PSC opens hearing on Mississippi utility rates

Published 10:53 pm Monday, July 7, 2008

JACKSON (AP) — Off-the-mark cost projections have contributed to increased power bills along with steep fuel prices, a Mississippi Public Utilities official testified Monday during public hearings spurred by rapid utilities rate spikes.

Virden Jones, Public Utilities director of electric, gas and communications, told the Public Service Commission that Entergy Mississippi and others are passing along a rate increase spurred not only by fuel costs above its projections but also by the way utility companies project those costs.

Entergy has raised residential rates 28 percent from July to September to compensate. That increase caught the attention of the commission, which called for an investigation and audit of the rate increase and Entergy’s fuel purchase practices.

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Commissioner Brandon Presley said Monday during a break in the hearing that Mississippi residents have been calling commissioners to ask for relief as utility bills rise dramatically.

While commissioners say they are not accusing anyone of wrongdoing, Presley and Lynn Posey each were elected to their first terms in November and found commissioners had no input in the approval of fuel cost increases if Public Utilities staffers found no reason for concern.

Presley says approval has become a rubber-stamp since the Mississippi Public Utilities staff has not requested a change in company proposals in the last decade.

‘‘It just seems that this process has been utility-driven,’’ Presley said. ‘‘It’s been driven by the companies and that’s how we’ve gotten to where we are. It seems obvious to me the process has seen very little scrutiny.’’

Officials with Mississippi Power, a south Mississippi utility, testifed Monday and Entergy officials are scheduled to testify Tuesday morning. Entergy provides power to 45 of Mississippi’s 82 counties, primarily in the western part of the state.

At issue is whether companies should continue the practice of projecting fuel costs or simply pass on those costs dollar for dollar. The business of projections has gotten more difficult after fuel costs began rising and falling unpredictably around 2000.

Jones testified that the ‘‘under and over recoveries’’ of fuel costs are a major cause of rate volatility. Companies try to predict their future fuel costs and bundle them into the rate. When they ‘‘under recover’’ that money, an increase is passed on to the customer. When they ‘‘over recover,’’ money is given back.

Both Mississippi Power and Entergy have been off the mark recently, causing fluctuations in rates when they miss in either direction, Jones said. Entergy overcharged by $59.9 million in the final quarter of 2007. Then in the first quarter of 2008, the company was $3.9 million below estimates. Jones said that could cause customers to feel a steep rate increase. Mississippi Power, which adjusts fuel costs annually, undercharged by $19 million in 2007.

Mississippi Power Chief Financial Officer Frances Turnage said her company has been underestimating fuel costs since December 2004, which means customer rates are adjusted upward annually to compensate for fuel costs.

‘‘What has kept us from catching up is the rising cost of fuel,’’ she said.

She said her company’s goal is to predict future fuel prices to the penny and the current practice can save money for customers when it works well. But Presley and PSC Chairman Leonard Bentz, a 2006 appointee who was elected to a full term in November, closely questioned Turnage about whether companies can make money by putting excess funds in an interest-bearing account while waiting to adjust prices in the next quarter.

Turnage said any extra money is mixed with the company’s other income and can earn a return. But the company pays a carrying charge of 12 percent until it is credited to the customer, negating any profit.

‘‘My answer is we don’t make money overcollecting from customers,’’ she said.

Presley asked Turnage the question a half-dozen ways and was still not satisfied.

‘‘I don’t feel like we’re getting the answer we’re looking to get,’’ Presley said.

Neither are customers, who are constantly calling commissioners. Presley got e-mails while sitting in the hearing and one consumer from DeSoto County called while he was at lunch. She didn’t leave her name but asked him to do something about high utility costs.

Both Presley and Bentz asked members of the Public Utilities staff why more questions haven’t been asked of companies seeking rate increases in the past. It’s been more than eight years since the way fuel costs are passed on has been examined and both suggested orders may be forthcoming to do so.

‘‘I would suggest the Public Utilities staff get together and start looking for ways to make this more transparent,’’ Bentz said.