In October 2017, a crowd of 85-odd people filed into a meeting of the New Orleans City Council wearing fluorescent-orange shirts with black lettering: clean energy. good jobs. reliable power. They claimed to be supporters of the local power company, Entergy New Orleans, in its quest to build a new gas plant in the city’s predominantly black and Vietnamese east.
Standing in the lobby, I asked them, one by one, what sense of civic duty had brought them to advocate gas combustion at this Monday evening hearing. Each would only say, “Talk to Gary,” and direct me toward one of the two burly men who were quite literally herding the group toward the City Council chamber.
Gary said he was part of the newly formed Council for Responsible Governance. His partner, Dan, explained, “If there’s another emergency and this power plant isn’t built, there’s a good chance we won’t survive it.”
Dan and Gary did not live in New Orleans. Nor were they leaders of a new community-action group. They had been sent by a Beverly Hills company called Crowds on Demand, and they had lured the orange-clad posse with under-the-table cash and promises of a pizza party at the nearby Dave & Buster’s.
The most convincing recruits, which included some professional actors, were paid extra to deliver speeches written by one of Entergy’s PR firms. The rest were simply required to wear the shirts and “clap every time someone said something against wind and solar power,” one of the fake supporters told The Lens, the New Orleans publication where I work.
Antagonism toward the plant had grown in the preceding months. Some claimed its location was fueled by environmental racism, and that it would be another node in Cancer Alley—the stretch between New Orleans and Baton Rouge densely pocked by petrochemical infrastructure. Others focused on New Orleans’s precarious seat on the receding Gulf Coast, arguing that the city should do its part to reduce carbon emissions. And then there were those who argued that the plant was simply a waste of money that would add to New Orleans residents’ already bloated energy burden.
A 2018 investigation by the City Council showed that Entergy officials saw the community opposition as a major threat and spent over $1 million to counter it.
Just days before the hearing, the then-CEO of Entergy New Orleans, Charles Rice Jr., directed another executive to send more conscripted advocates to a City Council meeting. “Hell I would pay for more if they can get them,” he wrote in a text message. “This is war and we need all the foot [soldiers] we can muster.”
He was told that for 75 demonstrators and an additional 10 public speakers, Entergy would need to pay $29,000.
“Deal,” Rice responded.
In the annals of corporate lobbying, Rice’s battle tactic is commonly called “astroturfing.” It’s a scheme designed to imitate the appearance of genuine grassroots support while obscuring the actual decision-makers and funders. But industry insiders say that the ploys are becoming both more frequent and audacious.
“It’s across the board,” says Daniel Tait, a research and communications manager for the Energy and Policy Institute. “What you see is a coordinated effort across utilities to manipulate the public into supporting their projects and/or manipulate regulators into thinking there’s public support for their initiatives.”
In February 2018, South Carolinians got a glimpse of this industry-backed shadow theater when a group called the Consumer Energy Alliance sent fraudulent e-mails to state legislators bearing the names and addresses of residents who later said they were impersonated, according to The Post and Courier of Charleston. The e-mails advocated a plan by the Dominion Energy power company to purchase SCANA Corporation, a utility holding company, and denounced legislation that would prevent SCANA from charging customers billions of dollars for a nuclear plant that had recently been abandoned midway through construction. (The Consumer Energy Alliance denied that it was to blame for the impersonated e-mails.)
The Consumer Energy Alliance claims to be “the Voice of the Energy Consumer” on its website, but in reality, it represents 80 energy providers, including Dominion Energy. The group ran a similar astroturfing campaign in 2016 by sending letters on behalf of Ohio and Michigan residents in support of a proposed gas pipeline without their permission. One of the alleged supporters had died in 1998.
Of course, utility-industry astroturfing isn’t always as dramatic as fake actors or forged letters. It most commonly takes the form of a front group with a strong media presence and an innocuous name, like New Mexicans for Progress. That was a real group created in 2018 and funded by the PNM power company. During its brief life, New Mexicans for Progress outspent all other political committees in the state’s 2018 primaries in order to undermine the campaigns of two environmentally friendly candidates for the New Mexico Public Service Commission—the state body that regulates PNM.
Nationally, astroturfing is on the rise. The Supreme Court’s 2010 Citizens United ruling opened the door for unlimited corporate donations to closed-book organizations masquerading as grassroots movements. Meanwhile, social-media companies, with their sham efforts at transparency, have made it simple and cheap to anonymously broadcast messages to massive, curated audiences.
But when looking at the utility industry in particular, the growth in duplicitous campaigns can be traced to a parallel trend: the dramatic transformation of the energy market over the last decade. For the first time in the country’s 130-year electricity history, energy demand isn’t rising. And new technology is finally yielding competitive alternatives to the centralized utility monopoly. Utility monopolies are at risk of losing the business model that has yielded unfettered profits for over a century.
That model has existed since the late 19th century, when commercial electricity was just becoming a reality. Coal had only recently surpassed wood as America’s primary energy source and Thomas Edison was publicly electrocuting dogs and horses to prove that his version of electricity was safer than that of his rival, Nikola Tesla. It was a different time, and the industry was starting from scratch.
To build a massive new system that could light up cities and extend to isolated towns, the government made deals with upstart power companies. The companies would be responsible for building the generation, transmission, and distribution system for entire regions. In return, they would receive monopolies over the energy customers in that region and be entitled to charge those customers for the cost of new infrastructure, the cost of operating those facilities, and, vitally, a guaranteed percentage profit on infrastructure investments.
“One constant across all regions, and this is still the problem, is that utilities were incentivized by commissions to build more stuff, to build big stuff,” says Tait. “And that wasn’t always a bad thing back when energy demand was rising by 10 percent a year.”
For the past century, utilities have primarily made profits for their shareholders by building infrastructure and charging customers for the highest return on equity permitted by their government regulators—traditionally around 10 percent. But the harmony between profit incentives and public demand began to falter in the 1970s, when two major oil crises made people mindful of their electricity use and introduced manufacturers to the idea of energy efficiency.
Then, in 2008, the Great Recession hit and energy use dropped. Energy demand has historically followed the ebbs and flows of GDP growth, so this wasn’t a shock. But in 2010, as the economy recovered and GDP once again rose, an aberration appeared in the trend: Energy demand was stagnant.
Today, in defiance of a century-long habit, energy demand is no longer rising. Some argue that demand will resume climbing as electric cars and other forms of transportation are adopted en masse, but that effect is far from clear.
Regulations in most states have yet to adjust to this new reality, leaving many of the same incentives to “build big stuff” in place. Today, on average, regulated utilities are still allowed to collect a 9 to 11 percent return on equity through their customers’ monthly bills. And as long as that door remains open, investor-owned utilities (which are legally obligated to protect their shareholders’ investments) will take advantage.
The utility industry was already one of the most capital-intensive sectors in the United States, but today it’s building at lightning pace. Annual infrastructure investments in the utility industry nearly doubled over the last decade, according to a 2016 report from the Edison Electric Institute (EEI), a utility-industry trade group. In 2018, power companies reached an all-time high of $130 billion in capital expenditures.
“I think where we are is in the dying gasps of an industry,” says Monique Harden, the assistant director of law and policy for the Deep South Center for Environmental Justice. “Companies are just building these unnecessary gas-power plants because they can then sit back and collect the profits for the next 30 years. That’s really the game. It’s a global pattern of utility companies kind of hedging their bets.”
In New Orleans, where Entergy is pushing its new gas plant, customers will cover the cost of building the plant—estimated at $211 million—while the company will reap a guaranteed 11 percent return on investment over the next three decades. Before the plant produces a watt, Entergy will have solidified a $23 million profit. Customers will also cover the cost of fuel, staff, and maintenance once it’s completed.
“Entergy gets a guaranteed profit, while customers take on all the risk,” says Logan Burke, the executive director for the New Orleans–based Alliance for Affordable Energy.
Lethargic energy demand isn’t the only trend to jeopardize the traditional utility model. Since 2008, renewable alternatives to traditional energy generation, such as wind farms, have become economically viable faster than even optimists predicted. But by itself, the competitiveness of renewables isn’t a dire threat to monopoly utilities. Power companies have been able to maintain control over the mass production of renewable energy.
The real peril for utilities is a growing appetite for energy decentralization.
In the early 20th century, as the industry was still taking shape, utility companies were considered a “natural monopoly,” meaning that a single firm could provide energy more efficiently than multiple competing firms. Economists have questioned this logic in recent decades, beginning as far back as 1984, when Business Week published a cover story titled “Are Utilities Obsolete?”
Recent technological leaps in small-scale, locally controlled generation are providing a more practical answer to that question.
“There’s a movement for energy to be more distributed and therefore more in the hands of individuals and communities, which is what a lot of people in our circle call ‘energy democracy,’ people having more agency over how energy is made and used,” says Burke.
Small-scale generation, with a focus on renewables, is growing exponentially. Community solar projects are expanding solar-panel access to renters and homeowners who couldn’t otherwise afford their own. Cheap battery storage is solving the problem of cloudy days. And demand-response initiatives are giving communities the option to reduce use, rather than increase supply, when demand is unusually high.
“The new technologies of power generation no longer require the same scale or centralization of ownership,” says a report from the Institute for Local Self-Reliance. “The shift toward these decentralized power sources like solar is nearly inevitable.”
Utility-industry insiders are inclined to agree.
“The threat to the utility model from disruptive forces is now increasingly viable,” says a 2013 EEI report. “One can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically ‘cut the cord?’”
Altogether, these evolutions present an existential threat to the natural monopoly model.
“For the first time in our lifetime, we have choices,” says Harden. “Up until now, the decisions have been for us. But now people are engaging because they see alternatives. So, it’s forcing the utility companies to do something they’ve never had to do, which is try to present their obsolete, polluting, unnecessary ways of producing energy are viable and popular.”
If there’s any lingering doubt over whether utilities take this disruption seriously, ask former Michigan representative Gary Glenn. Glenn, a Tea Party Republican and former chair of the House Energy Policy Committee, was a fervent champion of decentralized energy and distributed renewables and was antagonistic toward Michigan’s two major utilities—Consumers Energy and DTE Energy—at every turn. (Among advocates of energy decentralization, there’s a wide variety of visions, ranging from complete market freedom to rigorous public control.) Together, the two companies have a monopoly over 90 percent of the state’s energy customers.
In the run-up to the 2018 state legislative elections, a group called Citizens for Energizing Michigan’s Economy (CEME) began targeting a small handful of candidates, including Glenn, with a flood of television, radio, and social-media advertisements. Consumers Energy gave CEME a staggering $23.5 million in 2017, and $43.5 million overall since its 2014 inception.
Glenn lost the primary election in August.
“The utilities see people trying to take agency over their energy, and decided they need to counter that community message with a different community message,” says Burke. “It’s ironic that as energy becomes more distributed and more democratized, the use of fake democracy and fake community support is rising to try and counter it.”
In New Orleans, after Entergy’s astroturfing scheme came to light, the City Council considered ways to preempt future attempts. But it wasn’t easy. Astroturfing is likely protected by the First Amendment in most cases. And new restrictions, like grassroots-lobbying disclosure requirements, tend to do more harm to genuine grassroots organizations than to astroturfing campaigns anyway.
Council president Jason Williams voted in favor of the plant when the Council approved it in 2018. Shortly after the astroturfing campaign came to light, he spoke with WWNO about the implications for the democratic process.
“Are we living at a time when corporate America has figured out a way to co-opt grassroots organizing?” he asked.
But Williams, along with the rest of the council, stopped short of rescinding approval for the plant. Although the council flirted with the idea earlier this year, it backed down when Entergy informed the city that it had already spent $96 million (although they hadn’t yet broken ground on construction) and that costumers would have to pay them back whether or not the plant was ever built.
Instead, the Council imposed a $5 million fine on the company—the biggest fine it’s ever imposed, according to Council vice president Helena Moreno. But Entergy New Orleans’s parent company, Entergy Corporation, is worth $14 billion and paid out more than $650 million in shareholder dividends in 2018, leading the Energy and Policy Institute’s Tait to question whether $5 million is truly a deterrent.
“It’s worth the risk,” he says of the astroturfing scheme. “They got caught and that sucks. But they got the plant.”