Thursday, March 21, 2013
Not impressed with first Public Service Commission hearing
I attended my first Public Service Commission (PSC) hearing last week. I was not impressed.
Because power companies have monopolies, the PSC is there to protect the consumer. But that’s not what I witnessed. Instead, PSC commissioner Leonard Bentz seemed irritated at some of the citizens who showed up to protest the new rate hikes precipitated by the new $3.7 billion Kemper lignite plant.
Bentz started the meeting by complaining about “misinformation” published by various reporters and columnists. I guess that includes me.
During a break, I approached Bentz, gave him my card and told him I would be happy to meet with him to straighten out any misinformation. I was not warmly received.
I can certainly understand the pressure Bentz feels. It would make me testy as well. But what about the 300,000 or so utility customers who will soon see a 25 percent increase in their utility bills?
Bentz takes issue with Sierra Club reports indicating rates will eventually go up 60 percent or more. He pointed out that the rate increase is 25 percent, not 60 percent. Regarding this first rate increase, he is correct. But who said this will be the last? It could well be the first of many.
The question is, why are rates going up at all? As a businessman, I buy new equipment to lower my cost of production, not raise it. I don’t recall any brownouts in Southeast Mississippi. So why was this plant built in the first place?
The tab for the new plant is $3.7 billion and rising rapidly. The total number of customers served by the plant is about 300,000 - about a fourth of the state. That comes to $12,000 per utility customer on average. The interest and principal to pay that off over 20 years could easily top $1,000 per year per customer. That’s why tensions are running high.
To be sure, the PSC limited the public’s exposure to $2.4 billion and held firm on that. So the Southern Company went straight to the Legislature and got another billion dollars in bonds, which the customers have to pay back through their utility bills. Those two numbers add up to $3.4 billion.
For the record: Bentz opposed the extra billion that the Legislature approved, and he has no blame for that. Rumor has it that just about every lobbying firm in Jackson was in on the action.
The Southern Company will be looking to its Mississippi customers to pay for the cost of the plant, sooner or later.
There is something very wrong when a company making $3.75 billion in operating profit can force utility customers in the poorest state to pay for an experimental $3.7 billion power plant that isn’t even needed.
Typically, efficiencies are gleaned from decades of tweaking complex industrial processes. I predict this experimental plant will be an operating disaster.
And in the off chance lignite gasification miraculously works the first time out of the gate, the Southern Company owns 90 percent of the patent rights - not the Mississippians who financed it.
Former Gov. Haley Barbour lobbied hard for the project and appointed Bentz to the PSC board. Barbour’s lobbying firm has received $2.6 million from the Southern Company, according to the Sierra Club.
Perhaps when natural gas was $9 in 2008, there was a sliver of logic. But that was a 40-year high. Since then, natural gas prices have dropped below $4. With the advent of fracking, low prices are forecast indefinitely.
For Kemper to break even with the natural gas alternative, gas prices would have to immediately go up to their all-time highs and stay there for the next 40 years. That isn’t going to happen.
As one industry observer put it: “We built a $4 billion experimental plant when all we needed was a few small natural gas turbines to handle peak loads. We could have achieved that for a fraction of the cost.”
A full-scale natural gas plant would have cost one-sixth as much and produced 50 percent more electricity.
Any private company would have pulled the plug long ago. But that’s not how it works in the world of a regulated monopoly. Instead, the Southern Company will spend millions to lobby influential government officials and make Mississippi’s families swallow a huge increase in their monthly power bills. This is the very thing the PSC was designed to prevent. Instead, the commission is enabling it.
Along with Bentz, who comes from the coast, PSC Commissioner Lynn Posey has supported Kemper. Posey represents the Central District where the plant is being built, but his voters won’t have to pay for it. So Posey may see jobs for his district at no cost.
Brandon Presley, the northern commissioner, has opposed Kemper with no small amount of outrage. But he is outnumbered. He has written several guest editorials along the lines of this one, but to no avail.
I have written about this misguided project for years now. Never once has anyone from Southern or the PSC disputed my facts or attempted to show me the light. I hope to meet with Southern Company officials in the near future and visit the plant. Nothing would make me happier than to discover I am completely wrong, for I feel sad that this economic albatross is going to be around the neck of my beloved state for the next 40 years. This is 72 times the size of the beef plant.
I recall taking a government course in college about how regulatory agencies end up getting cooped and manipulated by the very industries they are supposed to regulate. As far as I can tell, this is precisely what has happened here. Monopolies are simply bad for society. Don’t try to regulate them. Break them up and allow consumers choice. Given a choice of electricity providers, I seriously doubt many Mississippi utility customers would have chosen the one with the highest price - even if it is bleeding edge technology.
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