Should Entergy’s customers pay more for less?

Guest contributor Kelley Williams argues that recent power rate increases are not warranted and are the result of misguided focus on renewables.

Entergy Mississippi is an electric utility.  It has a legal monopoly in 45 counties with almost 400,000 residential customers (households).  It is regulated by the Mississippi Public Service Commission (PSC).  The PSC has allowed Entergy to increase rates for these customers 32% over the last three years.  Why?  Should customers pay even more for less?

Entergy has some old and inefficient generating plants.  They are expensive to operate and maintain.  So, their electricity is expensive.  The PSC’s main job is to see that utilities provide affordable reliable electricity.  It hasn’t done its job.  It should have encouraged Entergy to replace the old plants years ago.  It didn’t.  That may explain the 32% rate increase.

The PSC was busy encouraging Mississippi Power’s Kemper County Lignite plant experiment.  It took seven years and $7.5 billion for the PSC to admit the experiment was a failure.  Then the PSC approved $986 million to salvage pieces of the failure for a hybrid natural gas plant, $114 million to transmit its power to Mississippi Power’s monopoly service area, and another $78 million for “regulatory assets.”

Oops.  Now the PSC says Mississippi Power has too much power.  It must shut down some other plants to make room for the hybrid’s power.  So, customers will pay $1.2 billion for the unneeded face-saving salvage job, plus costs to shut down operating plants.  Seems there’s no end to customer pain from the PSC’s Kemper experiment.  To be fair, it had help from a Governor, Department of Energy bureaucrats, contractors, consultants, out of state workers, and other pilot fish.

Now it’s doing it again.  Different experiment. Different commissioners.  Different promoters.  Different Governor.  Some of the same lobbyists, bureaucrats, and pilot fish.  Similar predictably bad results for customers.  Are we slow learners or what?

The experiment this time is solar power.  The PSC is the enabler.  Entergy is the experimenter.  Customers are the guinea pigs – again.  Entergy already has one solar plant.  It plans more.  Estimated total cost is $1.2 billion.  Kemper deja vu all over again.

Entergy’s solar dreams are also built on exaggeration, wishful thinking, and some outright lies.  Here are some examples.  Sunshine is free, therefore solar electricity is cheap. Government subsidies and tax breaks pay most of a solar plant’s cost, therefore solar plants are almost free.  Solar plants don’t emit carbon dioxide, therefore there will be fewer climate change disasters.

Solar proponents ignore solar’s intermittency (plants don’t work 70- 80% of the time) and its resulting blackouts.  They fantasize about batteries that will store enough power to deliver (dispatch) electricity when solar doesn’t work.  Until fantasy becomes reality, utilities that build solar plants must also build natural gas plants to dispatch power when solar can’t.

So, customers pay twice – for solar plants and for natural gas backups.  That’s the real appeal of solar for utilities.  They get to build more plants.  Thanks to the PSC, they break even on their higher cost electricity.  They make money financing the plants.  They get a guaranteed 10%+ return on capital invested.  The more plants the PSC approves, the more utility shareholders make.  And the higher customers’ rates – for dirtier (less reliable) electricity.  That’s paying more for less.

Utilities take advantage of laws the legislature passes.  They help the legislature pass more laws that favor them.  Their executives do their jobs.  They’re good at it.  They make millions.  Last year, the CEOs of Entergy Mississippi and its parent company made $14.8 million.  The companies spent millions more on lobbyists, public relations, and lawyers.

Last year, the three PSC commissioners made $234,000.  Total.  The PSC’s budget was $4.4 million.  The PSC is over matched.  It’s high school vs. the Kansas City Chiefs.  Rules, referees, talent, and compensation favor the pros.  The game is rigged.

Small customers suffer.  Big customers don’t.  They have their own highly paid CEOs, lawyers, lobbyists, and flacks.  They get special deals.  They get help from the Mississippi Development Authority and other state agencies.  Or they don’t build plants here.  That create jobs here.  That politicians here can brag about.

What about importing clean electricity from other states to keep rates lower here?  Good luck with that.  The legislature just gave Mississippi’s utilities a monopoly to transmit imported electricity too.

So why don’t entrepreneurs in Mississippi use natural gas from pipelines that cross the state (transporting gas from Texas, Louisiana, and offshore to the Northeast) to generate and export electricity to growing markets in the Southeast?  Well, that’s been tried.  Mississippi’s monopoly utilities wouldn’t take or transmit the upstart’s electricity.  The PSC couldn’t be bothered.  The upstarts went bankrupt.  The monopolies then bought their plants for pennies on the dollar.

Some slow learners still play in rigged games.  Why?  There’s an apocryphal story about a cowboy who said: “Yeah, I know the game at the saloon is crooked.  But it’s the only game in town.”  Smart money doesn’t play in crooked games.  It looks for level playing fields – those without Certificates of Need that create healthcare monopolies, without occupational licensing barriers that protect incumbents, without captured regulators, swinging door regulators, home-cooked crony capitalists, etc.  So, there’s not much smart money that’s investing here.  It’s going to states more open for business.

If you have drunk the “climate change is destructive” Kool-Aid, don’t despair.  Earth’s average sea level air temperature is a Goldilocks 59º F.  It’s warming gradually due to natural causes, not carbon dioxide.  Warm is better.  More arable land.  Longer growing seasons.  More food.  Carbon dioxide in the atmosphere is 410 parts per million – just above life sustaining minimums.  It’s increasing gradually too.  More CO2 means a greener lusher planet.  The earth is about halfway through a 12,000-year interglacial warm cycle.  Enjoy it for another 6,000 years.  Mankind didn’t create it.  Mankind isn’t destroying it.  (For more good news, see Bill Penky’s A Tale of Two Climates: One Real, One Imaginary.)

Solar panels won’t stop natural climate change.  (Neither will windmills.)