Nevada County Picayune and Gurdon Times Newspaper Archive

Electrical Utility Officials Hold Conference

The existing tax structure used to collect nearly $200 million in taxes from the electric utility industry in Arkansas will have to be changed if the industry is restructured, according to Lavenski Smith, chairman of the Arkansas Public Service Commission (APSC).

Or maybe not, depending on which of several expert witnesses who testified during the Utility Deregulation Conference, sponsored by the Arkansas Center for Public Affairs, you choose to believe. The two-day conference was at Fairfield Bay June 30 and July 1 was another in a series of conferences designed to help legislators, trade associations, APSC officials and electric utility executives identify the issues and answer questions that will have lasting effect on the industry.

During the 1997 session of the Arkansas General Assembly, a joint committee of the House and Senate Insurance and Commerce Committees was charged with studying the issue of electric industry reconstructing and presenting a bill for consideration during the 1999 legislative session.

Since that time the joint committee has held five public hearings to gather relevant information.

During the most recent conference, participants voiced widely divergent opinions on the need for restructuring and the ultimate benefits or problems that would be created for Arkansas' businesses, commercial and residential consumers.

Smith voiced the APSC opinion that opening up the Arkansas electric industry to full competition will be good for the state's citizens, "If done correctly." He added that residential rates for Arkansas' residents would change as deregulation pushes rates closer to the actual cost of generation.

Further, Smith cautioned legislators that they must address the issue of reliability of the electric generation, transmission and distribution systems. "Reliability will need continued monitoring. It is not a bargain to pay less for electricity and lose reliability," he said.

Citing the state's move toward allowing customers a choice in their selection of a generating company, Smith said this deregulation process could be "the state's last great rate case." He also noted that the present tax structure would have to change under deregulation. "The legislature will have to make sure these changes are made."

In addition to the APSC chairman, four other speakers shared the view that electric utility restructuring would have an impact on taxes. Chris Rogers, an attorney representing the electric cooperatives, expressed concerns about the effect restructuring would have on school districts and local government.

"Our concerns center around the impact ad valorem taxes, which out-of-state suppliers would not pay, would have on local governments and schools. These taxes are based on assessed values of generation assets. In a competitive market these values cold decrease significantly and thereby reduce available revenues," Rogers said.

"The cooperatives hope that any legislation that is considered would balance revenues so that our local communities would not be harmed," he continued. "Our cooperatives depend on strong rural communities to continue the growth and development of Arkansas."

The APSC chairman noted that much remains to be done in addressing open access to the transmission system through which every generation provider would reach the distribution system and individual customers, and insuring that all companies doing business have the financial backing and capability to serve.

Ricky Bittle, director of planning, rates and dispatching for Arkansas Electric Cooperative Corporation, the wholesale power generator for the Electric Cooperatives of Arkansas (ECA) cautioned the group that controls must be in place to monitor and mitigate the effects of "market power" presently possessed by large investor-owned utilities.

The cooperative and the municipally-owned electric systems in Arkansas, according to Bittle , are "transmission dependent" since a few large companies own and control access to the transmission grid. He said any power provider who wishes to use the transmission grid would be at the mercy of those companies. "They could delay or limit the right to move power over the grid to the detriment of the local distribution system and consequently affect the quality of power to the end user."

To avoid such a problem, the electric cooperatives advocate creation of an Independent Systems Operator (ISO) responsible for scheduling power over the transmission system, collecting transmission fees and possibly state taxes that may be levied against both in-state and out-of-state generation providers.

Bittle noted that the Southwest Power Pool (SPP), is a voluntary association comprised of power generators in Arkansas and six other neighboring states which work together to ensure a dependable supply of electricity to the region. "The power pool is capable of serving as the ISO for this region. They have the pieces in place to set up the system and would be independent," he said.

Other considerations as the legislature moves toward a decision on deregulation of the electric industry should also include a workable timetable for implementation. ALERT (Alliance for Lower Electric Rates Today) advocates an immediate and aggressive more to deregulation.

Large industrial consumers such as those represented by ALERT would experience more dramatic savings with rapid implementation of customer choice legislation. Some of the largest corporations in the country belong to ALERT. The group's largest membership includes industrial giants such as Weyerhaeuser, Tyson foods, Wal-Mart, Riceland Foods and other large energy customers.