SADOW: Could Electricity Deregulation Tip The Scales In The PSC Contest?

The last edition of this space criticized politicians who should know better in attempting to insert more government into electric power regulation in Louisiana. Perhaps the upcoming Public Service Commission contest will present an opportunity for a winning candidate to embrace the winning issue of less government intrusion.

In the past, there might have been a case for close scrutiny of government in all aspects of this historically vertically integrated industry where generation, transmission, and distribution were performed by single firms in geographical areas where any competition faced tremendous entry costs. But the monopolistic environment, thanks to technological advances, has become softened at least on the distribution end, and to some degree on the generation side. Now, as long as a concern isn’t too far away from transmission lines to one of the three American power grids, as distribution becomes more and more deregulated in allowing customers to choose which supplier provides power, there is greater incentive to create generation capacity and plug it in, increasing choice further.

Unfortunately, Louisiana has yet to ride this wave of the future, until recently having just a handful of firms, dominated by Entergy, generate, transmit, and distribute power (although they have been able to buy and sell power on a wholesale basis) as the only provider in varying geographical regions. However, the first step to changing this occurred a few months ago when the PSC authorized Entergy to join the Midwest Independent Transmission System Operator Inc, with the specifics to be worked out over the next few months. This consortium governs power transmission in 13 states. Thus, the new member for the PSC from the open District 2 seat that will be elected no later than Dec. 8 will participate in some big decisions right off the bat.

By eventually passing over management, if not ownership, of its transmission lines, Entergy can sell its power at retail throughout the existing network (as well as save on those management costs and reap a one-time bonus for their sale). It also means that suppliers from the other parts of the network could do the same in Louisiana. While the young history of deregulation of power has had its ups and down the market, with technological changes, greater consumer awareness, and a recognition that absence of market control made it easier to cost shift for political purposes, eventually deregulation will bring lower costs for attentive consumers.

This landscape of change may develop into a defining issue of this campaign, pitting several candidates among which two Republicans appear to be the favorites with a Democrat spoiler, both of which may have higher ambitions on the future. State Rep. Erich Ponti got a look to serve as Speaker of the House , while former Department of Natural Resources Secretary Scott Angelle, now on the Louisiana State University System Board of Supervisors, served as interim lieutenant governor. Both in aggregate are conservative across a wide range of public policy issues.

But neither really has distinguished himself from the other on issues specific to the PSC. The ability to do so in a way that pleases the electorate especially is crucial to one’s chance of winning because of the Democrat in the contest, Forrest Wright, a utility consultant. While Wright doesn’t seem to be mounting much of a campaign, him background makes him credible and as the only Democrat in the contest he stands a good chance of picking a lot of votes in a low-information/stimulus contest like this from Democrats reflexively voting by party, potentially enough to knock out one of the major GOP candidates in the general election.

The key to making the runoff with Wright and then almost certainly win, or maybe to win it if both Republicans advance, could be having a signature issue such as distribution deregulation, by enabling that candidate to differentiate himself from the other main competitor. By promising to pursue this issue and to lead the charge in getting the legal environment changed to allow for electricity sales compensation, this kind of candidate would stand out and give the conservative district a reason to choose that one.

Fewer than five weeks remain until balloting for the spot. Stating a preference for bringing Louisiana choice in electricity consumption to be followed by lower prices through distribution deregulation might produce a win for Angelle or Ponti.

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