Huval worries mayor's LUS deal won't pay off for public

Claire Taylor | The Daily Advertiser

Show Caption Hide Caption Terry Huval on why the LUS electric division should not be sold Terry Huval, Lafayette Utilities System director for more than 20 years, retired suddenly July 18, 2018. He discusses why he believes the possible sale of the LUS electric division is not a good idea.

Terry Huval, the longest-serving director in the history of Lafayette Utilities System, retired suddenly Wednesday.

Huval had planned to retire Oct. 31, which is the end of the fiscal year. But in a news release issued Thursday morning, Lafayette Consolidated Government administration announced Huval was leaving early.

His early departure comes days after news that Mayor-President Joel Robideaux was considering allowing a company to manage and operate — or possibly even buy —LUS’ electric division. The city-parish council was taken by surprise.

Huval has been silent on the subject, but that changed with his retirement. Huval said he cautioned Robideaux against entering a management agreement with a private company.

"It's kind of hard to see what you would get turning (the electric operations) over to somebody else," he said.

Huval: Biggest concern is it hasn't been done before

Huval, as LUS director, served at the discretion of the mayor-president, so he remained silent, planning to retire Oct. 31. He opened up to The Daily Advertiser on Thursday morning after an emotional farewell to his employees more than three months earlier than he anticipated.

A management/operational agreement between the city-owned electric division and a private company, Huval said, should be looked at very closely because, to his knowledge, it hasn't been done successfully before.

"That's the biggest concern I have," he said.

More than a year ago, in April 2017, Huval said Bernhard Capital Partners Management representatives approached Robideaux about possibly buying or operating LUS' electric division.

In one of his earliest discussions with Bernhard representatives, Huval said he asked for examples of private companies successfully operating and managing municipal electric utility systems. He asked the question multiple times in the past year, he said.

"I never got a square answer," Huval said. "It doesn't give me a comfort level that we're getting into something that's already been tried."

RELATED: Robideaux wants to create new department out of LUS Fiber

Robideaux said he is considering a management agreement with NextGen in part because LUS’ facilities are 40 years old and need upgrading, which could cost $100 million to $200 million. The cost would be passed on to customers through rate increases. If a company took over, he said, the company would be responsible for upgrades and repairs.

Not all of LUS' facilities are old and need replacing, though. LUS built four new electrical generators in 2005-2006 to provide 200 megawatts of energy to city customers. LUS is part owner of a coal-fired electric-generating plant built in the 1980s in Boyce. The Doc Bonin generator on Walker Road, which is old, has not been used since 2013.

"There's a money motive here," Huval said.

Under the potential NextGen agreement, the city would get a $246 million cash payment. That money, Huval said, could be used for other pressing city needs such as drainage and public works projects.

The question, he said, is: Does privatizing LUS compromise customer service, reliability and low rates?

"If all we did was generate cash from selling the system and service went down, it would be a failure," Huval said, adding he has never attempted anything at LUS that had not been tried elsewhere and been successful because it's too risky for a public utility.

LUS pays $23 million a year to the city in lieu of paying taxes. A private company would pay taxes if it owned the utility.

Robideaux did not respond to requests Thursday for comment on this story.

The players involved in the management deal for LUS electric

On April 9, unbeknownst to the city-parish council, Robideaux signed a non-binding letter of intent with NextGen, a subsidiary of Bernhard Capital Partners Management, allowing the company to review LUS' accounting, facilities, operations and more.

In an interview Monday, Robideaux said he will review NextGen's findings and proposal and consider whether a deal with the company would be a good financial option for the city.

Robideaux said he expects the company to complete its due diligence by the end of July and meet with him in August for discussions.

Lafayette attorney Hank Perret on April 15 reserved with the Louisiana Secretary of State four corporate names on behalf of BR Industrial GP, which is an affiliate of Bernhard Capital Partners Management.

The names, reserved until Aug. 3, are variations of NextGen Utility Systems of Lafayette.

Bernhard and its affiliates donated at least $7,500 to Robideaux's campaign since 2015, according to campaign finance filings with the Louisiana Ethics Administration.

An affiliate of the company, Bernhard Capital Partners, is a client of lobbyist Tyron Picard who owns The Picard Group in Lafayette.

Former state Sen. Mike Michot of Lafayette, a long-time friend of Robideaux who served in the state legislature with the mayor-president, works at The Picard Group. Michot also served on Robideaux's transition team.

Robideaux, in a November 2015 news release announcing his transition team, said neither Michot nor The Picard Group would be awarded any contracts with Lafayette Consolidated Government.

RELATED:

What would Lafayette get paid for LUS?

Is LUS for sale?

The potential sale of the city-owned utility, which began generating electricity around 1897, and the lack of transparency on the part of the Robideaux administration took residents and Lafayette City-Parish Council members by surprise. .

Huval's legacy at LUS

A graduate of the University of Louisiana at Lafayette with an engineering degree, Huval worked for Gulf States Utility/Entergy for 16 years. The late Lafayette Mayor Kenny Bowen hired him in 1994 as director of the city-owned utility system. He remained director after the city and parish consolidated in 1996, serving under City-Parish presidents Walter Comeaux, Joey Durel and Robideaux.

In large part, Huval is responsible for bringing broadband internet to the city. It started in the 1990s with the intent of serving just LUS. Shortly after Durel took office, Huval approached him with the idea of extending the fiber service to residences and businesses.

In 2005, voters in the city gave LUS permission to issue up to $125 million revenue bonds to extend the fiber system throughout the city and to offer high-speed internet, telephone and television service to businesses and homes. Few municipalities were able to offer high-speed broadband internet service at the time.

Huval, who was the highest-paid employee of LCG, earning more than $200,000 a year, oversaw about 530 employees in the LUS water, sewer and electric divisions as well as the telecommunications/fiber division.