It looks like a carnival shell game. The pea is the Mississippi Public Service Commission (PSC). The hustler is the Legislature. Entergy is the barker. Economic development boosters are the shills. And the marks (suckers) are Mississippi families and small businesses. Who palmed the pea?
The Legislature and Entergy teamed up to do it. In January of last year, lawmakers passed Senate Bill 2001 in a rushed special session. Section 22 of the bill is a cleverly worded carve-out for Entergy and Amazon. It gives Entergy unique exceptions to historical regulatory oversight that protected customers from utility monopoly abuses.
Those exceptions sideline the PSC in all rate cases related to Amazon. They are unique. No other state has them. So Entergy — theoretically a regulated monopoly — is no longer regulated for its spending on Amazon. That’s a big deal. It’s a legislative poke in the eye of all Entergy customers except Amazon. How big a deal is it?
The PSC was created in 1884 to protect customers from railroad monopoly abuses. It was called the Mississippi Railroad Commission then. In 1938, it was given the job to protect customers from utility monopoly abuses. Why is it needed? As a “regulated” monopoly, Entergy gets a guaranteed 10% profit on its spending — if it benefits customers. The more it spends, the more its shareholders make. The PSC’s job is to see that Entergy’s spending is for the benefit of its customers (all its customers) — not just its shareholders.
How did the PSC do its job before the Legislature stripped it of authority? It first determined that a utility’s project was needed. Then, that the spending for it was reasonable. Then, that the project worked (used and useful test). If it passed these tests, the PSC could determine that the project was prudent and its cost could be included in the rate base. It was the PSC’s responsibility to assure that the regulated utility provided reliable, affordable electricity for all its customers.
Now, section 22(8)(b) says if the costs are identified and recorded, they are automatically presumed prudent. No PSC approval is needed for new plants, power lines, or other projects for Amazon. No used and useful tests. Entergy gets paid for its cost plus 10% even if the project doesn’t work. (I specifically cite to the sections of the bill because of Entergy’s double talk about prudence.)
But wait, it gets worse. There are no tests for reasonable spending. Section 22(7) removes the requirement for competitive bids from contractors. So, cronies with high bids can get the job. Entergy can mark their prices up 10% for its guaranteed profit. Everybody’s happy — except the small customer who picks up the tab.
But wait, it gets even worse. Section 22(8)(f) lets Entergy load the padded costs for Amazon (and interest on money borrowed to fund them) onto other customers’ rates years before the projects are operational. And (8)(h) removes caps on cost recovery plus interest. Entergy answers to no one — except its shareholders.
Rates for small customers in other states with data centers have gone up because utilities shift part of their costs to small customers — even with PSC oversight. Rates in Virginia have increased 29% and are expected to double. Rates in Georgia have increased 27%. What will happen to rates for small customers in Mississippi with no PSC oversight? Out of sight!
What about Amazon’s rates? They’re secret — a permanent trade secret. Section 22(3)(a-d) allows Entergy to make “a large customer agreement.” Terms can be set “without reference to existing laws” and are locked in place for the life of the agreement and are not subject to PSC modification even if costs increase more than the agreement provides for.
So Amazon gets a secret rate structure. The PSC is barred from adjusting it, and the public is barred from knowing about it and how much of their coming rate increases are to subsidize Amazon.
Secrecy in government is usually bad. It can be tolerated if for good reasons such as national security or to protect the innocent. Secrecy in the name of economic development that benefits a favored few at the expense of many is not a good reason. It can cause the rights of ordinary citizens to disappear — like the pea in the shell game.
It can also cause respect for government authority and integrity (is that an oxymoron?) to disappear. It can cause the perception that favors can be bought. It can cause other data center companies to rush to Mississippi to exploit a disappeared regulatory system.
That disappeared system leaves Entergy’s small customers defenseless and figuratively in the dark now — and can leave those unable to pay their higher electric bills actually in the dark later.
Kelley Williams, a Northsider, is chairman of Bigger Pie, a Jackson-based think tank promoting free markets and government efficiency.
