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Arkansas Power & Light, renamed Entergy, has made numerous attempts during the past 50 years to escape rate regulation but maintain its monopoly in its service area. The electric co-ops and natural gas utilities support Entergy's efforts.
Utility regulation has two essential components. The regulatory commission defines the geographical area where a utility offers exclusive service. The utility is a monopoly. In exchange for the monopoly franchise, the regulatory commission sets the rates (the prices) the utility charges its customers.
Utilities adore the monopoly in their service area but despise the commission's oversight of their rates. Utilities constantly battle the commission during rate-making hearings and continually seek escape routes.
Readers recall one of the first escapes with the Arkansas Public Service Commission's approval of the fuel-adjustment clause in the 1970s. At the time, the utilities threw up their hands, attempting to respond to fluctuating fuel prices. Implementing the fuel-adjustment clause transferred the risk of fluctuating fuel prices from the utility to the consumer. Utilities were pleased, while customers were miserable every month.
Utilities continue to be unhappy with the rate regulation by the PSC. In recent years, the legislation eliminated many hurdles in the utilities' favor, including shortening the period between filing a rate increase and the PSC's decision. However, this was not the only change. All the changes nibbled away the discretion vested in the PSC and, by legislative fiat, commanded the PSC to accept the utility's rate requests with little modification.
Underlying utilities' claims and assertions are that they refuse to accept that rate regulation limits their profits. Deregulating the rate-making process increases a utility's profits and increases utility rates. Still, they fully support their monopoly protection (no competing vendors of electricity or natural gas) provided by regulation.
In this legislative session, utilities mount a full-blown effort to undo and destabilize rate regulation.
Sen. Jonathan Dismang (R-Searcy) and Rep. Les D. Eaves (R-Searcy) filed Senate Bill 307 on Feb. 25. The bill is titled "The Generating Jobs Act of 2025." The title is grossly misleading. The correct title should be "The Arkansas Utility Deregulation Act of 2025."
The supporters titled it "Jobs Act" because no one opposes economic development. When economic development is the purported issue, everyone marches to the same tune.
Supporters emphasized the potential shortage of generating capacity, transmission facilities, and substations when none exist. No supporter offered any evidence or evidence of actual or potential shortage. Supporters offered bluster, smoke, and forecasts of continuous heavy rains if the bill did not pass out of committee.
The bill is 61 pages long, and effectively replaces the existing regulatory legislation by defining, at length, the new and revised powers of the PSC. The effect of the new legislation is extensive deregulation of monopoly electric and natural gas companies' rates.
SB307 and a replica in the House increase the profits of both electric and natural gas companies. Utility rates will likely rise slowly, followed by a continuous upward path. The more utilities built, the higher the profits and the higher the rates.
Readers and supporters of SB307 may recall the long and contentious fight when the Grand Gulf Nuclear facility began operation. Arkansas ratepayers paid and continue to pay a significant portion of the cost of this generating facility.
Under the terms of SB307, Arkansas ratepayers will see an increase in utility bills as soon as construction begins. Since the stockholder's return reflects the project's total cost, the more money the utility spends, the higher the profit earned. Consequently, the utility has no incentive to minimize the number of new facilities or their construction costs. The proposed legislation offers a negative incentive to minimize costs because the more it builds, the greater the profits.
Members of the Legislature face a daunting challenge when this bill comes up for a final vote. The 61-page length, where many lines in the bill refer to other parts of the bill, make amendments almost impossible.
If members of the General Assembly view it as their responsibility to protect the public interest by not deregulating Arkansas utilities, voting no is the best action.
John C. Pickett is a former member and chair of the Public Service Commission and an emeritus professor of economics at UALR. Email him at [email protected].