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Would power deregulation help economic development?

The lengthy process of determining the fate of electricity deregulation has been steady, but purposefully slow, decision-makers say.

“A plan that would benefit everyone through lower rates and assure that no one pays more for electricity takes time and thorough research,” said Nielsen H. Cochran, who is serving his fifth term as the state’s central district public service commissioner.

“Our first basic issue is making sure no one would pay more for service and that requires looking at many options,” he said. “The second issue is, would economic development be enhanced by electric deregulation? At this point, we can probably ascertain that more than likely, in our opinion, economic development may be enhanced simply because large industrial users who can currently negotiate a lower rate with their existing electricity provider already do that. In a competitive environment, the attractiveness of competition more than likely would generate an intense interest on behalf of these electric marketers to go after these industrial users. Economic development may be enhanced because of its attractiveness of competition to large market users.”

The same cannot be said about residential markets, Cochran said.

“There’s a distinct difference,” he said. “The third issue we had to address was…would competition be in the public interest? We asked that question to economists at the hearings, and they all said yes, that the public interest would be better served. We even asked if some consumers enjoyed lower rates while other consumers could possibly see an increase in their rates…would that still be in the public interest? Almost every economist said yes. I would find it very difficult to go to the Legislature and draft a bill that generally would say we may need to raise some electrical rates, but you’re better off in the long run because it’s in the public interest.”

North Mississippi Public Service Commissioner Dorlos “Bo” Robinson, who recently began a third term, said most north Mississippians “are not even aware of the fact that we are studying deregulation.”

“A high percentage of the ones I’ve talked to are opposed to deregulation,” he said. “I think they fear rates would be higher for residential customers. I’ve gotten positive response from people in industry who are for it.”

Robinson said he is positive about progress made on the deregulation issue.

“We’ll come forth with an order, but not in the next couple of weeks,” he said. “It’s a difficult task determining what might be best for the people. I’m not in a position to give a more definitive response than that.”

Hobson Waits, of the Electric Power Associations of Mississippi, said the PSC’s cautiousness in the decision-making process is appreciated.

“We are pleased with the thorough manner in which the Public Service Commission has handled the complicated issue of restructuring the electricity utility issue,” Waits said. “The PSC has studied restructuring for more than three years and has obtained a wealth of knowledge and information from industry experts. Even with this intense study, the PSC, to this date, has not made a final decision. This should be viewed as the Commission’s commitment to carefully review all aspects before making decisions and certainly demonstrates the complexity and seriousness of electric utility restructuring.”

Could retail competition be allowed in the industrial arena and remain status quo in the residential arena?

“We have raised that scenario,” Cochran said. “The problem is, in a regulated environment, which we have now, stockholder-owned utility companies have fixed costs, like a utility pole that needs to be replaced. Let’s say the pole costs $300 and it costs $1,000 to install a transformer. You’ve got an investment of $1,300 that’s rightfully paid by ratepayers. Let’s say you’ve deregulated your large industrial users. Now, they are not paying toward the replacement of that transformer and utility pole. Somebody else is serving them. That’s an oversimplification but if you allow part of your consumers to be able to pick and choose or negotiate their electricity costs, then you’re going to have some residential consumers or some small businesses, like McDonald’s, or Tote-Sum Stores whose owners may say, ‘I’m not an industrial user, but if I get all the other Tote-Sum Stores in my chain of operation to aggregate our usage, wouldn’t we be better able to negotiate a better electric price?’ Where do you draw the line? A municipality, or even a subdivision, may want to negotiate the best price to serve everyone.”

Aggregation is another option based on the proposed plan, he said.

“That’s certainly a way residential consumers could, theoretically, aggregate all their usage at the Reservoir, for example, to see if they could get a better price,” he said. “It’s highly unlikely. What happens if you have a family member that works for Entergy and another that works for another utility company? Theoretically, it’s possible. Practically, it’s unrealistic.”

Even though the process has been lengthy, the issue is too important for a rush decision, Waits said.

“It is necessary to move at a controlled pace and spend adequate time studying the many issues related to restructuring to be sure no decision will be made which will impact any customer in a negative way,” Waits said. “It is imperative that proper decisions be made to protect the people served by electric power associations, especially residential customers.”

Contact MBJ contributing writer Lynne Wilbanks Jeter at lwjeter@yahoo.com, mbj@msbusiness.com or (601) 364-1018.

About Lynne W. Jeter

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