Competition delay expected in Arkansas

Electricity competition in Arkansas could be delayed until 2003 or even later, depending on a recommendation by electricity regulators and state utilities due to be filed by Oct. 20 with the Arkansas Public Service Commission (PSC). Under legislation adopted in 1999, the market was originally scheduled to open between January 2001 and June 2002.


Electricity competition in Arkansas could be delayed until 2003 or even later, depending on a recommendation by electricity regulators and state utilities due to be filed Oct. 20 with the Arkansas Public Service Commission (PSC).

Under legislation adopted in 1999, the market was originally scheduled to open between January 2001 and June 2002. But the commission staff, investor-owned utilities, and electric cooperatives have been meeting this week and are expected to come up with a new date to recommend to the state legislature. That 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.

A spokeswoman for the commission said the collaborative group has been hashing out their differences all week and failed to come to a consensus. Candace Wright said there is general belief the market isn't ready for competition but disagreement on how long to recommend delaying it.

Speaking in New Orleans last week, Sandra Hochstetter, chairman of the PSC, said prices increases in California, Montana, and New England "are requiring our evaluation of whether or not those things could happen in Arkansas, and if so, how to avoid them here."

She noted the Arkansas law gives the PSC flexibility on how soon to open the market, "although the original time frame may be too early....We need to be able to continue to use the legislative reporting process to make changes in the legislation or the dates as necessary."

Arkansas's "low cost" utilities, relative to national and regional market prices, support the need to do a cost-benefit analysis to give the PSC pricing input into the public interest balancing equation, Hochstetter said. 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.

Hochstetter noted eight new merchants plants are to be located in the state with at least two scheduled to come online between 2002-2003, while time will tell how many of the others will be constructed. Arkansas needs the additional generating capacity regardless of whether retail competition has started or not, she said.

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