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| Regulating utilities keep electricity rates low | | Print Article | Email Article | | Often times people suggest utility bills would be lower with  greater competition or that people ought to have a choice in who provides their electricity. In Mississippi, utilities are publically regulated and in exchange for an exclusive service area, the state caps their profits, sets their rates, and requires the utility to serve everyone in the area. But would Mississippi benefit under deregulation?
The Mississippi Public Service Commission (PSC) considered that idea and held a series of hearings from 1996 through 2000 to consider a move toward deregulation. Deregulation trends were sweeping the country and a number of states were convinced it would lower rates. Mississippi’s rates then - as now - were low compared to the national average and the PSC determined deregulation would lead to higher residential and industrial rates. Mississippi rejected deregulation; other states were not so wise.
A 2005 USA Today report noted “Not one of the 16 states – plus the District of Columbia – that has pushed forward with deregulation since the 1990s can call it a success… consumers in those states fared worse than residents in states that stuck with a policy of regulating their power industries.” Many states that initially pursued deregulation have either reversed the policy or been forced to apply stopgap measures to address the price shocks experienced by ratepayers. In a report titled “Shocking electricity prices follow deregulation,” USA Today noted, "utility bills are rising sharply for residents in many states that unshackled their power markets as rate caps, the final remnants of regulation, expire...While average prices rose 21% in regulated states from 2002 to 2006, they leapt 36% in deregulated states.”
Advance Mississippi recently released an issue brief examining Mississippi’s regulatory regime and electricity delivery system; and examined the role and business models of publically regulated utilities and unregulated independent power producers (IPPs).
The customers of regulated utilities - like Mississippi Power and Entergy Mississippi - are end-users: homes, businesses, industries. The utilities generate or purchase electricity and transmit it to the customer on the power grid it maintains. Utilities have a statutory "obligation to serve" and charge the lowest reasonable rates for electricity as approved by the State of Mississippi.
The customers of IPPS - companies like Entegra Power Group, KGen Power Management, Calpine, and Magnolia Energy - are not end-users. These companies sell power to utilities. They can cut on or off whenever profits dictate; and they do not have transmission lines to deliver their power apart from tying in to the utility owned grids. IPPs do not have rates approved by the PSC; they sell power for maximum profit. Entegra Power explains it’s "mission is to provide attractive returns to its shareholders" who are “a consortium of major banks and private equity funds."
IPPs may provide valuable services to utilities and to Mississippi retail electric customers. For example, Tennessee Valley Authority (TVA) has a long-term contract to buy power from the GDF Suez’s Red Hills Power Plant in Choctaw County. And Entergy Mississippi currently purchases significant amounts of power from IPPs, and in the First Quarter of 2008, Entegra delivered 555,133 MWH of electricity into the Entergy system.
Other times utilities and IPPs are at odds. Because IPPs want to sell their electricity to utilities, they sometimes oppose the construction of new “base load” power generation facilities by utilities. For instance, Magnolia Energy and Entegra Power filed complaints with the PSC against Mississippi Power’s proposed Kemper County clean coal project. In order to profit, IPPs need to sell their power to Mississippi Power, so the less power Mississippi Power produces, the more they will need to purchase from IPPs.
Due to periods of low-demand and relatively low-cost power, some IPPs do not operate during the winter months. Following Hurricane Katrina, several IPPs were offline and unable to provide power to the grid. Meanwhile, Mississippi Power restored electricity to everyone who could receive it in just 12 days.
Also, because Mississippi electricity rates typically fall below the national average, Mississippi IPPs often seek to sell their electricity out-of-state. Without a transmission line to do so, the question becomes should the IPPs pay for this, or the ratepayers of Mississippi through the utilities?
Questions like these are resolved by Mississippi’s elected PSC whose ability to set the rules and protect the ratepayers is only possible because of Mississippi’s regulated power system.
Deregulation can seem attractive, but it has failed elsewhere and the PSC did not pursue it for fears it would fail here. Mississippi continues to benefit with low electric rates compared to other states because of that sound energy policy decision.
Advance Mississippi’s mission is to advocate for sensible energy policy that will fuel economic opportunity in Mississippi, and educate policy makers, business and community leaders, and the general public about superior energy policies that will foster economic growth. Two Advance Mississippi members are mentioned in this issue brief: Entergy Mississippi, Inc. and the Tennessee Valley Authority. For additional information about Advance Mississippi, visit: www.advancemississippi.com.
Steven Carter, Program Director, Advance Mississippi
Distributed by Capstone Public Affairs, LLC | | | | | 9/1/2010 » What the HNNA Scholarship has meant to me | | 9/1/2010 » Civil rights act may impact county elections next year | | 8/26/2010 » Sports Scoop: Pregame | | 8/26/2010 » It’s Union County magazine time again | | 8/26/2010 » Troops are hamstrung |
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