Leader Blues

Wednesday, December 21, 2005

EDITORIAL >> Arkansans used again

Pardon our paranoia, but it is hard to escape that old feeling that Arkansas is not a real state but a colony, to be exploited when the need arises. That is indisputably the case whenever we are hauled before the Federal Energy Regulatory Commission.

Maybe we asked for it historically by giving big corporations our natural resources — natural gas, bauxite, timber — virtually tax-free for a hundred years until they were about gone. The state’s unofficial motto was, plunder us, please!

Monday, for the second time in 20 years, the regulators at FERC said Arkansas electrical customers of Entergy Corp. should subsidize those in other states. Starting in 2007, customers of Entergy Arkansas will send some $200 million a year to the Entergy subsidiary in Louisiana so that it can lower the light bills of its customers. It has nothing to do with Katrina. Louisiana filed this case years ago.

Arkansas ratepayers already have paid some $3 billion to Louisiana and Mississippi over the past 20 years so that electrical bills in those states will not be so high.

The Federal Energy Regulatory Commission held that the expense of generating electricity in the states served by the big Entergy holding company should be more or less equalized.

Since Arkansas generates nearly all of its electricity at nuclear and coal-fired plants, which now produce power much less expensively than do gas-burning plants, we are supposed to help Louisiana. Louisiana generates some electricity from nuclear units, but most of its electricity comes from natural gas, the cost of which has risen sharply since 2000.

There is no earthly justification for requiring energy customers in one state to subsidize those in a slightly richer state except for a private agreement among the operating businesses of a holding company. Equalization has not always been a federal policy. It was not when Arkansans were paying much higher costs than neighboring states.

In the 1960s and ’70s, Arkansas Power and Light Co. (now Entergy Arkansas) produced power mainly by burning fuel oil and natural gas. It embarked on a costly strategy of converting to nuclear and coal power. Arkansas homeowners and businesses (except those served by co-ops and municipally owned utilities) had to pay higher bills based on the plant investment and the future cost of decommissioning the nuclear units at Russellville. Louisiana and Mississippi were not required to bear any of the higher costs for Arkansas customers.
But three young regulators for Gov. Bill Clinton in 1979 — Jacksonville’s Wally Nixon, Scott Trotter and Basil Copeland — discovered a new system agreement among the utility companies of the three states to share the cost of building and decommissioning a giant new nuclear plant in Mississippi. Major costs were to be shifted to Arkansas customers because by that time the cost of building nuclear plants had leaped to, in the case of the Grand Gulf plant in Mississippi, about $3.5 billion.

They persuaded Clinton to protest and the Arkansas company renegotiated a somewhat better deal with the other companies, but Louisiana went to FERC. The federal commission assigned Arkansas 37 percent of the cost of the plant. Arkansas appealed to the federal appellate court in Washington and lost.

But it could have been far worse even then. One of the federal judges, a dilettante named Robert Bork whom President Reagan later tried to put on the U.S. Supreme Court, came up with a cockamamie theory by which Arkansas should bear just about all of the cost of nuclear plants in Arkansas and Mississippi. Arkansas did not have much clout in Congress then and it had been voting consistently Democratic. That was the only justification that seemed plausible.

Now, FERC has embraced something close to Bork’s perverse theory.

We remember the rage of the man who defeated Bill Clinton in 1980, Frank White, when he discovered the ramifications of the deal. White talked about calling a session of the legislature to buy Arkansas Power and Light Co. and operate it as a state utility to protect Arkansans from the depredations of the holding company arrangements. He might have been on the right track.

Entergy Arkansas says it may try to sever itself from the system agreement, but that will take many years, if FERC and the courts even allow it. Our only hope is to get a federal appeals court in Washington, now populated by Borklike extremists, to overturn FERC. Get ready to pay.