Entergy Corp. on Sept. 21 disclosed "four preliminary options" for future ownership and operation of subsidiary Entergy New Orleans LLC, including divesting the utility, one day before a meeting with the New Orleans City Council to examine its performance during and after Hurricane Ida.

In the wake of the storm, which made landfall as a Category 4 hurricane Aug. 29, Entergy and subsidiaries Entergy Louisiana LLC and Entergy New Orleans, bore the brunt of damage that caused more than 1 million outages, some of which lasted weeks. New Orleans City Council President Helena Moreno, along with consumer and environmental advocates, plans to launch an investigation into Entergy's storm response, including the "failures" that led to the citywide blackout, along with potential alternatives to the city's utility ownership and management. At a Sept. 22 utilities committee meeting, Moreno plans to introduce measures that call for an audit of Entergy New Orleans' operations and a study on retail competition as it applies to utility ownership in the city.

The first of the options proposed by Entergy would merge Entergy New Orleans with Entergy Louisiana to establish one company for all Louisiana customers regulated by the Louisiana Public Service Commission, which Entergy said would lower rates for New Orleans residents and spread risk of storm cost recovery across a larger customer base.

Under the second option, Entergy would sell Entergy New Orleans to another public utility or private entity, allowing the city council to retain its regulatory authority over the utility, assuming a willing and appropriate buyer is found. Entergy advised such a transaction "could lead to benefits or drawbacks" depending on the specifics of the deal.

The third option Entergy proposed would set up a standalone utility company for the city, "without Entergy Corporation's ownership," the utility wrote in its announcement. This option would also allow the council to retain its regulatory authority, though the company argued this option "would likely create significant credit risk" which could be costly and "change the ability to fund ongoing business operations and secure funds for storm restoration." Even as part of Entergy, Entergy New Orleans "has been downgraded twice in the last 12 months by ratings agencies due to its storm risk and weakening financial performance," the utility said.

The fourth and final option Entergy proposed the City of New Orleans run its own utility by municipalizing Entergy's assets so the city can directly manage electric and gas systems for customers and have maximum control over customer rates and operations. Entergy argued that this option could lead to higher financing costs and more costly operations.

"It is obvious that we have reached a critical juncture in our relationship with the city council," said Rod West, utility group president of Entergy in a statement Sept. 21. "The council's expected resolution will require it to make an important choice: will the city continue with Entergy as its energy partner or pursue another alternative?"