Although the state appears to have all the elements in place to successfully open its electricity markets to competition, the chairman of the Mississippi Public Service Commission (PSC) continues to harbor serious doubts as to how such a move will accrue to the benefit of the state’s retail customers.

In an exclusive interview with NGI, PSC Chairman Nielsen Cochran last Thursday said that he worries that by opening up Mississippi’s retail generation markets to competition, the end result will be that the state’s retail customers will be slapped with higher costs.

Cochran underscored the point that the PSC does not have the authority to open the state’s electricity markets up for competition. As with most other states, that power resides with Mississippi’s state legislature.

Three years ago, the PSC initiated a docket to look at whether or not opening up the state’s retail generation would be in the best of interest of Mississippi and the state’s consumers. “We had numerous hearings on specific issues,” Cochran said.

At the conclusion of the hearings, which lasted over two years, the PSC provided to the state legislature and the governor the Commission’s findings in an order issued last summer. “The end result was, in the suggestion to the legislature and to the governor, we felt like it would not be in the consumer’s best interest at this time … to open that market up,” Cochran said.

At the same time, the PSC notified the legislature that it would continue to monitor activity in Washington, DC, and other states to see if there was any reason for the state commission to revisit its initial conclusions. “Well, we haven’t,” the PSC’s chairman noted. “We felt like, and still do, that opening up this market — generation, retail generation — would in fact increase, and I still feel that way strongly, the cost to the average retail customer here in our state if we open the market for competition.”

Cochran pointed out that Mississippi is not facing power shortages. “We don’t have a lack of generation,” he said. The PSC chairman said that the state has certificated numerous merchant plants to be constructed. “So wholesale generation in this state is very healthy,” he added.

The same goes for retail generation, Cochran went on to say. He said that one of Entergy Corp.’s subsidiaries has just completed and brought online a plant in west Mississippi. In addition, Mississippi Power Co., a unit of Southern Co., has just completed two plants that went online earlier this year.

Cochran fleshed out his thoughts on electricity competition in the state in a recent speech before the Vicksburg Civic Club. “My comments were that you need two things in order to have a viable, competitive market,” he said.

“One is you have to have a product,” he said. “And there have to be numerous similarities to that product, whether it’s electricity or automobiles, to sell.” Cochran believes that the second prerequisite needed in order to have a successful competitive market relates to having a means of transporting a particular product.

“As of last year when we issued the order, and I think it stands today, you don’t have those two things in this country that would provide a real, competitive environment that would benefit the consumers,” the PSC chairman said. “You don’t have a transmission system that’s integrated to the point where you can have a viable transportation system,” he added. Moreover, Cochran said that there has been, and is, a lack of wholesale generation nationwide to meet the needs of consumers “in a reliable way,” which he said has been proven in other markets.

The PSC chairman emphasized the point that his state is not opposed to the idea of competition in and of itself. The question for Cochran remains how such a move would benefit customers in Mississippi. “Certainly, we are open to competition,” he said.

Cochran highlighted a number of positive trends for the state’s energy markets. Specifically, he noted that Mississippi has some of the lowest electric retail rates in the country, a solid supply of generation, and a transmission system that is “more than adequate.” In addition, the PSC chairman said Mississippi has an ample supply of natural gas. “If you look at the grid system in this state, we have literally hundreds of interstate gas pipelines that criss-cross this state,” Cochran said.

So when the PSC chairman tallies up all of these pluses, the idea of opening up the state’s electricity markets to competition becomes less than appealing, given Cochran’s belief that such a move is likely to hurt consumers in their pocketbooks.

He pointed out that this is why the PSC opposes FERC’s push for regional transmission organizations (RTOs). Cochran is concerned that an RTO will “cost our consumers more money now, than what they’re paying now.” The PSC has already filed a response to FERC’s RTO plans at the Commission in opposition to what the federal agency has been attempting to do.

He noted that several states were unhappy with the way in which FERC initially handled its approach to RTOs. Among other things, certain state regulators have felt that they weren’t given enough of an opportunity to provide input on the development of RTOs.

States were given an opportunity to air their grievances over RTOs at a week-long set of workshops sponsored by FERC in October. More recently, the federal agency unveiled plans to create a specific division within its Office of External Affairs to work closely with states on critical electric and natural gas issues. The initial focus of the FERC-state partnerships will be on RTOs.

Cochran said that one good state to watch in evaluating the development of competitive electricity markets is Texas. “Certainly, they are mainly or primarily a stand-alone state in terms of generation and transmission,” he said.

But the PSC chairman also pointed out the difficulties Texas has had in terms of getting retail electric competition off the launching pad. “So if Texas can’t do it, and cannot generate savings and not hamper reliability, then I’m very doubtful that it can be done in a way that saves ratepayers money.”

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