Kelley Williams, Chair BiggerPieForum, March 27, 2015
The governor recently signed a bill to let Mississippi Power Company buy natural gas reserves with customers’ money. That’s like giving customers’ credit cards to a compulsive gambler at the casino door. The casino opens July 1.
Customers now bigger pigeons. In 2010 the company predicted the price of natural gas would be over $10 per million BTU’s by now. It hid the embarrassing prediction and bet billions on an experimental plant to make a cheaper substitute from lignite. The cost of the unfinished Kemper gasifier is $5.2 billion. If it runs, its substitute gas will cost over $25. The price of the real thing is now $2.75. You can buy (hedge) it for ten years for $3.67. The company has been spectacularly wrong about the price of natural gas and its ability to make a substitute for it. Yet the Public Service Commission could still make customers pay for its mistakes. The new bill makes it easier to make customers pay for more company mistakes. It’s a bigger pay-to-play game, and the customer is a bigger pigeon. Looks like the price of PSC poker dealers is going up.
So how did Senate Bill 2093 become law? It was perfunctory end of session legislation to resolve utility turf fights and, oh yes, create jobs. The senate passed it with no nays, no debate, and no questions after a one minute explanation. Ditto, the house. And the governor probably signed it in the name of jobs. The utilities may have actually read it.
One insider said A Beheading Bill could pass in the name of jobs for executioners and sword makers and black mask retailers and morticians and so on. This bill may decapitate utilities’ customers and competitors economically.
Let’s cooperate. Actually the bill began innocently enough. Well, not really. It began as a gift to electric coops, also known as Electric Power Associations. It would let them build “Field of Dreams” sub stations and industrial parks in the middle of nowhere and provide capital as bait if no one comes. Hopefully, someone will come, build a plant, buy some electricity, and – you know – create some jobs there. But since the cost goes in the rate base, not to worry if no one comes.
Now EPA’s (unfortunate acronym) aren’t regulated by the Public Service Commission. Their regulator is the Federal Energy Regulatory Commission. This presented a problem and an opportunity for Mississippi Power and Entergy, also know as Investor Owned Utilities. The problem was that FERC might let EPA’s do things in the name of jobs that the PSC couldn’t let IOU’s (appropriate acronym) do. The opportunity was to cooperate on the bill so IOU’s could do more things.
Beats Base Load Act. So the bill, now an act, became a Christmas Tree with lots of gifts under it. Utilities can now buy gas reserves and make customers pay plus a guaranteed return if the PSC says the purchases are prudent. The act says purchased reserves can be prudent even if they aren’t producing gas to generate electricity for customers. This is a sweeter deal for utilities than the Base Load Act that makes customers pay for utility spending before they get direct benefits from it. Now utilities can spend billions and make customers pay even if they never get direct benefits.
The act could let IOU’s shop for new businesses too, not just natural gas reserves. When the PSC approves, customers will pay for them plus the usual 15% tip. The 15% may seem low considering the high tuition for the Kemper education. But the company brain trust may think nothing can be worse than Kemper. Thus any new business will be better. And the brain trust knows Mississippi Power’s monopoly faces weak demand growth due to energy efficiency, alternative energy subsidies, and a poor service area economy. (Was Kemper really needed?) Now IOU’s can invest in new businesses and grow. How about a chain of Mississippi Power Oyster Bars? Or Entergy Energizing Fitness Centers?
Or Mississippi Power can make payday loans so poor customers can pay for electricity. The company could be a full service banker. Impoverish customers, and then lend to them – the old sharecropper and plantation commissary model. Its land and credit monopolies worked for planters and friends. However, sharecroppers never got out of debt. “Saint Peter, don’t you call me ’cause I can’t go. I owe my soul to the company store.”
What are friends for? The IOU business model also works for shareholders since the 15% monopoly return is guaranteed. The model could work for customers if regulators were competent and fair and did their duty to assure customers reliable affordable electricity. But regulators seem to favor shareholders. Why? Could it be that shareholders and friends are organized and have lobbyists and lawyers and experts and make campaign contributions? Is that why the IOU business model may spread to the rest of the economy come July 1?
The IOU’s have influential business and political friends. They have symbiotic relationships (i.e., they live off of each other and help each other.) Friends like the Mississippi Economic Council, the Mississippi Manufacturers Association, Atmos Energy, the Grand Casinos, and the Gulf Coast Business Council want to tell the Supreme Court they like the Base Load Act and are cool with construction interest for Kemper. But they may be late with their amicus briefs.
Looks like utilities can now play monopoly with the rest of the economy and make more friends. Who wants to compete with a monopoly? Who can compete with a monopoly? Who will invest and try? Why invest anyway unless you are an insider? Hey, Boss Hogg, can we talk?
Are monopolies good if you are not an insider? Do you remember the last time a monopoly did something new? Or that you liked? Or cut prices? Just askin’.