 190.200 192.900 Indices 3rd Quartile 3"d Quartile 3rd Quartile 4th Quartile 4?1 Quartile (I) Data sourced from US Energy Information Administration Form (2) BIA began collecting and including and data in Form 2013 and WHEREAS,~witness Rogers also testified that: ENO was definitely aware of its decline in reliability performance by May of 201 5, when its report to was due. However, while not aware of the exact calculable annual SAIDI and numbers for 2014, ENO either was or should have been aware of its decline in late 2014 based upon the increased need to respond to customer outages as compared to 2013. ENO witness, Melonie Stewai't at the June 28, 2018, UCTTC meeting indicated that are always monitoring the performance of our entire system to ensure that we are spending the dollars in the right places.?4 At that same UCTTC meeting, Ms. Stewart indicated that ?In 2013 we had outstanding distribution reliability, and we did back off on our funding because we didn't want to spend money on a system that was performing extremely well.?5 Ms. Stewart went on to indicate that ?As we backed off on that funding we did see the reliability go in the wrong direction.?6 When questionedlfurther about the reduction in funding, Ms. Stewart clari?ed that ENO reduced its inyestment in the distribution system by about one million dollars. In 2014, ENO was both aware of the decline in system reliability and the relationship 7" I d. 28 USwActive\113471302\V-1 between investment in the distribution system and the resulting system reliability;75 and WHEREAS, witness Rogers testi?ed that in response to declining reliability, ENO did not adequately increase its distribution operations and maintenance expense in 2015 nor did ENO increase its distribution capital addition suf?ciently in 2015;76 and WHEREAS, witness Rogers testi?ed that Initial Response failed entirely to address the critical timeframe leading up to the increase in outages and complaints that led to the Council?s urgent involvement in mid?2017. Rogers testi?ed that the majority of the testimony submitted with ENb?s Initial Response focuses on actions being taken currently, after the Council initiated its investigation into outages and reliability issues. For example, Mr. Patella discusses remedial actions started by ENO in April 2038, long after the problems were recognized and allowed to persist: The actions touted by Mr. Patella resulted from the ?ling of a Revised Reliability Plan in response to the Advisor criticism of the initial Plan ?led by ENO, which was deemed essentially useless. In addition, the engagement of Quanta Technology, LLC, which was incorporated into Initial Response by reference, did not occur until August2018, again long after the Council intervened and well after the notable decline in reliability performance; and WHEREAS, witness Rogers testi?ed that the delay in engaging Quanta may be explained by the Supplemental Direct Testimony of Mr. Patella where Mr. Patella testi?ed ??In many ways, Quanta?s review and conclusions con?rmed what we already knew or suspected about distribution system. For instance, we knew that our reliability metrics had slipped in recent years and suspected that they would not match up favorably with the reliability metrics of high 75M. at 9?10. 76 1d. at lO?i l. 29 performing utilities selected by Quanta for benchmarking.??77 As Mr. Rogers testi?ed knew it had a problem, yet avoided thoroughly addressing it until forced to do so by the Council, which, ?78 and in my opinion, is not demonstrative of prudent or reasonable conduct; WHEREAS, witness Rogers also testi?ed that no other witnesses in the ENO initial Response provided testimony demonstrating that ENO acted prudently in addressing the declining performance of the distribution system. Rogers noted that only other witness who provided testimony in response to the prudence investigation, was Mr. William L. _Sones. Mr. Sones? testimony addresses only transmission reliability and the transmission related contribution to SAIDI and Rogers also noted that ?[w]ith respect to transmission reliability efforts and results, Mr. Sones lists transmission projects completed from 2013 to 2018 to compliance with NERC reliability standards, to adhere to planning process, and to reliably serve customers??0 Clearly, none of the efforts described by Mr. Sones were undertaken or intended to address the distribution reliability problems that began to cascade in 2014. In fact, witness Rogers notes that ?Mr. Sones admits that the projects he identi?ed not speci?cally address the causes of the outages recently experienced by and WHEREAS, witness Rogers testi?ed that attempt to use storm hardening expenditures as eVide?nce of prudent investment in the reliability of the overall distribution system was ineritless. As Mr. Rogers testi?ed, ?Ms. Stewart makes that argument in testimony incorporated by reference. Storm hardening is a separate issue, which relates to the resiliency of 77 1d. at 13, citing Supplemental Direct Testimony ofTad S. Patella at 6. 78 It]. at 13. 79 Id. 30 citing Direct Testimony of Wiliiam LISones at 12. 8' 151., citing Direct Testimony S. Sones at 14. 3O US_Active\1 the system in storms and hurricanes. It seeks to mitigate damage tothe system and facilitate recovery. It does not address the day?to?day operation of the distribution system, even though there can be some carryover benefit.?82 Mr. Rogers goes on to explain that the storm hardening reference by Ms. Stewart was the result of other dockets in which the Council initiated action and caused ENO to make such upgrades and improvements. ?Moreover, the storm hardening work was not in response to declining reliability and did not start until well into 2017;?83 and WHEREAS, the Quanta Report explained that ?[t]he primary goal of the Storm Hardening program is to improve the resiliency of the circuits serving Critical Customers. Critical Customer examples include public safety and health facilities, civil defense facilities, and facilities important to restoration process.?84 As testified to by witness Rogers, storm hardening is a completely different category from whether or not BNO prudently invested in and maintained its day?to?day distribution system; and WHEREAS, Mr. Rogers testi?ed that: ?There is simply no discussion [in Initial Response] of what, if any, reasonable decision?making process informed the decision to reduce investment in the distribution system [as reported by Melonie Stewart, Vice President of Customer Service]. Nor is there any testimony that explains why ENO was not immediately proactive in mitigating the decline in reliability performance. Response relies heavily on what they are doing currently to improve reliability, not on any prudent internal process or decision?making processf?Quanta Report at 29. 85 Rogers Testimony at 14. WHEREAS, witness Rogers also questions why response fails to address why it did not investigate or adept the use of best distribution maintenance practices to improve reiiability performance of its distribution system when problems started and before the Council initiated an investigation.?86 In fact, when ENO did ?nally engage Quanta to conduct an assessment in 2018, well after the decline in reliability had begun, the best Quanta could say about distribution program was that. it ??includes adequate components to continue addressing existing and short? term needs in this area.?37 Adequate components are hardly best practices. The prudence standard ?essentially applies an analog of the common law negligence standard for determining whether to exclude value from rate base. is, the utility must demonstrate that it ?went through a reasonable decision making process to arrive at a course of action and, given the facts as they were ??38 and should have been known at the time, responded in a reasonable manner; WHEREAS, ?the focus in a prudence inquiry is not whether a decision. produced a favorable or unfavorable result, but rather, whether the process leading to the decision was a logical one, and whether-the utility company reasonably relied on information and planning techniques known or knowable at the time.?39 In addition, prudence is an ongoing obligation of the utility ?the inquiry encompasses a public utility?s continuation of an investment as well as its decision to enter into that investment, and requires the utility to reSpond prudently to changing circumstances M90 or new challenges that arise as a project progresses; and 36 at 18. 37 Quanta Report at ii. (Emphasis added.) a 33 Gulf States Uri/?ies Co. LPSC(La. i991), citing Appeal of Conselvation Law Foundation, 127 NH. 606, 507A 2d 652, 673 (1986) and citing Re Cambridge Eleclric Light Co, 86 574 39 Id. airing Meizenbaum 1). Columbia Gas Yl?ansmission Corp, Opinion No. 25, 4 FERC l6l,277. 9? 1d. Re Central Vermont Pubiic Service Corp, 83 532 (VLPUbSerde. I 987) and citing In Re Long island Lign/ing Co., 71 262, 1985 WL 258217 (N.Y.Pub.Serv.Comni?n, 1985). ?32 WHEREAS, when serious doubt about prudence is raised, as it is here, ?the burden shifts to the utility. ?doubt? is created if the challenge raises a question the answer to which is not arguably in favorof prudence. A doubt is ?serious? if there appears at least a possibility that, 7392 upon due investigation, the answer to the question will lead to a ?nding against prudence; and WHEREAS, the very essence of ?serious doubt? is manifested in the following ENO actions: 1. precipitous decline in reliability beginning in 2014, which by its own admission dropped its performance reliability from 1Sl and 2'?1 quartile to 4?1 quartile performance between 2013 and 2017; 2. 2,599 outages for the period June 1, 2016 through May 31, 2017 occurring 56% of the time in fair weather conditions; Equipment failures were implicated in 41% of the outages (as reported by Quanta); La.) 4. Quanta?s identification of deficient asset management system; 5. END representatives? persistent inability to answer basic questions about its distribution system and reliability issues at two UCTTC meetings; 6. Ms. Stewart?s statement that funding was reduced by a million dollars after 2013; 9' Id. citing Union Electric Co., 40 F.E.R.C. 61,046 (FERC 1987); Long Island Lighting Co. v. Public Serv. Comm'n ofNew York, 134 135, 523 615 (3d Dept.1987); Re Central Vermont Pub. Serv. Comin?n Corp, 83 532 93 Alliance. for/Ifforclable Energy. Inc. v. Council ofCitv of New Orleans, 578 So. 2d 949, 958 (La. Ct. App), 1131;; granted sub nom. Alliance. forAffordable Energv. Inc. v. The Council oft/1e Citv of New Orleans, 585 So. 2d 554 (La. 1991), and writ granted. 585 So. 2d 555 (La. 1991), and vacated sub nom. Alliance. forAfforclable Enerev v. Council of it]! of New Orleans, 588 So. 2d 89 (La. 1991) citing New England Power Co., 27 FERC 63,037, at 65,157 (1984), rev?cl on othergrounds, 31 FERC 61,047 (1985). an 3.3 US_Active\1 13471 7. Mr. Patella?s statement about engaging Quanta admitting that ENO ?knew that our reliability metrics had slipped in recent years and suspected that they would not match up favorably with the reliability metrics of high performing utilities selected by Quanta for benchmarking? 8. failure to engage Quanta until 2018; 9. submission of an Initial Plan that was rejected as essentially useless; and 10. The Quanta Report characterizing distribution reliability program as merely ?adequate;? all leading to the conclusion that serious doubt is raised about the prudence of ENO, which shifts the burden of demonstrating prudence to the utility; and its Initial Response ENO has failed to provide any evidence of prudence suf?cient to meet the standard as provided by applicable case law and regulatory standards; and WHEREAS, the Code of the City of New Orleans Section 158?1045 addresses the enumerated rights of ENO customers: Among the rights that are more fully set forth in the council-adopted customer service regulations governing the provision of utility services in New Orleans, customers shall have the following rights: The right to safe and reliable service in accordance with industry standards; and WHEREAS, Section 10 of the Service Regulations Applicable to Electric and Gas Service by ENO (?Service Regulations?) provides: The Company shall use Prudent Utility Practice to provide safe, adequate and continuous Service but shall not be responsible for loss or damage caused by the failure or other defects of Service when such failure is not reasonably avoidable or due to unforeseen dif?culties or causes beyond its control; and 34 WHEREAS, Section of the Service Regulations de?nes ?Prudent Utility. Practice? as: ?The practices, methods and acts, which, in the exercise of reasonable judgment in light of the facts (including but not limited to practices, methods and acts engaged in or approved by a significant portion of the utility industry) known at the time the decision was made, would have been expectedto accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition;? and WHEREAS, ENO clearly had a pre-existing obligation to engage in practices, methods and acts typically engaged in or approved by a significant portion of the utility industry for the purpose of meeting its obligation and to provide safe and reliable service in accordance with industry standards. Reliability performance declines from the ist to 4111 quartiles while employing merely ?adequate? reliabilitymeasures falls short of the Service Regulations requirements; and WHEREAS,'witness Rogers testi?ed that Response fails to address the critical timeframe leading up to the increase in outages and complaints that led to the Council?s direct involvement in mid-2017. The majority of the testimony focuses on actions being taken currently, after the Council initiated its investigation into outages and reliability issues. . .. The actions touted by Mr. Patella resulted from the ?ling of a revised reliability plan in response to Advisor criticism. In addition, the engagement of Quanta Technology, LLC, which is incorporated in Response by reference, did not occur until August 2018, again long after the Council intervened and compelled ENO to act;?93 and WHEREAS, witness Rogers also testified that: ?There is simply no discussion of what, if any, reasonable decision?making process informed the decision to reduce investment in the 93 Rogers Testimony at 12. US_Active\1 distribution system. ?Nor is there any testimony that explains why ENO was not immediately proactive in mitigating the decline in reliability performance. Initial ReSponse relies heavily on what they are doing currently to improve reliability, not on any prudent internal process 3:94 or decision?making process; and WHEREAS, the Quanta Report only analyzed current reliability practices and their impact on future reliability performance, without any helpful examination of the time period after 2013 and before the submission of the Revised Reliability Plan: Quanta conducted a review of distribution reliability program and a comparison of its distribution reliability practices versus industry leading practices and those of a selected group of high performing utility peers. distribution reliability performance had declined in the last five years, and its 2017 key distribution reliability indices (SAIFI and were close to the borderline between 3rd and quartile of the 2017 Annual Distribution Reliability Benchmark. ENO has increased its reliability spending in the last three years and has planned further investments in key infrastructure, technologies, and systems to stOp and reverse this trend and improve reliability performance. The results of Quanta?s assessment indicate that distribution reliability program includes adequate components to continue addressing existing and short? term needs in this area. If investments in distribution reliability and grid modernization continue as planned, it would be expected that distribution reliability indices improve to 2nd quartile performance. . .. The improvements in ENO reliability will not be immediate, since some investments BACKBONE program) are essentially needed to stabilize performance and prevent further decline of reliability indices, while others deployment of smart reclosers) are largely intended to improve performance, and most importantly, because of the legacy construction and design of distribution grid coupled with aging infrastructure. The overall effort to achieve reliability improvement on the END system should be viewed as a long?term initiative, as opposed to quick fixes;Quanta Report at (Emphasis Added.) 13471302lV-1 Rogers testified, ?In my opinion, as an expert in the utility industry, a prudent utility would be able to demonstrate that it had an active capital project and program in place to maintain system reliability. Further, a prudent utility would havebeen able to demonstrate that once it realized that its capital project and program was failing to maintain reliability that ittook immediate steps to correct the reliability issues. ENO has failed to ?96 and demonstrate that it used prudent utility practice; WHEREAS, Section 10 of the Service Regulations is particularly relevant for purposes of imposing a fine and/or penalty, because Section 10 provides specific circumstances under which ENO ?shall not be responsible for loss or damages caused by the failure or other defects of Service.? The logical corollary of this clause is necessarily a counterfactual circumstance under which ENO shall be responsible for loss 01' damage caused by the failure or other defects of Service; and WHEREAS, pursuant to Section 10, ENG shall be responsible for loss or damage caused by the failure or other defects of Service when such failure is reasonably avoidable, and due to foreseeable difficulties or causes within ability to control. These standards reasonably avoidable, foreseeable, and ability to control are objective measures of Prudent Utility Practice. Accordingly, ENC has preexisting reliability standards that it must either meet, or face the consequences for failing to do so; and WHEREAS, Section 3?130(7) of the Charter provides: ?The orders of the Council shall be enforced by the imposition of such reasonable penalties as the Council may provide. . The Council adopted the Service Regulations in Resolution No. R~l7?228, and, in so doing, the Council 9? Rogers Testimony at 15. 134-213an ordered compliance with Section 10?s continuity of service obligations. To enforce compliance with those reliability obligations, Section 3?1300) instructs that the Council may 1 impose reasonable penalties; and WHEREAS, ENO has been on notice since at least 1999 that inadequate distribution system reliability could result in penalties under Section 3430(7) when the Council reacted comprehensively to a?previous decline in reliability with Resolution No. That resolution placed ENO ?on notice? that failure to complete the remediation plans could result in the imposition of ??nancial penalties, which penalties shall be in an amount the Council deems suf?cient to constitute reasonable penalties and which assure the ultimate achievement by ENO of a reliable electric distribution system? and WHEREAS, a 2011 Order of the MPSC is highly instructive for determining an appropriate penalty in similar circumstances.97 In that Order, the MPSC imposed a $1 million civil penalty on Potomac Electric Power Company (?Pepco?) for failing ?to satisfy its legal obligation to provide its customers with reliable service.?98 The investigation was in response to ?an ?9,9 which the unusually large number of customer complaints about chronic electric outages, commission found-was a result of poor vegetation management. The commission further found that ?the utility?sfailure to maintain its system properly subjected ratepayers to an excessively large number of power outages of long duration, both during storms and on fair weather 97 In re: Potonmc Electric Power Company, 102 408, 201 WL 7164366 295 373. 93 WL 7164366 at l. 99 Id. US_Active\1 l3471302\V-1 Pepco?s imprudent mistake was in not committing adequate resources to vegetation management 57100 and in order to attain an acceptable level of reliability; WHEREAS, the MPSC rejected Pepco?s argument that SAIDI and SAIFI standards are not reliable because of ?unique? tree canopy issues, not unlike legacy infrastructure argument. The commission responded that ?as a matter of policy, each utility has an obligation to provide reliable service based on the particular circumstances and characteristics of its service territory.?101 The commission noted that if a utility is presented with a unique challenge like an extensive tree canopy, ?it should be more active than other utilities in executing tree trimming. ?it :5l02 is not perpetually relieVed from the obligation of maintaining a reliable system; and MPSC Order tracks directly witness Rogers? testimony that assertion that its reliability problems stem? from its legacy construction simply highlights failure to maintain and improve its system over timef?03 and WHEREAS, the also rejected Pepco?s argument that ?the Commission may only penalize a utility pursuant to a regulatory standard with an objective even though the commission was concurrently engaged in rulemaking related to establishing standards;104 and WHEREAS, MPSC found that Pepco acted imprudently and imposed a civil penalty of $1 million. ?After consideration of the substantial decline in reliability resulting from Pepco?s inadequate vegetation management practices, and the significant costs, both economic and non? economic, imposed on the Company's Maryland ratepayers, we have determined that a penalty is ?00 Id, Id at 21. '02 Id. '03 Direct Testimony ofloe Rogers at 16, A WL 7164366 at 34. appropriate in this case. In establishing the appropriate amount of any civil penalty, PUA ?13? 201(d) requires us to consider the number of any other previous violations, (ii) the gravity of the current violation, the violator's good?faith efforts in attempting to achieve compliance after notification of the violation, and (iv) any other appropriate and relevant mattersf?ms and WHEREAS, what constitutes a ?reasonable penalty? is intentionally left to the Council, consistent with general regulatory principles: We do not agree that the term ?reasonable level? is susceptible of only one interpretation. ?Reasonable level? is a vague term, and its presence in an administrative statute such as the Public Service Commission Law suggests that the General Assembly intended to entrust the formulation of speci?c standards to the technical expertise of those charged with enforcing the statute;106 and WHEREAS, the significant impact of the ever?increasing outages is documented by a representative sample of outages in 2017 and 2018 provided by witness Rogers in his testimony, which list includes: March 15, 2017 Mid City?Carrolton 14,000 customers affected June 12, 2017 Algiers 3,000 customers affected June 15, 2017 Algiers 3,000 customers affected June 21, 2017 Orleans Parish?wide 4,700 customers affected August 25, 2017 - Gentilly 7,500 customers affected January 1,2018 - Algiers 2,400 customers affected February 21, 2018 Mid-City, Navarre, 5,000 customers affected lcl. at 32. ?05 Baltimore Gas and Elec. Co. v. PSC of Matyland, 501 A. 2d 1307, 1314 (Md. 1986) citing See Spring?eld Ed. Ass?n v. Springfielct?, Etc, 290 Or. 217, 621 P.2d 547, 555-57 (1980); Brix v. City ofScm Rafael, 92 Cal.App.3d 47, 50?51, 154 Ca1.Rptr. 647 (Cal.Ct.App. 1979); Roberts v. Police it'emen's Retirement, Etc, 412 A.2d 47, 50 Kopp v. State, Idaho 160, 595 P.2d 309, 312 (1979-); WIPE v. Illinois Pollution Control Ed, 55 475, 13 Ill.Dec. 149, 152, 370 1176, 1179 (Ili.App.Ct.l977) 4O USwAcliveH February 27, 2018 Mid?City, Treme 4,000 customers affected March 2, 20.18 7 Mid?City 1,900 customers affected and LSU Medical Education Building March 3, 2018 - Gentilly 432 customers affected March 4, 2018 New Orleans Metro Area 2,427 customers affected May 15, 2018 Uptown 23,700 customers affected June 5, 2018 Uptown 1,000 customers affected July 2, 2018 -. Uptown 2,300 customers affected September 17, 2018 Uptown 7,500 customers affected September 25, 2018 Bywater 2,000 customers affected September 30,2018 - Bywater, Lower Ninth Ward 2,000 customers affected;'07 and WHEREAS, even this small sampling of the total outages indicates the enormous and pervasive impact of precipitous decline in reliability during a portion of the relevant period, March 2017 September 2018; and WHEREAS, a similar point was made by Councilmember Banks during the July 19, 2018 UCTTC meeting COUNCILMEMBER BANKS: Gary, all of the technical stuff, that's real nice. I want you to walk real slow with me, though. April 30th, June 22nd, August 30th, October 2nd, January 17th, May 15th, May 16th, May 28th, June 11th, all of those dates 1 got a text on my phone telling me the lights are out at my house. Now, my issue with that is that at Some point somebody has got to figure out something near [sic] there got a problem. So at what point I hear you are saying you are trending up, but at what point do you get to the point where you ?gure that we either got to go change something, fix something, or do something. I hear all you are saying, but I ain't ?07 Rogers Testimonyat 1.6?.17. 41 US_Active\1 making this up, man. Y'all sent me the texts. 80, clearly, there is a problem. If it's a transformer, if it's a line, if it's mutant ninja squirrels, whatever it is in that area, there is clearly a problem there. I don't know how many outages are affecting the same person throughout the city, but I can tell you right there in mine, so I have got to believe that Iain not that special and I am not that unique; '03 and information provided by ENO to the Advisors showed that 56% of outages occurred during business hours, which multiplies the impact of the disruptions'caused by the outages, as noted by Councilmember Williams: COUNCILMEMBER WILLIAMS: . And I struggle with the fact that today you say you all realize that you are not investing enough and you are falling short. You said that, but the reaction to that again seems delayed, and I am certain that shareholders of Entergy did not suffer during those times. I am also certain that restaurants like Atchafalaya that go dark on Sunday when it's sunshining outside or when there?s a little bit of rain ?and, Mr. Huntley, you know I would call you when half of that portion of Magazine was dark and they lost their biggest day of revenue, that Sunday brunch crowd. Businesses, people, citizens, ratepayers suffered during those times. Why wasn't there aquicker reaction to reinvesting in that grid?109; and WHEREAS, New Orleans is largely dependent upon the tourist economy; power disruptions to hotels, restaurants and visitor venues are particularly disruptive ,to business operations and impact .the City?s reputation as a tourism venue; and the Maryland commission?s penalty was similarly bolstered by the commission?s recognition of the economic and non-economic impacts of outages: Pepco's customers have paid a substantial price for Pepco's neglect, measured not just by direct economic costs such as closures of businesses leading to lost wages and reduced tax revenue, but also by less tangible costs, including the physical discomfort caused by multiple outages and the uncertainty of knowing when persistent outages will end;} '0 and '03 July 19, 2018 Transcript at 36?37. June 28, 2018 Transcript at 77. ?0 In re: Potomac Electric. Power Company, l02 408, 201 WL 7164366 295 373, at 9. 42 the guidance of the MPSC Order with respect to the appropriate considerations for establishing a penalty the Advisors argue that with reSpect to the following: 1. The Number of Any Other Previous Violations. As noted above in 1998, as a result of numerous customer complaints to the Council regarding service reliability and continuity of service in New Orleans East, as well as complaints by residents in other areas of the City, on July 16, 1998 the Council adopted Resolution No. which addressed in aggressive fashion reliability deficiency, ultimately extending it City?wide in Resolution No. The resolution also placed ENO on notice that non-compliance could result in ?nancial penalties ?in an amount the Council deemed sufficient to constitute a reasonable .penalty and which assure the ultimate achievement by ENO of a reliable electric distribution system,? 2. The Gravity of The Current Violation. Again, as noted above, in just-the period June 1, 2016 through May 30, 2017 2,600 outages occurred affecting every area of the City? impacting tens of thousands of residents, businesses and visitors, over 40% of which were caused by ENO equipment failures. Approximately, 56% occurred during normal business hours. Approximately 48% of all outages that occurred between 8:00 am. and 5:00 pm. were greater than two hours in duration, and approximately 31% of outages during this period were greater than three hours in duration. 54% of all outages that occurred between 5:00 pm. and 8:00 am. were US__Active\1 13471302W-1 greater than two hours in duration and 38% of outages during this time period were greater than three hours in duration.l The Violator?s Good Faith Efforts. In attempting to ameliorate the outages, L1.) Resolution No. R?l7~427 directed ENO to provide the Council with its formal p1a?ns,?budgets, and schedules for improving the reliability performance of its distribution system. The Initial Plan filed by ENO on November 10, 2017 was reviewed by the Technical Advisors and found to be functionally useless. The Technical Advisors concluded that the Initial Plan?s lack of signi?cant details and ?thwarts the Council?s ability to perform a thorough and comprehensive review of reliability plan and to constantly measure performance in accomplishing its reliability plan as proposed.?1 ?2 4. Any. Other Appropriate and Relevant Matters. The Advisors argue that throughout this process ENO has shown a lack of urgency that would remotely match the concerns consistently expressed by the Council. The best example of this lack of urgency and inability to address the concerns of the Council in even a fundamental fashion are the transcripts of the June 28, 2018 and July 19, 2018 UCTTC meetings. ENO REBUTTAL AND RESPONSES WHEREAS, on June 28, 2019, ENO submitted its ?Rebuttal Comments in Response to the Advisors? Comments on Response to ENO Filing and. Prudence Investigation? (?Rebuttal Response?), which included rebuttal testimony by Melonie P. Stewart and Tad S. Resolution R-17-427 at 2-3. ?3 Resolution No. at 2. (Emphasis added.) 44 US_Active\1 13471302w-1 Patella, RE. The ENO Rebuttal Response reiterates general reliability programs, which Ms. Stewart described as ?extensive information about several major reliability-focused efforts that were in place from 2013 to 2018 and will continue to be in effect (or will be improved upon) in 2019 and beyond,?1 1?3 and WHEREAS, Ms. Stewart went on to explain once again the general reliability programs. However, the Advisers argue that Ms. Stewart?s general descriptions of general reliability programs is not responsive to the prudence investigation mandate of Resolution nor reSpensive to their burden to provide evidence of prudence with respect to the speci?c occurrences that motivated the Council?s investigation in the first place. In addition, the Advisers? argue that parroting of their general programs is misguided in that the 2018 Quanta Report, relied on heavily by ENG, concluded only that distribution reliability program includes adequate l4 and components to continue addressing existing and short term needs in this area; WHEREAS, .the Advisers argue that while ENO was facing a reliability crisis it employed ordinary procedures rather than crisis management. Obviously, the ordinary procedures were inadequate, but ENO never rose to the occasion as the Council continually urged them to; and WHEREAS, Ms. Stewart objected to Mr. Rogers? testimony that ENO provided no evidence of any decision?making process in response to the decline in reliability. In response, Ms. Stewart says has provided detailed information about the reliability programs that it employs en a routine basis and other projects, efforts, and initiatives that are expected to improve distribution reliability (including efforts taken in response to the increase in outages in ?3 Rebuttal Testimony ofMelenie P. Stewart at4. ?4 Quanta Report at ii (Emphasis added.) "5 Rebuttal Testimony of Melenie P. Stewart at 20-21. 45 13471302014! The Advisers again- argue that routine projects are not responsive to a crisis. The Advisers argue that ENO never seemed to grasp that 2,600 outages during just one year of the period in question, which affected tens of thousands of residents, businesses and visitors, is not a routine situation; and WHEREAS, the Advisors argue that lack of appreciation of the situation and tepid response were also evident in its Initial Plan, which was so deficient that it was rejected by the Council upon the recommendation of the Utility Technical Advisors; and WHEREAS, Ms. Stewart and Mr. Patella referred to the so-called ?reliability blitz? in late 2016 and early 2017 as evidence of appropriate efforts to respond to the decline in reliability; and Advisers argue the reliability blitz does not demonstrate best practices with respect to utility operations. The need for a reliability blitz, absent a storm or other abnormal event, represents ENO operating in an atypical mode that could have likely been avoided through improved asset management and increased investment and maintenance of the distribution system prior to the reliability decline. Such management and investment could have avoided both the signi?cant decline in reliability and the need for ENO to bring in a number of outside. contractor crews to assist in executing targeted reliability projects. Further, the Advisers argue that the MPSC Order confers that this?is net evidence of prudence, but of prior deficiencies. The MPSC addressed a similar argument concluding that although the utility increased its reliability spending in one year, ?it did so only because of imprudently inadequate expenditures in prior years.??6 The commission ruled that ?the fact that we need this enhanced retroactive more aggressive vegetation ?5 In re: Potomac Electric Power Company, 102 408, 201.1 WL 7164366 295 373, at 1. 46 US?ActiveH 13471302\V??l management is a function of not having done appropriate vegetation management for some period of time beforeg??7 and Stewart also argued that Mr. Rogers did not take into consideration the cost minimization objective of prudent utility practice indicating that is expected to provide safe, reliable service at the ?lowest reasonable cost? to customers.??3 The Advisors argue that Ms. Stewart establishes a false dichotomy. The obligations of ENO are clear with respect to the obligation to provide reliable service. There is no exception to that obligation. There is no option for providing semi?reliable service. The obligation to provide it at the lowest reasonable cost does not abrogate the obligation to provide reliable service. New Orleans City Code Section 158?1045 makes clear that ENG customers have a right to safe and reliable service. The ENO Service Regulations provide that ?the Company shall use Prudent Utility Practice to provide safe, adequate and continuous (emphasis added); and WHEREAS, Ms. Stewart admitted, though she tries to minimize it, that ENO ?did reduce investment in the distribution system by about $1 million in 2014. . and WHEREAS, the Advisors argue that it is truly ironic that ENO argues that the cost minimization objective is a defense against 2,600 outages affecting tens of thousands of residents, businesses and visitors between June 1, 2016 and May 31, 2017 when during that same period ENO was in a cycle of earning excess revenues estimated to be more than $40 million. Specifically: 2014? $10.6 million; 2015 $19.5 million; and 2016 $11.2 million;120 and ?7 WL 7164366 at 33, FM 182, citing June 16, 20l I Transcript at 182. ?3 Rebuttal Testimony of Melonie P. Stewart at 20. ?915/. at 22. '10 Direct Testimony of Byron S. Watson (Docket No. Advanced Metering) at Table 1. 47 WHEREAS, both Ms. Stewart and Mr. Patella refer to a 2013 Quanta Study, which they cite as support for compliance with industry practices in 2013. However, the Advisors argue that reliance on the 2013 Quanta Study is misplaced. Unlike the 2018 Quanta Report which detailed an assessment of distribution reliability improvement initiatives, the 20.13 Quanta Study focused predominantly on storm preparedness, storm restoration planning and emergency operations, and storm hardening as opposed to an evaluation of compliance with industry practices in maintaining distribution reliability. In addition, 2013 was a well performing year for distribution system as a result of improvements required by the Council in several resolutions in 1998 reacting to a previous substantial decline in reliability performance by distribution system i I 22 land addition, the Advisors argue that the 2013 Quanta Study was prepared as a post?event analysis of damage that resulted from the August 28, 2012 Hurricane Isaac.123 Quanta?s opinion was that ?condition of facilities is not a factor leading to more damage than what could be expected by a storm such as Hurricane Isaac and with a distribution system serving a major metropolitan The study addressed numerous storm related issues such as ?Storm Restoration Planning and Emergency Operations,? ?Infrastructure Hardening Business-Analysis,? and ?Technology as a Storm Hardening Strategy.? Accordingly, the 2013 Quanta Study is not evidence of prudent conduct with respect to the day?to-day performance of the END distribution system during the time period covered by Resolution No. In addition, there is nothing Reliability Study ofthe ?Electric System in Orleans Parish, Quanta Technology, LLC, July 17, 2013. '33 See Resolution No. 11-98?460 and Resolution No. ?23 See 2013 Quanta Study. '34 Id. at 9. 48 US__AClive\1 in the Quanta Study that would support decision to reduce distribution system funding in 2014;and WHEREAS, Nis. Stewart objected to the premise underlying the questions in Mr. Rogers? testimony regarding whether ENO increased its distribution expenses and capital expenditures in 2015 in response to declining reliability; and I WHEREAS, in his testimony, Mr. Rogers relied on data as reported by its FERC Form?1 for the years 2009 through 2018 and testified on changes in distribution capital additions and distribution expenses from 2015 to 2018 when ENO was aware of its declining reliability. Mr. Rogers was not solely focused on calendar year 2015; and WHEREAS, Ms. Stewart focused her rebuttal to Mr. Rogers in this area on calendar year 2015. Ms. Stewart failed to recognize the signi?cance of trends in the data that showed that ENO did not report remarkable increases in distribution expenses (49.8% to 105.9% higher than the 2009-2013 five?year average) until 2017 and 2018; and WHEREAS, Ms. Stewart, in her rebuttal testimony, criticized Mr. Rogers for not following up on Form-1 footnote regarding electric plant in service that states: ?negative project additions include reversal credits from prior year additions for unclassified project costs closed to plant in service,? which reversal credits materially reduce the amount reported in 2015 FERC Form-1 regarding distribution capital additions in 2015;'25 and Ms. Stewarts testi?ed, ?Without that adjustment, the form would have reflected distribution capital additions of over $32.6 million in The Advisors note, '35 Rebuttal Testimony of Melanie P. Stewart at 27-28. 13? Rebuttai Testimony of Melonie P. Stewart at 28. 49 however, that adjusted amount represents only a 4.1 percent increase over the $31.3 million amount reported for 2014 and that the following year, 2016, the reported amount was $30.7;m and WHEREAS, ENO is responsible for the level of detail provided in its 2015 FERC Form? 1. ENG did not provide, as directed by the Council in Resolution No. R-18-475, more detailed information in defense of its conduct, even after admitting a decline in reliability and a ?backing off? in funding. It is disingenuous to suggest that an accounting note solely regarding 2015 in the FERC Form~l data used by Mr. Rogers in any way affects Mr. Rogers? fundamental conclusions; and WHEREAS, Ms. Stewart testified that Mr. Rogers did not correctly apply the prudent utility standard in his testimony because does not examine the causes of any of those outages or identify any ENO maintenance program, process, or decision that falls below what would be expected from a reasonable utility or, more importantly, what alternative decisions he believes ENO should have made based on what was known or reasonably knowable at the time.?128 The Advisors? argue that Ms. Stewart, not being a lawyer, would not be the best reference for the appropriate prudence. standard, eSpecially for the applicable burden of proof and responsibility in this proceeding; and WHEREAS, Resolution No. R-18-475 clearly directed ENO to testimony, evaluations, analyses, workpapers, and other information, as the Company believes will be of assistance to the Council in this prudence investigation,?129 which ENO clearly did not do in its Initial Response; and '37 Rogers Testimony, Table 5 at- l. '23 Rebuttal Testimony ofMelonie P. Stewart at 34. ?39 Council Resolution'No.? R?t8-475 at I4. (Emphasis added.) 50 WHEREAS, serious doubt about prudence was raised; therefore, ?the burden shifts to the utility. . . .?130 The Advisors argue that: ?doubt? is created if the challenge raises a question the answer to which is not arguably in favor of prudence. A doubt is ?serious? if there appears at least a possibility that,i1pon due investigation, the answer to the question will lead to a ?nding against WHEREAS, Resolution No. clearly ?raises a question the answer to which is not arguably in favor of prudence,? leading to ?at least a possibility that, upon due investigation, the answer to the question will lead to a ?nding against prudence,? a serious doubt about prudence was raised and the burden of demonstrating prudence was shifted to ENO, which burden it did not carry; and WHEREAS, because the burden shifted to ENO, Mr. Rogers did not need to ?examine the causes of any of those outages or identify any ENO maintenance program, process, or decision that falls below what would be expected from a reaSOnable utility or, more importantly, what alternative decisions he believes ENO should have made based on what was known or reasonably knowable at the time? as suggested by Ms. Stewart; and Patella questioned Mr. Rogers? comparison of reliability with that of other utilities while acknowledging that ?[h]is conclusion is similar to what I advised the '30 Gulf States Utilities C0.?v LPSC(La. 1991) citing Appeal of Conseniation Law Foundation, 127 NH. 606, 507A 2d 652, 673 (1986), citing Union Electric Co., 40 F.E.R.C. 61,046 (FERC 1987); Long Island Lighting Co. v. Public Sci-v. Conun'n ofNet-ir York, 134 135, 523 615 (3d Dept. 1987); Re Central Vermont Pub. Serv. Comm'n Cor/1., 83 532 ?31 Alliance. for Affordable Energv, Inc. v. Council ofCiiv of New Orleans, 578 So. 2d 949, 958 (La. Ct. App), writ granted sub nom. Alliance. for Affordable Energv. Inc. v. The Council oft/7e Citv of New Orleans, 585 So. 2d (La. 199E), and writ granted. 585 So. 2d 555 (La. 1991), and vacated sub nom. Alliance. forAffordab/e Energv v. Council ofCiiv of New Orleans, 588 So. 2d 89 (La. 1991) oiling Net-r England Power Co., 27 ERC 63,037, at 65,157 (1984), rev?d on other grounds, 31 FERC ii 61,047 (l985). US_Active\1 13471302014 Council in my June 2018 testimony for 2013?2015, ENO was generally in the second or third quartile among US. utilities, and scores for 2016?2017 placed ENO in the fourth quartile among US. utilities for those years.?132 Mr. Patella averted that ?[l]ooking at nation??wide quartile comparisons, however, does not necessarily allow for meaningful conclusions about distribution maintenance practices.?133 Mr. Patella testifies that ?Quanta?s own benchmarking study, by contrast, used EIA data and other publicly available data to identify potential peer utilities for comparison to ENO, but that was only the beginning of Quanta?s study.? and that ?Quanta?s benchmarking study is far more helpful in comparing ENC) with other utilities than the cursory quartile comparisons set forth in Mr. Rogers?s testiinony.??34; and WHEREAS, the Advisors note that Quanta, utilizing Institute of Electrical and Electronics Engineers benchmark data in comparison with historical reliability performance, determined that reliability performance for 2017 is close to the borderline between 33rd and quartile in'the? benchmark?? Quanta?s conclusion was not dissimilar from witness Rogers? analysis that showed 2017 performance in the quartile and the Council believes the Advisors? comparison and the 2018 Quanta Report are each informative; and WHEREAS, Mr Patella questioned Mr. Rogers? assertion that BNO did not provide information to address the critical timeframe leading up to the increase in outages and complaints that led to the Council?s direct involvement in mid-2017. Mr. Patella suggested that he provided information about the weather during that ?critical timeframe.?136 The Advisors argue that Mr. ?33 Rebuttal Testimony ofTad S. Patella at 8. 133 Id. at 10. '35 Quanta Report page 35 '35 Rebuttal Testimony ofTad S. Patella at 18. 52 Patella?s testimony with respect to weather was pure speculation and did not provide any causal connection to aiiy'OLitages or the trend of outages after 2013; and WHEREAS, speci?cally, Mr. Patella suggested that ?both 2016 and 2017 were signi?cantly hotter and wetter than the average of the preceding years.?37 Mr. Patella also testi?ed that there was a substantial increase in lightning strikes during 2016 and 2017. However, the Advisors argue that Mr. Patella?s testimony was abstract and theoretical. Mr. Patella did not tie his weather related testimony to any outages that actually occurred. However, in the information originally provided to the Council in response to Councilmember Brossett?s letter-,ithe speci?c weather conditions. referred to by Mr. Patella hypothetically were not in existence during any signi?cant portion of the outages reported on by BNO. Speci?cally, the weather condition described as ?heat? accounted for just 3% of the total outages, while the weather condition described as ?rainfaccounted for only 5% of the total reported outages, and ?wind? accounted for only 2% of the outages. Accordingly, Mr. Patella?s weather-related speculation had no factual connections to the prevailing weather conditions during the overwhelming majority of the outages that occurred during what own data reported as ?fair weather,?138 and WHEREAS, M1. Patella also referenced the 2018 Quanta Report, which makes the ?39 and Quanta?s statement ?that service territory ?is very vulnerable to weather events, additional statement that ??weather parameters such as temperature, lightning ?ash density, precipitation and relative humidity have a direct effect on various aspects of distribution reliability '37 Id. '33 Technical Advisors? Review ofInitial Report at 3. ?39 Rebuttal Testimony of Tad S. Patella at 18; citing Quanta Report at 74. 53 performance.?140 The Advisors argue that these generic statements in the Quanta Report are not related to any conclusions by Quanta that any of these conditions or factors accounted fOr any particular outages among the thousands suffered by the local community during the time period covered by Resolution No. and WHEREAS, Mr. Patella disagreed with Mr. Rogers? testimony that ENO has used aging infrastructure as an excuse for its declining performance, citing selected sections of the Quanta Report to conclude that ?[?ailure rates do not seem excessive at this time but the legacy design features of the system along with high customer density and a congested urban environment do, in many cases, contribute to higher CI and However, the Advisors argue that Mr. Patella has cherry-picked only two components of the overall picture of the state of the END distribution system and the problem inherent therein. Speci?cally, Quanta pointed out in its infrastructure discussion that ?Entergy?s current asset information does not allow for an in?depth analysis of age of a class of equipment or other analysis often done in review ofequipment failure situations. Some data on the distribution line transformer and wood pole population at ENO was obtained and is basis for discussion of those asset Accordingly, the Advisors argue that rosy conclusion that failure rates did not seem excessive only applies to the limited data'Quanta was able to obtain on certain distribution line transformers and wood poles. lack of current information on the age of other classes of equipment prevents an ?in?depth analysis. . .often done in review of equipment failure situations??43 Accordingly, Mr. Patella only reported on a small Rebuttal Testimony of Tad S. Patella at 18?19; citing Quanta Report at 39. Rebuttal Testimony ofTad S. Patella at 24?25; citing Quanta Report at 19. ?3 Quanta Report at 16. (Emphasis added.) ?3 Id. 54 US_ACtive\1 part of the data of two components of all equipment classes subject to failure analysis. This flea on the elephant analysis provides no useful insight into aging legacy system and the age- related equipment failures for classes where ENO is not maintaining sufficient information; and WHEREAS, in making peer comparisons Quanta concluded that ?[ojverall, distribution reliability practices are similar to the other utilities included in the survey. The primary difference is related to the failure rate analysis which is not possible at this time, but is expected to be available in the future as new systems are implemented.?44 The Advisors argue that the Quanta benchmark survey is essentially useless because comparisons are not able to be made because of lack of information necessary to make valid failure rate analysis comparisons; and Mr. Patella disagreed with Mr. Rogers? assertion that ENO did not investigate or adopt the use of ?best distribution maintenance practices? or ?proactivemeasures? to improve reliability performance, primarily objecting that ?Mr. Rogers does not explain what he considers to be ?best distribution maintenance practices? or ?proactive measuresmm The Advisors argue that the ?Executive Summary? of the Quanta Report compietely refutes any objection stated by Mr. Patella in that Quanta concluded that ?[t]he results of Quanta?s assessment indicate that distribution reliability program includes adequate components to continue addressing existing and short?term needs in this area.?146 The sum total of the Quanta analysis is ?adequacy.? By de?nition, that does not equal best practices or proactive measures; and CONCLUSIONS ?4 1d. at 51. (Emphasis added.) ?5 Rebuttal Testimony of; Tad S. Patella at 25; citing Rogers Testimony at 18. '45 Quanta Report at ii. 55 WHEREAS, the Council, having reviewed the full record presented in this proceeding as well as the independent analysis performed by the Advisors, conclude that the burden of demonstrating prudent conduct legally shifted to ENO, and ENO did not prove that it acted prudently in the maintenance and repair of its distribution reliability system during 2014-2017, and that it did not act prudently in its investment in the system having reduced funding by $1 million in 2014 after which its reliability performance declined annually resulting in results falling from ?rst or second quartile to fourth quartile; and WHEREAS, the Council further concludes that ENO did not act prudently in its reaction to the reliability crisis, which caused ENO customers pay a substantial price, measured not just by direct economic costs such as closures of businesses leading to lost pro?ts, lost wages, and reduced tax revenue, but also .by less tangible costs, including the physical discomfort caused by multiple Outages and the uncertainty of knowing when persistent outages will end; and WHEREAS, the Council, having been advised on the applicable law, ?nds that a one-time penalty of$l million imposed-against ENO is reasonable, appropriate and consistent with Code of the City of NeW'Orleans, the Service Regulations Applicable to Electric and Gas Service by Entergy New Orleans, the precedent of the Maryland Public Service Commission in Re: Potomac Electric Power Co. (Case No. 9240, December 21, 2011) and other regulatory law; and WHEREAS, the Council also ?nds that the one-time $1 million penalty should be used to benefit ratepayers; and WHEREAS, the omission from this decision of any argument or portion of the record that may exist or may have been raised by the participants does not mean it has not been considered, 56 All such arguments and portions of the record have been evaluated and found to add nothing further to the substance or effect of this decision; NOW THEREFORE BE IT RESOLVED BY THE COUNCIL OF THE CITY OF NEW ORLEANS THAT: ENO is assessed a one-time $1 million penalty to be applied/paid in accordance with further directions from the Council. THE FOREGOING RESOLUTION WAS READ IN FULL, THE ROLL WAS CALLED ON THE ADOPTION THEREOF, AND RESULTED AS FOLLOWS: YEAS: Brossett, Giarrusso, Gisleson Palmer, Moreno, Nguyen, Williams 6 NAYS: Banks 1 ABSENT: 0 . 23-7 l8 .: A TRUE AND CORRECT 0ch if. UK) . .. . AND THE RESOLUTION WAS ADOPTED. CLERK omr?uczt. - 57 US_Active\1