High electricity rates will cost state billions

By WYATT EMMERICH,

Mississippi Power Company has some of the highest electricity rates in the state, but that’s not stopping them from asking for more.

If they get approval for raising rates, an expert says the 23-county service area will lose 640 jobs a year and $5.6 billion over the next several decades.

David Dismukes, executive director of the Center for Energy Studies at Louisiana State University, presented his findings to the Mississippi Public Utilities Staff recently. Dismukes, a well-respected expert in the field, was testifying at the request of the staff, which is an independent advisory group to the Mississippi Public Service Commission (PSC.)

Dismukes’ testimony consists of 170 pages of testimony, graphs and documents, much of which shows Mississippi Power rates to be much higher than other comparative utility companies in the area.

You can read the entire study at northsidesun.com. Go to the “news” then “documents” using our menu.

One graph shows MPC residential rates averaging $85 per month compared to $68 average of its peer group.

Another graph shows that MPC residential rates are 28 percent higher than Entergy Mississippi, according to the U.S. Energy Information Agency.

One graph shows these higher rates, if approved, will ultimately cost 22,466 jobs.

These comparative higher rates are relatively recent. In 2011, MPC rates were in line with the peer group.

MPC industrial rates, in contrast, are only slightly higher than the peer group.

One factor driving higher MPC rates is significantly higher capital spending on power plants, transmission and distribution lines. For instance, net plant investments per customer was over $10,000 per customer compared to $4,000 for its peer group.

I cringe to think what these numbers would look like if MPC had managed to get the PSC to sign off on the Kemper lignite gasification plant. The numbers would be off the chart.

But even without Kemper, MPC has been spending way more money than its peer group and trying to pass the cost on to consumers. The PSC needs to just say “no.”

I don’t blame MPC for trying to make as much money as they can. That’s the job of the MPC executives. In fact, they would be violating their fiduciary responsibilities to their shareholders if they did not try to maximize profit.

The problem here is this whole system of regulated monopoly. It doesn’t work. The PSC was created to protect ratepayers, but they quickly get co-opted by the very companies they are supposed to regulate.

Back while Kemper was under construction, one of the PSC commissioners held a fund-raiser even though he wasn’t running for re-election. A dozen or so sub-contractors for the Kemper plant donated money. It was a payoff for supporting the boondoggle.

The Kemper boondoggle was so outrageous that it attracted the attention of the media. Eventually, the public was informed and new PSC commissioners were elected and have started doing their job – protecting ratepayers.

But prior to Kemper, MPC was able to push through excessive rates and spending without getting on the radar screen. That’s how they ended up with rates so much higher than their peer group. In a perverse way, MPC was far more successful than their peer group. Anyone owning Southern Company stock, the parent of MPC, benefitted.

This same regulated monopoly structure was used with the airlines and with telephones. Eventually, the public wised up and demanded deregulation. Since then, consumers are far better off with more flying choices. Imagine where we would be if the telephone was never deregulated. There probably wouldn’t even be an internet.

So the question we must ask is this: Why do we continue to cling to this outdated regulated monopoly structure for our electricity production? It simply makes no sense.

You can make an argument that distribution lines to the homeowner should be a regulated monopoly. It’s difficult, but not impossible, to have multiple power lines running into the same homes.

But there is little rationale for electricity production and major transmission lines to be a protected monopoly. Let the market pick the winners and losers and let the consumers pick the price they are willing to pay.

Such a system is already working in Texas and many other states. In Texas, you can buy your electricity from dozens of competing power plants, ensuring the lowest possible price. It’s more efficient and less prone to corruption.

This is where our Republican leadership needs to step up to the plate and make it happen. If they want to remain in power, they must implement progressive changes that raise the standard of living in this state. Deregulation of the electricity market is achievable.

Instead, the Republican leadership gave us the Baseload Act – one of the greatest pieces of corporate welfare ever devised.

The Baseload Act allowed utility companies to start charging customers for power plants before they even started producing electricity. The idea was to save interest charges but anyone who understands the time value of money would realize that was an illusion. Even worse, it meant that ratepayers would have to pay for any failures.

This is how the tea party movement started. Republicans, instead of deregulating monopolies and freeing markets, protected monopolies and promoted corporate welfare, which was a great help to fund-raising. Instead of deregulation, we got the Baseload Act.

In politics, you have to get your money somewhere. For years, the go-to money for the Democrats were plaintiff attorneys who had hit home runs. For the Republicans, it has been the utility companies. That’s the way the system works.

My job is to explain this to voters in an understandable way. I did it during the tort wars and I’m doing it with the power companies. After that, it’s up to the voters.

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