Louisiana regulators want electricity deregulation cost estimate

By Kate Thomas
OGJ Online

HOUSTON, Jan. 25, 2002 — Louisiana, which up to now has held off deregulating the electric power industry, appears to be reconsidering that position or is, at least, keeping its options open.

The Louisiana Public Service Commission (PSC) recently asked investor-owned electric utilities to estimate how much it would cost to make the transition to a competitive retail market. The PSC said it wanted to have the information before yearend.

Large industrial consumers have lobbied long and hard for the right to choose their generation suppliers, but Louisiana regulators have yet to find competition will serve the public interest. But recently, the PSC asked the staff to investigate a number of issues that have bedeviled other states during the transition to a deregulated electric market.

PSC supervising attorney Vanessa LaFleur said the staff is setting a schedule for a series of “collaboratives” to examine the questions raised by the commission. These include a definition of “large industrial customers” and the potential for allowing only users with loads of 5 Mw or more to select suppliers, compared to permitting all customers to choose suppliers.

Late last year, the commission ruled large industrial consumers who didn’t have projects under way on Dec. 31 could not build their own cogeneration units to escape stranded costs, if and when regulators determine deregulation is in the public interest. The PSC said it acted to prevent large industrial customers from shifting their responsibility for stranded costs to residential, commercial, and other industrial consumers, for whom self-generation is not a option.

Commission studies showed Entergy Louisiana Inc., a unit of Entergy Corp., New Orleans, is likely to have nearly $1 billion in above market costs, resulting from it purchased power contract with the 192 Mw Sidney A. Murray hydroelectric power station at Vidalia, La., on the Mississippi River.

Under a 42-year contract ending in 2031, Entergy is presently obligated to pay 12.5?/kw-hr, rising to 20.5?/kw-hr. The staff recommended the costs be considered for recovery under a stranded cost mechanism, if and when retail access is introduced. “Vidalia is a sticky issue,” LaFleur said. “If we didn’t have Vidalia, we probably wouldn’t have stranded costs.” The case is presently before a commission administrative law judge.

Among other things, the commission asked the staff and legal counsel to analyze methods of encouraging construction of new generating capacity to serve regulated load in Louisiana. The Louisiana Mid-Continent Oil & Gas Association urged regulators to require utilities to use competitive bids. “Over the long run, competitive bidding will help secure a diverse, long-term supply of electricity for Louisiana,” the organization said. Entergy said the issue had already been settled under a previous commission ruling.

The PSC also asked the staff to develop parameters for future market power investigations and potential adaptation of affiliate rules and standards of conduct for a competitive market. Meanwhile, the commission said it wants to keep an eye on what is happening in the Texas retail market “to ensure that we are not losing industry or jobs to that state as a result of its move to retail access.”

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