Submitted by Patrick Sullivan
“Compared to all other states, Mississippi is among the lowest cost states and is not dealing with energy scarcity risks… something is going right,” the Mississippi Energy Institute President writes.
Winston Churchill wrote, “Those that fail to learn from history are doomed to repeat it.”
As Mississippi families and businesses painfully adjust to high energy prices, understanding the main causes is important because politicians and others will point to myriad things to blame.
In Mississippi, about 80% of electricity generated comes from natural gas, so when U.S. natural gas prices more than double in a one-year span, electricity prices go up. Come winter, it will show in high heating bills. That causation is obvious.
Some people may seek to blame something local, like Mississippi’s regulated utility system or new solar generation projects. Compared to all other states, Mississippi is among the lowest cost states and is not dealing with energy scarcity risks due to short supply or inadequate infrastructure like other places. Comparatively, something is going right.
It doesn’t take an expert to know high-cost energy is bad for the economy, but even worse is high-cost, unreliable energy. Cost and reliability should be the two main fundamentals guiding energy policy.
Mississippi elects Public Service Commissioners to oversee regulation of private electricity and natural gas supply systems, getting the best of both worlds in private sector innovation and efficiency mixed with government transparency. While no system is perfect, several decades of practice provide a generation of experience to evaluate.
Economies of scale makes regulated utility systems work when governed correctly. Mississippi is one of the only states where the companies’ returns are incentivized on three factors: customer price, customer reliability and customer satisfaction. Also, in order to recruit more business and increase sales, utilities have an economic incentive to provide low-cost energy.
As old, inefficient electricity generation facilities close and as demand grows, new generating facilities are needed. Already very reliant on natural gas for electricity, only adding gas plants will eventually result in total dependency on a single fuel source.
Nuclear power from Grand Gulf makes low-cost electricity for Mississippi, but with the lack of a federal nuclear energy policy, building new nuclear is very costly and takes many years. Mississippi has some coal generation, but the U.S. government has made it near impossible to build new coal plants even though coal use globally is increasing.
For diversification, Mississippi electric utilities have added some solar facilities into the mix. At least for the foreseeable future, solar will make up a small percentage of Mississippi’s generation due to its intermittent nature, but some solar power fits into our system for several reasons.
Electricity generating costs are highest when power demand peaks. Sunshine corresponds as summer power demand is peaking when AC units across the state are laboring to keep us cool. Also, more and more, companies looking at new business opportunities want access to some renewable power generation, so solar projects stand to help the state recruit new industries. Like all generation, solar projects in one utility area aren’t paid for by customers in another part of the state.
Thankfully, Mississippi is a well-supplied, reliable energy state without the scarcity challenges seen elsewhere. Electricity and natural gas systems here are among the top in cost and reliability. Absent the occasional storm outage, where local utility workers have become exceptional at restoration, Mississippians don’t have to worry with disruptions and threats seen in other places.
Just a few examples are the tragic energy crisis in Texas in early 2021 still with ongoing grid and supply challenges, the repeated planned blackouts in California, the annual winter natural gas shortages in New York, and the disastrous situation Germany is in by cutting at-home production and relying on Russian gas. To be sure, Mississippi has avoided making bad decisions that caused these crises.
At the peak of the last energy price spike in 2008, then-Governor Haley Barbour prophesied that “ten or fifteen years from now, companies looking to site facilities will ask about energy… ”Can we get it?”
Mississippians are facing the consequences of federal policies that constrained or outright prevented energy supplies to be developed or delivered while demand was quickly growing. Even so, Mississippi’s claim as a reliable energy state with costs lower than most places is a real competitive advantage and one that ought to be leveraged.
To avoid the economically catastrophic energy shortage events happening elsewhere, Mississippi’s energy policy should play on our strengths and continue to encourage more development of all types of energy. We’ll remain better off for it despite dysfunction in D.C.
Submitted by Patrick Sullivan. He is President of Mississippi Energy Institute.