PSC votes to discuss utility donations of ratepayers’ $
by Amy McCullough
Published: November 14,2010
What organizations got ratepayer money and how much?
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Entergy Mississippi’s Disallowed & Allowed Charitable Contributions
Mississippi Power Company’s Disallowed & Allowed Charitable Contributions
The Mississippi Public Service Commission (PSC) has voted unanimously to open a docket to explore restricting the amounts of charitable contributions that public utilities can make and then recover from customers.
The vote comes weeks after the Mississippi Business Journal published a story highlighting the state law that allows regulated public utilities to take credit for charitable and civic contributions that are funded by their customers.
Over the past three years, Mississippi’s regulated electric utilities – Entergy Mississippi and Mississippi Power Company — collectively donated more than $3.1 million to schools, colleges, civic organizations, arts events, chambers of commerce, education foundations, Boys & Girls Clubs, municipalities and other entities for which they were reimbursed by their customers.
State law allows “reasonable charitable or civic contributions” made by utilities to be treated as business expenses. Other states, such as Alabama, Arkansas, Florida and Georgia, do not allow this practice. Louisiana does.
The state PSC comprises three commissioners who regulate electric, water, sewer, natural gas and telecommunications utilities. An open docket allows public citizens, utility representatives and others stakeholders to submit opinions to commissioners for consideration.
Northern District Commissioner Brandon Presley made the motion to open the docket on charitable contributions after reading the Oct. 4 MBJ story, “It’s legal in some states.”
“(The story) put some of the things I’ve been grumbling about for the past several years into print… The story showed in black and white how much ratepayers are paying for these types of giveaways,” Presley said.
“My concern over these donations is not over the charities themselves but the question is whether it should be the ratepayers making these donations or stockholders of the utility companies. I think it ought to be the stockholders. You should not be able to go about spreading goodwill in the name of the company and go take the money out of the wallets of the ratepayers,” he said.
Central District Commissioner Lynn Posey said the Commissioners will be looking at what amounts of utility donations are appropriate for recovery in rate base.
Posey also said, “(The utilities) are allowed a certain amount. It’s strictly state statute.”
When asked, Posey said he could not readily recall to what extent donations were allowed by the law.
However, nothing in state law places restrictions on the amounts. Mississippi code 77-3-79 states that: “Reasonable charitable or civic contributions shall be allowed as cost of service not to exceed amounts established by regulations adopted by the commission.”
The Commission has never created any rules defining what contributions or amounts thereof are “reasonable.” The only Commission rule specific to the practice of donation reimbursement states: “Reasonable charitable or civic contributions shall be allowed as cost of service; however, the Commission shall not allow as cost of service for rate-making purposes any expenditures which it determines not to be reasonable, prudent or in the public interest. Due to the varied sizes and operations of the utilities regulated by the Commission, contributions will be studied individually to determine allowance as cost of service.”
Southern District Commissioner Leonard Bentz said, “I’m an advocate for trying to find every way, shape or form to determine what is beneficial and what is not beneficial in these tough economic times.”
Bentz began serving as a commissioner in 2006, and Presley and Posey were both elected in 2008, making for an entirely new PSC.
Bentz said this Commission, in addition to scrutinizing fuel audits, has been “whittling down” on the utilities’ charitable and civic contributions that can be reimbursed through rate base. He said the numbers that are recovered today are lower than they used to be.
However, according to public records, although the amount of Mississippi Power Company’s reimbursed donations did decrease from 2008 to 2009, Entergy Mississippi’s increased during that same time period. And overall, the amount of utility donations repaid by ratepayers has not decreased since the new Commission took office.
Bentz said making decisions for a regulated monopoly is different than running a private company, and both utility and ratepayer interests must be considered.
“I’ve always been an advocate for telling the whole story. The whole story is that ratepayers are the ones that fund all regulated utility companies in Mississippi. At the end of the day, all these other corporations that make these charitable donations — they make it based on their decisions they make in the board rooms. We’re in a regulated environment, so that means the Commission has got to make those tough decisions and lay it out as to how we want them to handle it… If I make a decision where both sides (the utilities and the ratepayers) don’t get 100 percent of what they want, I have probably made the right decision,” Bentz said.
Contributions First Screened by Public Utilities Staff
The Public Utilities Staff, a separate body from the PSC, initially reviews utility expenses and charitable contributions filed for reimbursement in rate base, disallowing any expenses it thinks are inappropriate. Any disallowed expenses are passed back to utility company shareholders.
The Staff was formed in 1990 by the state Legislature to act as an independent body of technical professionals who give rate-making advice and research to the PSC, which votes on rates.
Previously, the Staff was under the authority of the Commission. The Legislature’s decision to separate the two entities followed a 1989 federal grand jury indictment of one Mississippi commissioner and another former commissioner for taking bribes related to PSC business.
Staff executive director Bobby Waites said he favors the Commission’s recent decision to open a docket on charitable contributions, because additional parameters would make his job a lot easier.
Currently, the Staff uses overall numbers provided by previous Commission-approved rate cases as benchmarks when looking at charitable contributions, Waites said. Items specifically prohibited by law, such as lobbying expenses, as well as costs such as spousal travel, club memberships and any donations that provide a company benefit are not allowed to be recovered in rate base.
“We don’t allow Christmas turkeys,” Waites said.
However, records show the Staff has allowed donations to organizations and events such as the Como Opera Guild, Dixie National Sale of Junior Champion, Meridian Youth Baseball and the Gulfport Annual Easter Egg Hunt Sponsorship to be included in rate base. Those donations were subsequently approved by the PSC.
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