Leader Blues

Wednesday, November 25, 2009

EDITORIAL >> We can thank Wally Nixon

The wheels of justice grind slow but exceedingly fine, and it may cost you $3.5 billion in the interim.

That seems to be approximately the sum — it could be much more — that the people of Arkansas have paid to their largest electric utility the past 25 years so that our neighbors in Louisiana, Mississippi and Texas do not have to pay full price for their electricity. Arkansans might have been poorer but they were still required to subsidize homeowners, businesses and industries to the south.

Most of us had long ago forgotten about that travesty even while we were writing the fattened checks to Entergy Corp. every month. The 687,000 Entergy customers in Arkansas will still be writing checks for the subsidies — some $391 million this fiscal year alone — until 2013, but then we will be free at last.

Last week, the Federal Energy Regulatory Commission ruled that in 2013 Arkansas could withdraw from the “system agreement,” the infamous pact signed secretly by the operating companies of the big utility holding company, Middle South Utilities, in the late 1970s and modified and enshrined by that commission and various federal courts since then.

Finally.

Louisiana will appeal FERC’s order to the Court of Appeals of the District of Columbia, which could keep Arkansas in the pact and require us to continue to pay Louisiana’s electric bills, but we have an idea that this time rudimentary justice will prevail over politics. Let’s be optimistic.

Paul Suskie, chairman of the Arkansas Public Service Commission, cheered the decision. It will save Arkansas homeowners and businesses hundreds of millions of dollars, perhaps billions, if the courts do not overturn it, he said.

It was in 1979 that a young lawyer in the state Energy Department named Walter Nixon III, who lives in Jacksonville, discovered the existence of an agreement among the sister operating subsidiaries of Middle South in Arkansas, Louisiana, Mississippi and a small chunk of Texas that obligated Arkansans to pay a big share of the construction costs of big nuclear power plants planned or being built in Mississippi and Louisiana.

You may remember the name of the first one: Grand Gulf. Arkansas Power and Light had built two nuclear units at Russellville and big new (and heavily polluting) coal plants near Pine Bluff and Batesville, and Arkansans were paying higher bills to amortize the construction costs but also taking advantage of the lower fuel costs of the nuclear and coal plants. But now Arkansas was also going to have to help the Louisiana and Mississippi utilities amortize their conversion to cheaper generating fuel.

Wally Nixon’s discovery goaded the state’s new governor, Bill Clinton, to try to get Arkansas out of the deal. It was a nasty fight, which contributed to Clinton’s defeat after one term in 1980 when the utility investors bankrolled his opponent. It came to a head in 1985, when the Federal Energy Regulatory Commission and the District of Columbia Court of Appeals sided with Louisiana and Mississippi (those states had voted for Ronald Reagan in 1980 and Arkansas had not and they were better positioned in Congress) — so Arkansas was saddled with paying 36 percent of the cost of two nuclear power units at Grand Gulf in Mississippi and another unit that was planned outside New Orleans.

It could have been far worse. One Court of Appeals judge — Robert H. Bork, soon to be nominated by Reagan for the U. S. Supreme Court— dissented from the other judges and insisted on a bizarre formula that would have required Arkansas customers to amortize virtually all the generating capital in the other states.

If Bork had persuaded another judge to join him, Arkansas would have been a far poorer place the past quarter-century. The Senate and our own senators, David Pryor and Dale Bumpers, did one of their best days’ work when they rejected Robert Bork for the Supreme Court.

The system agreement has been modified and reinterpreted from time to time but never in a way that helped Arkansas much. Four years ago, President George W. Bush’s FERC ruled that the operating companies in the system had to equalize their production costs, which has meant that those of us buying our power from Entergy Arkansas had to help Louisiana ratepayers when natural gas prices soared.

Much of Louisiana’s power still comes from gas-fired boilers, which is less polluting but for the past three or four years far more expensive than nuclear generation and somewhat costlier than coal. If you use 1,000 kilowatts of power a month at your house you’re going to send $218 this year to Louisiana so that people’s light bills there can remain low.

If you live in Baton Rouge or New Orleans, that sounds like elemental fairness. But we would like to keep our charity at home, in Arkansas and the regulators in this new administration are going to let us do it.