Arkansas Regulators Eye Delay, Repeal Of Elec Dereg

- CHICAGO - Officials at Arkansas' utility regulatory agency recommended Thursday that the state delay, or even repeal, its plan to enact electric deregulation in two years, saying it isn't clear the plan will benefit customers.

Staff of the Arkansas Public Service Commission made the case in a report presented to the commission Wednesday, said John Bethel, the PSC's executive director. The commission will send its own report on the issue to the state legislature later this month.

"We didn't believe that there were opportunities for most customers to benefit from retail access," Bethel said. "It really does need to be a clear gain."

The Arkansas legislature passed a law in 1999 that called for the state to deregulate the industry, allowing all retail electric customers to choose their provider by January 2002. In 2001, when it didn't appear the state would be ready to support competition that soon, the legislature passed a new law to delay the start of competition until October 2003.

The new law also required the PSC to assess whether the state is ready for competition by 2003, and the commission has asked PSC staff to review the issue. The commission has the authority to delay competition until October 2005, a move Bethel said is supported by commission staff, utilities and large industrial power users.

The commission doesn't, however, have the authority to cancel the deregulation law - that would require legislative action. So the commission staff recommended Wednesday that the commission delay as much as possible while also asking the legislature in its report later this month to repeal the law, Bethel said.

Deregulation should be canceled because there isn't solid evidence the plan still carries real benefits for Arkansas customers, Bethel said. Other states have deregulated since Arkansas passed its law in 1999, and their experiences don't send a clear message that competition can benefit customers in Arkansas, which is already a low-cost state, he said.

"The circumstances that were in place when the law was passed in 1999 have passed," Bethel said. Major Utility Still Wants Competition

New Orleans-based Entergy Corp. (ETR), with 650,000 Arkansas customers through its Entergy Arkansas affiliate, is the state's largest electric utility. The company supports a restructuring plan delay, but doesn't support repealing the law, said Steve Strickland, Entergy Arkansas' director of regulatory affairs.

"We do think that repealing the law goes too far at this time," he said. "We still support the concept of retail competitive access."

There hasn't been clear development of a robust wholesale market in the state, he said, which is needed to support an open retail market. Also, the state hasn't yet determined what type of structure would be used to support the new competitive markets.

"We have to see that the market structure is in place to support retail access," Strickland said.

But the commission would be moving too fast if it recommended repealing the law this year, he said. The Arkansas legislature meets every two years and isn't back in session until next year, he noted, which leaves the commission plenty of time to continue reviewing the issues before making a recommendation.

Entergy Arkansas still believes the law could potentially benefit its customers, Strickland said. And the law also carries benefits for the company, as it would allow it to recover stranded costs, or the cost overruns usually associated with building large nuclear plants. Entergy Arkansas owns Arkansas Nuclear One, a 1,690-megawatt generator in the state, and buys 36% of the output from Entergy's 1,290-megawatt Grand Gulf nuclear plant in Mississippi.

Utilities often fight for a stranded-cost recovery plan when deregulation plans are enacted to ensure they can still gather the money if their customer bases erode. Entergy Arkansas would lose the right to recover stranded costs, which haven't been calculated yet, if the plan is repealed, Strickland said.

Michael Teague, spokesman for Arkansas Attorney General Mark Pryor, said Pryor supports an indefinite delay for restructuring, as he agrees the state isn't ready. But Pryor also doesn't want to throw out the plan completely, as the legislature may choose to start assembling a new plan from scratch that might not have some of the same favorable consumer benefits.

"We really wouldn't like to see this whole thing started over," Teague said.