The Cost of Electricity: Why Do Neighboring States Pay Less?

How much are you paying for your electricity? If you're an Entergy customer, based on where you live, the numbers can be very different.

In Arkansas, where power primarily comes from coal and nuclear plants, the cost of production is much cheaper than here in Louisiana, where natural gas is the main source of power. Those differences are paid for by the customer.

Back in June 2005, the Federal Energy Regulatory Commission (FERC) mandated that those production costs must be more balanced, meaning Arkansas will have to pay up. Last week, the Arkansas PSC filed a complaint with FERC.

"All of a sudden, Arkansas realizes they're going to owe a lot of money," explains Jimmy Field, a member of the PSC. "A big rate increase for them when this goes into effect, which we hope will be January 1."

That date for rate changes may be wishful thinking though.

2006 is a test year for what the energy costs actually are, and those numbers will need to be analyzed.

"That takes time to do," explains Entergy spokesman Bill Benedetto. "You can't do it January 1, just like you can't do a company's earnings on the first day of the year. We'll get it done as quick as we can, but we're thinking sometime around that June time frame."

PSC Chairman Foster Campbell says the discrepancies in rates speak for themselves when a small business in Louisiana is paying 35% more than the same small business in Arkansas.

At the same time, Benedetto says Entergy has always tried to limit costs and will continue to go after the cheapest energy they can find, while continuing to bring new cheaper power sources into Louisiana, like coal and nuclear plants.

When the new system agreement goes into effect, Entergy Arkansas could see annual payments to other Entergy utilities, primarily in Louisiana, somewhere in the range of $150 million to $350 million per year.