Editorial: A good idea could withstand study, so what's the rush to elect PSC?

A good idea could withstand study

February 23, 2011 

Sen. Ray Jones

By what logic does a spike in heating bills during an exceptionally cold December merit upending Kentucky's regulation of utilities?

If legislators want the state to have a predictable and friendly business climate, electing the Public Service Commission is probably the exact wrong message to send.

Yet, with no study or examination of other states' experiences — which is becoming a pattern in this session — the Senate voted 29-5 to enlarge the PSC from three to seven members, six of whom would be elected from districts and one statewide. The governor has appointed the commissioners for 71 years.

The ostensible motive for Senate Bill 151, sponsored by Sen. Ray Jones, D-Pikeville, was a 17 percent rate increase by American Electric Power last summer. The PSC approved the increase after the parties, including the attorney general and advocates for low-income consumers, reached a settlement.

Then came an early winter that slammed Southeastern Kentucky the hardest. Electrical usage for heating soared in a region of poorly insulated, substandard housing, unemployment and fixed incomes. The utility rate increase was one of several factors that inflicted financial pain on residents.

Backers of SB 151 insist the solution is to elect a PSC that will be directly accountable to voters and therefore less likely to approve rate increases.

This logic prevailed even when Kentucky's largest electrical consumers — auto, aluminum and other manufacturers — warned the effect would be the opposite.

Especially since a U.S. Supreme Court ruling last year opened the floodgates on anonymous political money from corporations, utilities and other corporate interests that could be spent in unlimited amounts to influence PSC elections and members.

Do we want businesses to think that if they come to Kentucky they'll have to engage in a bidding war for control of utility rates?

Maybe there is good case for electing the PSC. If so, the Senate didn't take the time to make it. A Senate committee substituted a study for the bill's original language, but the Senate overruled its own committee and on Friday approved the original bill calling for an elected PSC.

A quick study by Attorney Tom FitzGerald, who represents low-income utility customers, turned up no evidence that consumers, especially small customers, are better protected from rate increases in the 13 states that have elected PSCs. If anything, they have less protection, he discovered.

The last state to make a change, Tennessee, switched from a corruption-plagued elected commission to an appointed one.

We're not saying the PSC has been too pure for politics or has no room for reform. There's a revolving door between its staff and utilities. Commissioners owe their jobs to the governor. Decisions by an especially politicized PSC in the 1990s set the table for Kentucky American Water's 47 percent rate hike over the past two years.

But it's hard to see any advantages to injecting even more politics.

So, might there be another motive? Maybe it's a coincidence, but Jones, the Pikeville legislator sponsoring the bill to shake up the PSC, has worked as a lawyer for a company that was the subject of an unfavorable PSC audit and ruling.The PSC reported a number of abuses by Utilities Management Group, which holds a multi-million dollar contract to operate the water and sewer system in Pike County.

The PSC audit spurred an investigation by the state auditor which found a "questionable procurement process" led to the 2005 contract with UMG. Road-building magnate and political kingmaker Leonard Lawson was one of UMG's early backers.

Last year, Jones' law firm and UMG contributed to a campaign fund that tried to unseat the company's most prominent critic, Pike County Magistrate Chris Harris.

We'd hate to think that a Pike County grudge could spur a precipitous change in utility regulation. But it makes about as much sense as thinking an elected PSC could reduce the cost of electricity.

The House should kill SB 151.

If the idea merits serious consideration, there's plenty of time for study before next year's General Assembly.

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