Sometime soon, after hearings and some pondering, the state Public Service Commission will give Entergy Corporation the go-ahead to raise the monthly electricity bills of homeowners, businesses and large industries on the company’s distribution system in Arkansas.
If everything goes according to Hoyle, big industrial users of power like the giant paper companies, steel mills and Riceland and Tyson Foods won’t see much of an increase, but the rest of you will. If the state approves Entergy’s request for $167 million in new revenues and the company’s proposed rate schedule, residential customers will see their monthly bills go up 13.2 percent, most businesses 13.6 percent and the big industrial users only 1.9 percent.
If you would like to know who to thank or to blame for what happens to your light bill, this is a handy manual. It starts with the Arkansas legislature, which in the closing days of the regular session in March passed a law that encourages state regulators to give utilities bigger rate increases than they have in recent years but to go more lightly on big industries and more heavily on homes and small businesses when it spreads the higher costs around among electricity users.
Entergy Arkansas filed the rate request April 24, about three weeks after Gov. Hutchinson signed “An Act to Reform Rate Making of Public Utilities,” which the legislature had passed with almost no discussion and with little public fanfare. The 2015 legislature is the most corporate friendly in the state’s history. More about that in a moment.
Entergy can make a case that it should earn more money from its Arkansas customers, so as to be fair to its investors and attract capital to make improvements to its distribution and generation systems. Entergy Arkansas is expanding renewable energy sources and it and its parent company are buying all four units of the giant and virtually unused gas-burning Union Power Station at El Dorado, which will reduce its carbon pollution and help it meet the government’s new climate-change standards.
The so-called “reform” of utility rate making was an odd bill, filed by Rep. Charlie Collins, the Republican chairman of the House Insurance and Commerce Committee. Where it originated nobody knows, but its objects are clear: fatter profits for the utility and its big industrial customers.
The legislature can’t order higher earnings for the utility and lower rates for industries that consume large amounts of electricity or gas, but it can lean on the regulators, who are appointed by the governor, to make it so. That is what the law does.
From now on, when the PSC calculates an adequate rate of return for investors on a utility’s common stock, the law says that it must weigh all the factors and evidence submitted by the utility and the intervening parties, including what other states in the region are doing. The PSC can’t simply ignore the testimony that nearby states like Texas and Louisiana allow utilities to have a much higher rate of return than the PSC under Gov. Mike Beebe has allowed. The commissioners are now forced by law to explain in their final order how much weight, if any, they gave to the generosity of the other states and why it isn’t being equally generous. The commissioners will get the message.
Second, the law reverses the historic standard for allocating the utility’s rates among the classes of customers—mainly residential, general business and big users. Historically, as a matter of public policy, homes and general business were favored in the allocation and the PSC could consider ways to soften the impact on industries that consumed massive kilowatt hours. Collins’ law reverses the formula to favor the big industries, if someone makes a case that low industrial rates are good for economic development. (Entergy officials accordingly testified that it indeed would be good for economic development so they loaded the higher rates on homeowners and small businesses.) The law specifies that if someone—the staff of the PSC or the attorney general, who historically championed the cause of homeowners in the ratemaking—makes a case that the impact on homeowners should be softened the PSC is allowed to figure out a way to do that. But big industries by law are now the primary concern.
That is the terrain on which the fight over higher rates and how they will be distributed among customers will be fought. You can guess the outcome.
The attorney general for the past 40 years has intervened in utility rate cases to fight for the interests primarily of residential customers. That seems to be over with the new attorney general, Leslie Rutledge. She received heavy election financing from the Koch brothers, owners of Georgia Pacific, one of the big energy users. She has been fighting intervention in the case by those who would protect environmental and consumer interests.
We mentioned the corporate friendliness of this legislature, which for the first time since Reconstruction has huge Republican majorities in both houses. At a special session in the spring, the legislature voted to borrow $87.1 million to boost the profits of Lockheed Martin Corp. and help it beat two competitors for a lucrative contract with the Defense Department.
If it wins the contract, it will build military vehicles at Camden and Arkansas taxpayers will ante up some $125 million to pay off the loan. At the end of the regular session in March, it referred a constitutional amendment to the ballot to remove all limits on corporate welfare and permit future legislatures and local governments to obligate as much of Arkansas’ taxes as they like to corporations that might like to do business in Arkansas. And the legislature eliminated sales and use taxes that the big Texas gas production companies might have to pay for the sand they force into shale wells to extract gas. The state will pay the companies some $25 million in rebates.
All of that is the brave new public policy that Arkansas voters said they wanted, and it is what they will get. — Ernie Dumas
