Tuesday, February 11, 2020

Bigger Pie Forum: What's Wrong with How Mississippi Regulates Utility Bills?

What’s wrong with how Mississippi regulates electricity rates? The short answer: No one in the process represents only the customers – the everyday Mississippians who pay their electric bill.

 Entergy Mississippi and Mississippi Power Company are regulated by the Public Service Commission because they have a monopoly on providing electricity to their service areas and because they are owned by investors, not customers. (In contrast, rural electric cooperatives are not regulated by the PSC because they are owned by their members, who are also their customers, who have a voice in how the cooperative sets electricity rates. Rates in the TVA region are set by TVA, an agency of the federal government.)

When Entergy or Mississippi Power want to increase their rates or to build a new power plant, they have an army of lawyers, engineers, accountants, etc., to present their case to the PSC for approval. The people in their service areas who pay for their electricity have no practical way to challenge these proposals to increase their rates. It’s not that they are legally prevented from challenging the utilities, but they don’t have the expertise or the money to be able to fight a rate increase or to challenge the building of a plant (or other actions) that will increase their rates in the future.


Presumably, the PSC represents the people who elected them, which includes ratepayers (customers). But the elected Public Service Commissioners themselves don’t have the needed expertise to evaluate utilities’ proposals. They rely on a separate entity called the Public Utilities Staff (PUS) to evaluate those proposals, and they almost always rubber stamp the PUS recommendations.

The PUS was created as a separate agency 30 years ago after two PSC Commissioners were indicted for taking money from the utilities in exchange for approving what the utilities wanted.

But rather than establish the PUS to represent customers alone, the law gives it the task of “balancing the interests” of customers AND the utilities. In the PUS annual report, its Legal Division is described as having the “dual role of advisor and adversary.”

This would be similar to hiring an attorney to represent you in court, and then finding out he or she is required to also represent your opponent in the same case. That would be abhorrent in our legal system; it should be abhorrent in our regulatory system.

What is needed

First, it should be noted that this is not a criticism of the current Public Utilities Staff. To use the analogy above, you could have the most competent and honorable attorney representing you, but you still wouldn’t want him or her to “balance your interests” with those of your opponent. That is for the judge to decide.

In the same way, the utilities should represent themselves (as they already do), and there should be a ratepayer advocate’s office to represents ratepayers only. This could be accomplished by focusing the PUS’s mission on representing ratepayers alone, removing the “balancing” act they are now required to attempt. Then both should present their cases to the PSC, which would act in the role of a judge by hearing both sides and issuing a decision that balances the interests of the utilities and the ratepayers.

Objections

One objection to this idea is that it might cost taxpayers more money. Since Commissioners lack the expertise to evaluate these sometimes highly-complex cases, they would need to hire experts to provide the help that is now provided by the PUS. But, to return to the lawsuit analogy, judges often hear cases in which they have no expertise, so they hire “special masters” who have the needed expertise to advise them. The PSC already has similar authority, and the cost is assessed to the utility, so there is no additional cost to the taxpayers. Another option is to take part of the PUS and make it an independent ratepayer advocate, and transfer other PUS staff to the PSC.

Others say a ratepayer advocate is not necessary because the Attorney General has jurisdiction to intervene when necessary. While this is technically true, it is not a practical answer. First of all, the Attorney General’s office is even less equipped than the Commissioners to engage in these cases. That office currently has one attorney who has the PSC as one part of her portfolio. Even if it were desirable for the AG to take this on, most of the PUS would need to be transferred to that office in order for the expertise to be located where it would be needed. Second, the Attorney General is allowed to accept campaign contributions from utilities (PSC Commissioners are not), which could lend itself to favoritism toward those companies in making a decision to challenge them at the Commission or in court.

Conclusion

Most states have ratepayer advocates of some sort. Mississippians who pay the electricity bills should have that, too. We believe if such an advocate had been in place at the beginning of the Kemper County Power Plant fiasco, the development of that project would have ended much sooner. The issues that eventually caused the PSC to shut down the project were present in the very early stages of process, and those issues would likely have been pursued earlier and more diligently by an independent advocate than by an entity tasked with balancing the interests of the customers and of the company that would force them to pay for the plant.

Few people realize how close Mississippi Power customers came to being on the hook for the bulk of the $7.5 billion cost of that plant. At some point in the future, another speculative project will be proposed by an electric utility, and when it does, ratepayers will need an advocate who will scrutinize the project on their behalf. In the meantime, there will be plenty of other proposals by the utilities that will affect the budgets of the Mississippians they serve, and those proposals should be scrutinized by a ratepayer’s advocate as well.

A true advocate who is focused on the interests of customers – not one that has to balance their interests with those of the utilities – will help protect the people who otherwise have no voice in such a significant part of their budget and their lives.


This post was authored and sponsored by Bigger Pie Forum. 

11 comments:

Anonymous said...

A ratepayer advocate is needed long term. The new board promises to do things differently, we shall see.

Anonymous said...

Well, somebody had to pay for all the legal fees when Hood sued the utility company. You know, the case which mysteriously went away after Hood ran for governor.

Anonymous said...

How much LOWER would my electricity bill be if the rube Cooperative Energy REA's stopped hawking all their little hermit socialist kingdoms in the afternoon commercials on TV???? These arse wipes need to be regulated! They have a multitude of different rate schedules where one ratepayer subsidizes another rate payer. They should be fair game for Shad White. Check out their 990 forms online. Big salaries

Anonymous said...

Not a statewide utility, but Shad, or the PUS, or PCS should investigate the City of Brandon's water bills. A lot of people are very vocal about the high water bills to the tune of several hundreds of dollars a month and it falls on deaf ears. City of Brandon sends someone out and they claim its a leak "on your side of the meter" and when a plumber is called, no leak can be found. They wont do anything about it. The mayor could care less as Butch tries his best to deflect until he can get elected to a higher statewide position(which he couldn't pull off last election). You cant get anything done at the city level, someone needs to advocate for the consumer.

Anonymous said...


This is an old column by BPF and it is not their best. And in the interest of full disclosure (well, as much as you can under an "anonymous" byline) I worked at a private utility in Mississippi and have seen the regulation situation first hand.

The first question BPF needs to ask is: how do Mississippi's electricity rates compare with other states. Last time I checked we had some of the lowest rates in the southeast. You can't just say "the system is flawed" without telling us why. If our rates are among the cheapest, most consumers aren't going to care much about flaws in the system.

Then there is this line:

[In contrast, rural electric cooperatives are not regulated by the PSC because they are owned by their members, who are also their customers, who have a voice in how the cooperative sets electricity rates.]

That is probably how it should work, but it practice it does not. It is my experience that customers of co-ops believe they have lower rates because none of their money is going to "high paid executives," but if you ask them what their rates are they have no idea. If BPF had taken a few minutes to crunch some numbers they would see that private utilities (Entergy anyway, not sure about MS Power post Kemper) almost always have lower electricity rates than the co-ops. Also, ask your average go-op customer how much of a "say" they have in setting rates.

BPF is right a lot of the time and might even have a point this time if they provide more data. As things go in Mississippi, however, a better idea on electricity rates (make your own light bulb jokes) would be to let the MPSC and MPUS open the books of the co-ops in MS and give some of their customers relief.

Anonymous said...

All the REA's want is the individual meter-owner's "Proxy". If you mail your proxy vote back in to the coop, the existing coop board will "vote for you" generally to re-elect an existing board member. There is no way in hell a coop member- owner (ha) has any say in setting rates or rate schedules. big damn lie.

They want your proxy, and then shut up and get the hell out of our way.

Anonymous said...

2:11, you are so right. I once lived in a pretty rural area and belonged to an REA that, when you filled out your proxy and sent it back in you were automatically registered for a shotgun giveaway! The members couldn't wait for their chance at that every year. I'll bet 90% of the proxy's came back the next day with no other consideration!

Anonymous said...

The Southern district had Leonard Bentz and we know how well that worked out.
The best thing you can do is move out of a MS Power service area into a co-op and then get on time of use.

The three member PSC is a joke.

Anonymous said...

@ 1:34

I'm beginning to agree. For the last 18 months my bill has averaged $125. Just before then, it was around $75. I've checked for leaks and checked to be sure the meter isn't running without water being used (toilet leaks, etc) and there is nothing there.

I believe the rates increased around the time my bill went up, both flat rate and usage rates. Either way though, it really is ridiculous the way they are gouging residents for water services, especially considering the city property tax rates are some of the highest.

Anonymous said...

Thanks to having some of the lowest energy costs in the world, Mississippi is a great place to mine cryptocurrency.

Anonymous said...

Agreed the city of Brandon is damn joke , leadership is anti first responder as well. Unfortunately I don’t see anyone stepping up who will change the public utilities Dept to a positive anytime soon.

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