Dispute arises on delaying Arkansas electric competition

Kate Thomas
OGJ Online

Arkansas regulators and three investor-owned utilities have proposed asking the state general assembly to delay electric competition until October 2003 and possibly as late as 2005. But Arkansas electric cooperatives and the state attorney general are seeking a longer delay of up to 2005 at the earliest and as late as 2007.

Under legislation adopted in 1999, the market was originally scheduled to open between January 2001 and June 2002. But the Arkansas Public Service Commission staff, investor-owned utilities, and electric cooperatives have been meeting to try to reach a consensus on how long to delay competition.

A final recommendation will be incorporated into a report on the development of a competitive market that the commission must submit to state legislators before Jan. 1. (OGJ Online, October 13, 2000).

In filings Friday, Entergy Arkansas Inc., American Electric Power Inc./Southwestern Electric Power Co., Oklahoma Gas & Electric Co., and the Empire Distric Electric Co. joined the PSC in recommending at least a 21-month delay in competition.

Two of the state's biggest and most energy-intensive companies�Nucor-Yamato Steel Co. and Nucor Steel-Arkansas�did not object, although they did not specifically take a position on the delay.

The staff and the companies said the delay is warranted because it will allow time to implement the structures necessary for retail open access. They promised to use their "best efforts" to have all the necessary prerequisites in place for retail open access in place and operational by Oct. 1, 2003.

Speaking earlier this month, Sandra Hochstetter, chairman of the PSC, said prices increases in California, Montana, and New England require an evaluation of whether or not those things could happen in Arkansas, and, if so, how to avoid them. The PSC staff has warned retail electric rates could rise under deregulation.

Among the lessons learned from watching the experience of states which have proceeded with deregulation is that states need to have adequate supplies before beginning retail competition and not have a capacity shortage on the horizon, she said.

In addition, she said, there needs to be a functioning wholesale market and fully operational regional transmission organization with strong controls and enforcement power to prevent gaming and market abuses.

Competition options
In their filings, the investor-owned utilities said between now and 2003 they will spend time addressing generating and transmission capacity needs and associated cost recovery procedures and competition options for large industrial customers.

The attorney general' s offices said it is seeking a longer delay on the grounds the "evidence fails to demonstrate there is a reasonable chance for most customers in the state to realize cost savings," if the start date is 2003. In its filing, the attorney general also objects to a collaboration that addresses large industrial customers to the exclusion of competitive options for all customers.

The combination of low average electricity rates in Arkansas, relatively high generation costs from marginal new gas generation because of the runup in natural gas prices, and no commitment to rate decreases doesn't bode well for restructuring in the immediate future, the attorney general's office says.

Setting the date at 2003 does not give time for a proposed regional transmission organization (RTO) to be in place and working effectively, according to filings by the Arkansas cooperatives. They note the Southwest Power Pool only filed its proposed RTO proposal Oct. 13 and has requested a Jan. 1, 2001 start date from the Federal Energy Regulatory Commission (FERC).

But they note there is no assurance the RTO will be up and running by then because none of the investor-owned utilities have filed applications with FERC to transfer control of the transmission facilities to another entity.

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