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How the 1956 Public Utilities Act brought order to energy in Mississippi
In the early days of electrification in Mississippi, the landscape was different in every sense of the word. There was no rulebook governing business growth, and the proliferation of poles and stacked power lines crisscrossing overhead were a product of the era’s lack of regulated utility planning.
Prior to the 1950s, utilities in Mississippi weren’t regulated at the state level. Instead, counties and municipalities had their own guidelines that were nowhere near being uniform across jurisdictions. It soon became clear that Mississippi needed a regulatory model for public utilities operating across regions, and it came in 1956 with the Legislature’s passage of the Public Utilities Act, which empowered the Mississippi Public Service Commission to regulate utilities in Mississippi.
“Having utilities in competition with each other is not a very efficient way to plan an electric system,” said Henderson “Hinky” Hall in an interview prior to his death earlier this year. Hall was an attorney with Wise Carter Child & Caraway. “The Public Utilities Act required the commission to oversee all decisions about constructing new facilities, which was not the case before regulation. It was a very uncertain atmosphere to be in.”
The Public Utilities Act divided the state into service territories for energy companies like Mississippi Power & Light, which later became Entergy Mississippi, allowing them to be more focused and efficient. With the granting of exclusive areas to energy companies, they were no longer in competition for customers; instead, regulation by a single state entity simplified and strengthened the power grid while ensuring customers paid fair rates across the state for energy.
“The real benefit of the Public Utilities Act is that it created a single source for utility regulation rather than having a complicated patchwork system,” said Jeremy Vanderloo, Entergy Mississippi's vice president, regulatory and public affairs. “One state agency was in charge of setting reliability standards, setting customer rates across jurisdictions, and providing a measure of certainty and stability that Mississippians didn’t have before the Public Utilities Act existed.”
Formula rate plan provides transparency for customers
One of the regulatory tools created by the Public Service Commission to maintain fair rates while allowing for grid modernization is the formula rate plan. As costs to generate and transmit energy and improve infrastructure fluctuate from year to year, the formula rate plan allows rate adjustments to be determined by regulators based on annual reviews of utilities’ projected costs and revenues for the upcoming year.
“The formula rate plan is a great tool because it provides a lot of transparency for the commission and for customers,” said Vanderloo. “We have annual reviews, so they always know exactly how much any utility is earning in a particular year. They can set rates based on reliability, on how much we’re charging customers, and on the quality of our customer service."
“With a formula rate plan, the PSC looks at our costs every single year, and if those costs go down, that will drive a rate decrease for customers pretty quickly,” Vanderloo added. “Customers are paying our actual cost to fund the business, and that lets them know they’re paying the cost required to serve them—not anymore, not any less.”