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27.9.22

LPSC must prevent deal from gouging ratepayers

For many Louisiana ratepayers, their cost of electricity could go unnecessarily higher unless the Public Service Commission stays vigilant and doesn’t lapse into following political fashion.

Last week, the body gave final approval to Entergy Louisiana, which outside of its separate New Orleans entity provides electricity for almost all of the state except for its western-most parts, to incorporate up to 475 MW of power from four solar producers, one of which it will own and three from which it will buy. This alone, set to come online fully in mid-2023, will triple existing solar and wind generation capacity within the state, which at present accounts for just about two percent of total generation, the lowest among the 50 states.

That paucity isn’t a bad thing. In part, it allows the state to have relatively low residential rates with high consumption, although overall consumption is driven by industry. Although geography can cause significant individual fluctuations, overall renewable forms of energy cost much more to produce for a variety of reasons, including transmission, its non-dispatchable form, and necessity of dispatchable backup. Over time, as the portfolio of energy tilts more in the direction of greater portion of renewable energy, the more extra ratepayers must shell out as compared to use of fossil fuels.

Unfortunately for consumers, producers doing business in Louisiana have hurled themselves into more renewable form usage. Earlier in the month, the other two large providers operating in the state, Cleco and SWEPCO, separately declared they would build out almost as much solar capacity at Louisiana sites, with the latter announcing wind generation projects in other states. Both pursued this as they retire fossil fuel-burning facilities, a growing practice in the industry as Washington Democrats as well as some states run by Democrats have brought regulatory pressure to favor renewable energy, citing misplaced concern over the fiction of catastrophic anthropogenic global warming allegedly disastrously looming in the not-distant future.

So, while the PSC can’t make the private sector continue to use cheaper fossil fuel sources in their business, it certainly can discourage a reckless move towards more expensive and with no real benefit renewable energy reliance through its rate structure. As a monopoly regulator, the PSC has the power to approve of maximum rates that a provider may charge.

Unfortunately, the public can’t find out what deal it allowed Entergy because legally the company can shield that from view for competitive reasons. The best available information comes from documents filed that discuss the broad parameters and notable circumstances that could alter dramatically the estimates. In particular, the costs associated could rise considerably because of geopolitical factors – if the Asian manufacturers of the lowest-cost arrays on which the projects are based evaded tariffs placed on Chinese products, they could be hit with penalties up to 250 percent – and tax law rulings and changes.

The agreement mandates periodic reports to the PSC about adding the solar portfolio, most notably disclosure in 30 days if the cost of resources into it increases more than five percent, as this could translate into a request to boost rates. It also requires annual reviews and audits of expenditures for the portfolio.

Finally, part of the agreement includes a “green tariff” – the ability for consumers to use power generated only through renewable sources and pay accordingly. This provision can help to offset the upward price pressure these sources will apply onto all other ratepayers, by offloading the surplus cost onto essentially volunteers willing to pay more to salve their psyches.

Let’s hope with this deal the PSC keeps its eyes on the ball over the next few years and protects consumers. Perhaps someday renewable sources will become on all metrics similarly priced, or even cheaper, than others, but that day clearly isn’t here and there exists no compelling reason to force ratepayers to subsidize a flight of fantasy born of CAGW cultism. If an electricity provider wishes to increase the proportion of renewable energy in its portfolio, the PSC must be prepared to ensure it doesn’t pass the extra higher costs onto customers but reduces its profit margin, even below effective zero, if it wishes to play out this indulgence.

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