Nevada County Picayune and Gurdon Times Newspaper Archive

Utility Deregulation Bad For State

Utility deregulation could adversely affect Arkansas and Arkansans.

Ron Endsley, with the South Central Arkansas Electric Cooperative, told members of the Clark County Industrial Council deregulation is coming whether anyone in the state wants it or not.

There have been hearings on the subject, with State Rep. Percy Malone and members of the Arkansas Public Service Commission (PSC) attending. Most in Arkansas, Endsley said, don't appear to want deregulation.

However, the choice is not going to be left up to the people of the state. This is because larger, more heavily populated states, such as California, need cheaper electricity than they can produce and want to buy it from states such as Arkansas.

This will cause the price to increase, while giving few benefits to Arkansas electricity consumers.

"I think there will be competition in Arkansas," he said. "My guess is by 2003."

According to Endsley, the discussion in Washington, D.C. and Little Rock is centering around the deregulation of the generation process. The company owning the lines now will still own them once deregulation is in place, with customers only shopping for the generation part of the process.

The Legislature and PSC will have to make a decision as to how deregulation will be put in place in Arkansas otherwise it will be ordered by mandate from the Federal Energy Regulatory Commission (FERC), something Arkansans don't want or need.

Currently, he said, power companies without generating plants are pushing hard for deregulation. At this time, the cost of electricity in Arkansas is about 2 cents per kilowatt hour below the national average.

When deregulation goes into effect, he said, this will change and the rets will go up. This, he added, will hurt Arkansas in competing for industrial recruitment, because the state could no longer offer better electricity rates to potential industries as an incentive to locate here.

People in areas already under deregulation have joined together to negotiate prices, he said, but this is only for the electric part of their bills. The South Central Co-op, he said, spends 65 percent of its money to pay for power, with the rest going to run the organization and keep everything maintained.

One of the major problems of deregulation could be residential service, he said. Some electric cooperatives don't want to service residential users because there isn't enough profit in it for them. But, he added, the cost of operating such cooperatives could easily be shifted to residential users, thereby making their bills much higher.

"Deregulation is coming," Endsley said. "I think the first step will be by 2003 unless the feds regulate it sooner."

Another problem with deregulation, Endsley said, is there will be no excess capacity left. Currently, about 15 percent is kept back for emergencies such as power outages or the peak demands in extremely hot weather. With deregulation there will be no reserves and this could prove to be a problem.

"I can see no benefits to deregulation in Arkansas," Endsley told the CCIC members. "I don't know what to expect. It will be up to the general assembly and PSC."

Consumers could be faced with more telemarketing when deregulation occurs, he said. They could be solicited by electric companies the way they currently are by telephone companies.

Consumers could actually end up dealing with three different companies for their electricity one for the wiring, one for transmission and a third for generation of the electricity.

And, he said, customers could end up spending as much as $200 for a meter in order to get the lowest price on the generation portion of their bill.

Malone said several states have already been through the deregulation process, including California.

At this time, he said, there are no incentives for utility companies to take the risk and build new generating plants with deregulation.

It's a complicated issue, he told the CCIC.

However, the entire situation will be different for municipalities with their own power companies. These cities are not regulated by the PSC, but fall under the guidelines of the FERC.

Endsley said cities will be able to negotiate for lower rates because of this as they are basically subsidized by taxpayers, while the PSC will determine what the utility companies can charge.

"I think the General Assembly will do something," Malone said, "but we won't rush into it. Term limits aren't helping."

Malone said the problem will be to create an environment for universal service, such as the telecommunication industry has, and not leave the little customer out or stuck with higher bills.

In other business, Karen Jester told the CCIC members the July is Industrial Appreciation Month in Arkansas, with the annual Industry Appreciation Lunch scheduled for noon, Tuesday, July 7, at Bowen's Restaurant.

Barbara Pardue, executive director of the Arkansas Economic Development Commission (AEDC), will be on hand to speak.