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Regulators Forum: Shifting Winds, Shifting Strategies

State regulators grapple with investments, supply planning, and structural issues.

Fortnightly Magazine - November 2005

part of our emergency-response plans. We had to establish telephone services to offices that didn't exist before. And I spent a lot of time finagling $2.6 million worth of gasoline from a refinery to keep our restoration effort going.

At the same time as we were running out of gasoline, we had to divert resources from other things to get the pipelines back up and pumping. In Collins, Miss., there is a pumping station that I've driven past many times. I had no idea it was a matter of national security until we got calls from the vice president and the DOE about getting it back online.

Q: What's the status of the recovery effort now?

A: To get the system back up and running, utilities had to start at the power plants and tie-ins, and essentially build back the entire system. They did all of that, even out to rural areas, in three weeks or less. That is pretty impressive. It was a team effort, with everyone working together and helping each other.

We're still working hard, though, to restore basic services to some devastated areas. We're looking at a couple of years of recovery, when you add everything up.

Q: How much will it cost Mississippi utilities in the end? And how will they pay for it?

A: We have a cost estimate now, but it's not official yet. Let's just say it's staggering-more than I ever imagined it would be.

We will have to wait and see where to go from here. We are working with Gov. [Haley] Barbour and Sen. [Thad] Cochran, as well as President Bush. Everyone has a plan, and different ideas are floating back and forth. We probably will put a special rider on customers' bills to pay the cost of storm recovery.

In addition to cleanup costs, we are using a lot more natural gas now than we were before, and we know what the price of natural gas is doing. When we lost Plant Watson, we lost our cheap power and now we're burning natural gas at $12/MMBtu.

Another problem that we haven't looked at before, and that is somewhat troubling, is what do you do when the utility is ready and able to provide service, but the loads no longer exist? Mississippi Power had 195,000 customers prior to the storm, and when they got everyone back online they were down to 164,000 customers. Now they're up to 170,000, but many big customers aren't ready to come back yet. The casinos on Mississippi's Gulf Coast, and Chevron and DuPont plants won't be back online for months. That's substantial revenue being lost daily, and ratebase is set by the kilowatt-hours you sell.

We have case law going back many years that says utilities cannot recoup lost revenues from a storm outage, and that's appropriate. But we need to maintain our infrastructure, because those customers will be back. We have to wrestle with this and figure out how to handle it. We are looking at some heavy cost numbers, heavier than anyone would ever want