Wednesday, April 12, 2006

Favors for Private Utilities

(This post is a little off the beaten track for this blog; if you're pretty purely telecom or tech focused, you can safely skip it. But if hurricane recovery and local energy costs are of interest, or if you think simple fair play should be a factor in the repeal of the (un)Fair Competition law that hampers Lafayette and New Orleans, read on.)

The Advocate reports on House Bill 887, which is one of those proposed laws that, on the face of it it anyway, can probably be justified in the wake of a disaster. Its purpose is to provide private electrical utilities with the cheapest possible financing for their disaster rebuilding funding. The idea is that such cheap funding will mean cheaper rates for Louisiana customers in the long run.

That's a good goal, if it does in fact result in the energy companies' lowering our rates--which seems a bit mushy. Cheap bonding authority, to the extent that it doesn't harm or obligate the state, seems like a pretty decent way to achieve the goal of lower prices.

But it also seems like what is good for the goose should be good for the gander. Why in the world does our Legislature pass laws that make it cheaper for private utilities to borrow money to run their businesses, but impose special disabilities on public utilities that want to do the same?

Louisiana's Local Government Fair Competition Act includes clauses that are, quite deliberately, designed to make investors anxious about the security of Lafayette's bonds and so to raise the costs to the City-Parish. With the bill currently being considered, we see the Legislature extending special privileges to the private sector--and indeed only to one segment of the private sector--while continuing to impose special disabilities on the bonding authority of local communities that want to offer new public utilities.

I sincerely hope this means that the same legislators who vote for this bill will vote for the bills that would repeal the (un)Fair Competition Act (especially Lafayette Rep. Trahan, who is signed on as a sponsor). Favoring both would mean they were really voting with their citizens' best interest in mind.

But it's not altogether clear from reading the story and glancing over the bill that it is as simple as that.

For one thing, the law does appears to obligate the state to extend a huge raft of unspecified privileges and special protection for the "storm recovery property" (very complexly defined) that secures the bonds. In the proposed law the state promises not to:
Take or permit any action that impairs or would impair the value of storm recovery property
There's a clause further down that opts out the PSC and the city of New Orleans from being limited by this bill but that is a huge open-ended commitment that I can't believe needs to be made or should be made. The scope of things which are legitimate matters for public lawmaking and regulation that would "impair the value" is huge. The public is granting privilege--a favor--with this bill; it shouldn't be asked to pass on its sovereignty at the same time. What, by the way, ever happened to the old concept of tit for tat? What do the private corporations have to give up to gain this favor? Nothing visible.

What makes all this even stranger is that, actually, the law does not obligate the private utility companies to actually return any of their savings to the people of the state. And our legislators get all huffy when it's politely pointed out to them. Really. You can't make stuff like this up. The AARP rep wants to change the word "may" to "shall:"
....changing the word from "may" to "shall" would guarantee the companies and lawmakers would pass along any savings to consumers, he said.
Our lawmakers are astonished at his temerity.
"I am astonished at your opposition," said Rep. Diane Winston, R-Covington. She said utilities, like other businesses, need to increase their rates to cover their increased costs.

Winston said the wording changes sought by the AARP amounts to a mandate that consumers reap the benefits of any savings realized by the utility companies.

"Everybody's cost of business has gone up," she said. "You have to give a little allowance for them."
Hey, I'm astonished that Ms. Winston is astonished that anyone would want to make sure the declared purpose of a law she favors should actually be served. She ought to want to "mandate that consumers reap the benefits of any savings realized by the utility companies;" that is the only reason for our public officials to get involved. Without such guarantees, the only purpose of the law is to hand over special profits to the corporations who wrote this law. (And yes, this is another bill that is openly admitted to have been written by the corporations who benefit from it.)

Part of the way this bill works is that it authorizes a special, dedicated rate increase to fund storm recovery cost (costs incurred directly or indirectly) and to build up a reserve fund for that purpose (though no visible restrictions are placed on funds so reserved). The Advocate story doesn't make the rate increase visible. But the law itself certainly makes clear what the Public Service Commission is authorized to do:
If determined appropriate by the commission and provided for in a financing order, such amounts are to be imposed on customer bills and collected by an electric utility or its successors or assignees, or a collection agent, in full through a charge, which may be collected as part of the electric utility's base rates or in any other manner deemed appropriate by the commission, for the time period specified in the financing order, paid by existing and future customers receiving transmission or distribution service, or both, from the electric utility or its successors or assignees under rate schedules or special contracts approved by the commission. The commission may provide for payment of such charges even if the customer elects to purchase electricity from an alternative electricity supplier including as the result of a fundamental change in the manner of regulation of public utilities in this state. [emphases mine]
That last sentence would keep the surcharge on your bill in the unlikely event that this state follows Texas and other states and "deregulates" energy. These representatives are being careful, very careful, to make sure that corporations benefit. Would that they were so careful in pursuing our interests.

If these representatives are being honest about their true motivations, they'll vote to repeal the (un)Fair Competition Act and amend pro-private utility act to make sure that it serves the people of the state. Cheaper bonds would benefit the citizens of this state in both cases. If, instead, they are actually simply motivated by a desire to pass laws benefiting the private utility providers of this state, they'll keep the (un)Fair act and not do anything to hold Entergy to its promises.

It's not really all that hard to tell who our legislators are representing. You watch what they do.

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