The Louisiana Public Service Commission acted correctly on streamlining the vetting process of large power customers, but it shouldn’t get too far ahead in boosting the state’s competitiveness for economic development that may hike needlessly rates for all, leaving commissioners in a tough political spot.
Last month, the LPSC revamped how it evaluates power providers’ requests to bring on new customers, specifically designed for those with large demands. This change was held out as a competition measure, enticing such customers by cutting red tape and thereby speeding up rendering a decision.
Now, the provider that has gained the most to date by adding large customers, Entergy Louisiana, has signaled intent to add another such payee and in conjunction with that also seeks approval to upgrade transmission capacity. This mechanics of these proposals differ from the one that dominated discussions last year, the Hyperion project in Richland Parish, in that ratepayers in Entergy’s footprint would pay for a much higher proportion of the project.
With Hyperion, parent company Meta foots the bill for all the increased capacity except for a transmission line to which ratepayers will contribute. Entergy successfully argued that the new line also would handle loads other than Hyperion’s, making the ratepayer involvement necessary in the public interest of having the capacity.
In contrast, ratepayers would cover the large majority of one new line and potentially more on the way. Entergy has framed the argument as an exercise in economic development, that with existing deals gobbling up capacity that to keep service reliable and entice future growth that more capacity must come to fruition.
This is where things begin to get tricky for the PSC, posing essentially a chicken-and-egg quandary. Is it the improved competitive posture, by having capacity coming on board and at lower cost for a firm, that spurs economic growth that benefits all, or is it allowing ratepayers to keep more of what they earn without them shouldering as much of the burden of development but potentially having less incoming business discouraged by paying more that triggers the most growth?
To restate specifically to this case, which option produces maximal economic benefits: telling a firm that the infrastructure isn’t yet there, regardless of who pays for it, that could delay its startup or building the infrastructure now with ratepayer dollars that provides greater incentive for a firm to locate in Entergy’s Louisiana territory, nabbing deals that otherwise might not have materialized? One could try to thread the needle by asking ratepayers to plunk down money starting now and build and then when business arrives make it part of deals that they must chip in to a significant extent, but what if the vagaries of commerce and politics shift and promised projects fall by the wayside and others never show up?
It's an unenviable situation for commissioners who are elected to office and thus may bear the political brunt of higher rates foisted on consumers for what could be no good reason. Almost inevitably electricity demand will grow so transmission expansion is in the cards at some point, but it could occur at varying speeds depending upon development, so commissioners must anticipate the rate of growth and necessity of new capacity coming online, which will impact how much more ratepayers must contribute and how quickly. Asking for too much too soon may incur voters’ wrath, but not asking for it quickly enough may discourage development that could prompt the same.
The PSC has the proper processes in place to make these decisions, including the new expedited one. It just has to perform the balancing correctly.
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