Arkansas Legislators to Consider Measure Regarding Electricity Deregulation

Mar. 28, 2001

Arkansas Legislators to Consider Measure Regarding Electricity Deregulation

By Jeffrey Tomich

The state's largest electric utilities and its biggest industrial power users are squaring off over a bill that would let industry effectively sidestep the delay in electric deregulation.

Legislators may take up as soon as today a measure by House Speaker Shane Broadway, D-Bryant, that would let power users shop for a new electric supplier before Oct. 1, 2003 -- the earliest date by which residential customers and small businesses will have a choice of power companies.

Under the bill, the Public Service Commission would decide if industrial customers can buy power from a third-party generator or marketer. Utilities now have the right to serve all customers in their designated territories.

Jerrell Clark, executive director of Arkansas Electric Energy Consumers, a coalition of 25 of the state's biggest power users, said the measure would cut costs, aid economic development and reduce the chances that Arkansas will face a power shortage like California's.

Power consumption is growing in Arkansas, and utilities such as Entergy Corp., AEP Swepco and Oklahoma Gas & Electric haven't built new power plants in years. But with competition delayed until at least 2003, utilities will increasingly have to purchase power or add generating capacity to meet customers' needs.

"The fact remains that the utilities will have to go to the market [to buy electricity] or build, and the ratepayers are going to be impacted by that," Clark said.

One solution is letting big power users shop for an alternate supplier, thus freeing up existing electricity supplies for other customers, he said.

Broadway's bill would also allow companies, such as Alcoa or Acme Brick, that own electric generation facilities in other states to transmit power to plants in Arkansas. Currently, that's prohibited.

Utilities, which face the prospect of losing some of their biggest customers, oppose the bill.

"We're reluctant to support anything that speeds up competition for any particular customer group," said Bob Lyford, vice president and general counsel for the Arkansas Electric Cooperatives Corp., the wholesale power supplier for 16 rural electric co-ops serving more than 400,000 customers.

Lyford said appropriate mechanisms aren't yet in place to support competition and allow customers to switch suppliers.

The cooperatives had sought to delay deregulation until at least 2005. And unlike the state's investor-owned utilities, they are adding new generation capacity. On Thursday, the group requested permission to triple the generating capacity of its Fitzhugh generating station near Ozark.

Other groups, including New Orleans-based Entergy, the state's largest electric utility, and the Arkansas attorney general's office, have also expressed concern that letting large industrial customers choose suppliers now would shift costs to small business and residential customers.

"Entergy is a proponent of competition. However, we are an advocate of doing it right," spokesman James Thompson said.

If the bill is passed, it would give the Public Service Commission sweeping power to let customers choose their electric supplier. The agency is taking a "neutral" position on the legislation, though it did contribute to its wording, Chairman Sandra Hochstetter said.

Hochstetter said language in the bill does ensure it's no threat to consumers.

The bill would require that the Public Service Commission hold a public hearing on each request by a utility customer to purchase electricity from a third-party provider to ensure there's no adverse impact on other customers.

"With the PSC as the gatekeeper and all of the consumer protection measures in place, I don't see the potential for harm," Hochstetter said.

Hochstetter said there are additional means for easing a potential power shortage, but the proposed bill would be "one more tool in the toolbox that gets us through this transition." Under an amendment to Act 1556, signed last month by Gov. Mike Huckabee, electric consumers will be allowed to choose an electric supplier no sooner than Oct. 1, 2003. Competition could be delayed as late as 2005.

Arkansas Electric Energy Consumers, the coalition of big power users, didn't oppose the amendment to push back the start date for deregulation, which got broad support among lawmakers. But it immediately sought a way to get around the delay.

The state's largest power users are expected to be among the first to benefit from competition because suppliers will be more willing to give bigger users a price break. Currently, large electric customers subsidize service for small commercial and residential users.

The Public Service Commission held hearings on the need for additional power supplies during the transition to competition. It has yet to report its findings. However, the agency's executive director, John Bethel, said the commission will soon begin a study to look at electricity supply and demand in Arkansas.