Utility ratemaking is an arcane science that governments from Little Rock to Sacramento practice with varying degrees of concern for the public interest. Every time we read of a rate increase sought by one of our electric or gas corporations we remember Lord Hale’s dictum about regulating ferryboat fares across the English streams when King James was on the throne. The king gave us a good Bible and good public policy.
“Each ferry,” Lord Hale declared, “ought to be under a public regulation, to wit, that it give attendance at due time, a boat in due order and take but reasonable toll.”
Franklin D. Roosevelt, when he was governor of New York, embroidered on the good lord’s idea when he declared that the state Public Service Commission was not to be a mere arbitrator between the people and the utilities but a tribune of the people, “the biscuit cookers” as the late “Witt” Stephens liked to call his gas company’s customers. The Arkansas commission in its various incarnations has sometimes followed that rule, sometimes not. How should the commission approach the latest rate filing by Entergy Corp., the giant New Orleans-based holding company whose Arkansas subsidiary wants to charge its customers another $106.5 million a year in addition to the fuel charges that are passed on automatically to ratepayers?
Attorney General Dustin McDaniel says the company is entitled to nothing more than it is earning now, and the commission’s staff recommends slashing electric rates to reduce revenues by $13.5 million a year. They are unabashed champions of consumers, but their analysis is based on market considerations.
Thirty percent of the new revenues would be used to engorge the lifestyles of the holding company’s top executives, who are not doing badly already. The detailed assumptions for the rate increase ought to shock the conscience of the commissioners. Entergy would collect roughly $30 million a year to pass on to its top executives through bonuses, stock options, country club dues, jet travel, golf vacations, personal financial advice, football tickets, catered parties and — we are not kidding — help in paying their taxes. Entergy’s CEO last year hauled in nearly $18 million.
And you should help him pay his taxes?
The company also wants Arkansas homeowners to pick up the tab for a telephone bill that soared to $934 because Entergy was six months delinquent in paying it. A company spokesman explained that all the perks are necessary to keep the best suits happy so that they will not be tempted to take their talents to a competitor. If that is so, the rewards should come to Entergy from shareholders around the world who benefit from boardroom canniness and not the ratepayers. Stock options and bonuses are typically awarded for performance all right, but not of the kind that helps its captive customers, who have no other place to go. The executive compensation packages are based upon, as one financial consultant described it, “stock price, stock price and virtually nothing but stock price.”
We should remember, too, that part of the performance of these executives that the company says has been so stellar was to saddle Arkansas ratepayers with large rate increases to subsidize business and residential customers in Louisiana, Mississippi and south Texas. Arkansans will feel that increase later this year.
The current rate increase does not meet Lord Hale’s simple test.
