JXN Water and Entergy Mississippi have something in common. They are both regulated monopolies that have failed to provide affordable water and electricity to justify their monopoly status. They are “natural monopolies” based on the premise that competition involves costly duplication of plants and pipes and transmission lines and thus higher costs. Hence, regulated monopolies to provide cheaper water and electricity.
But they don’t provide cheaper service if they are not well run. JXN Water is not well run. Its rates are three - four times higher than neighboring cities. And Entergy’s residential rates are higher than they would be without the secret Amazon data center deal. In addition, JXN Water’s customer service is insultingly bad. Entergy’s customer service is good, but it’s not cheap.
The public faces of these monopolies are a Federal Judge who says he’s the CEO of JXN Water and the actual CEO of Entergy Mississippi. They have consistent but different responses to customers’ rate concerns. The Judge’s response is more cowbell. The Entergy CEO’s is less Boogeyman.
“I have a fever and the only cure is more cowbell.” That line is from an old Saturday Night Live skit. In the skit, Christopher Walken keeps adding cowbell to a terrible song to make it better. It gets louder and worse, not better. More cowbell now means more of a bad remedy that makes things worse.
The Judge’s remedy for a broken water system and sky-high bills is more rate increases — more cowbell. He says they are essential to save JXN Water from its death spiral. There’s little doubt that JXN Water is in a death spiral. But it didn’t get there because its rates are too low. In fact, rates for small residential customers are 2-10 times higher than they were before the Judge brought in an interim manager (Water Czar) to run JXN Water and fix things. And before the Czar created the Water Availability Charge (water access fee based on meter size).
The Czar knows municipal water systems. He has an impressive track record administering large, well-funded systems with strong internal controls and effective governance. He spent government money using no-bid contracts to fix Jackson’s inoperable plants and leaky mains. He deserves credit for that. He also deserves credit for any lingering excess expenses from the no-bid contracts.
But he does not know how to handle JXN Water’s chaos. He has no turnaround experience. He is an administrator — not a difference maker. He can’t fix a culture that hands out free water (E status) to friends and political favorites, that ignores billing mistakes and customer complaints about them, that gives arrearages from legacy graft and bond obligations the same (or higher) claim on operating revenues as current operating expenses. So there are current operating deficits. They get worse. The cure: access fees and higher rates. The result: a steeper death spiral.
When I was a little boy, some adults teasingly told me the Boogeyman would get me if I didn’t watch out. Now Entergy’s CEO tells residential customers the Boogeyman will get us anyway. He’s not teasing. He keeps a straight face. He treats residential customers like naive children. His Boogeyman is higher electric rates. He says rates are going up anyway. But they won’t go up as much with data centers as they will without them. So Amazon data centers mean less Boogeyman.
It is almost certain that electric rates are going up anyway due to inflation. Everything else does. But residential rates in other states with monopoly utilities and data centers have gone up faster than inflation. Much faster. There seems to be a correlation between rate increases above the rate of inflation and data centers. But Entergy’s CEO says it won’t happen here. There will be an inverse correlation. Less Boogeyman.
That’s hard to believe since the bill authorizing Entergy’s secret deal with Amazon removed most of the Mississippi Public Service Commission’s authority to monitor and approve Entergy’s spending for the data centers. The bill allows no-bid contracts, removes caps on rate increases, presumes prudence, etc. PSC’s in other states were not kneecapped. Yet their residential rates have increased much faster than inflation due to data centers. And ours won’t?
Higher rates due to data centers seem to be the alarming norm. So alarming that data center billionaires recently pledged that they would try to stop the increases. One of the billionaires owns Amazon’s data centers in the secret deal with Entergy. Is that why Entergy’s CEO says not to worry about higher residential rates? Nope. That’s not why.
He says trust us. We’ve modeled the next 20 years to predict residential rates with and without data centers. Our models show rates will be lower with data centers. You can trust our models.
But you can’t trust Entergy’s or any other models because they predict what they are programmed to predict. And as Yogi Berra said: “It’s tough to make predictions, especially about the future.” For example, models that forecast weather three days out get it right most of the time. Five days out is iffy. Two weeks out is just a guess. A year out is fiction. Weather is just one of many variables that affect electric rates. It’s arrogant to think you can predict those variables and the resulting rates 10-20 years out. It’s condescending to say customers should trust you.
Something else: the more precise a model’s prediction, the less believable it is. That’s why models have error bands. Energy’s CEO says data centers will shave residential rates by precisely $5 billion in Mississippi, Louisiana, and Arkansas and by $2 billion in Mississippi. He doesn’t say Mississippi customers will get a $2 billion rebate. He says that’s the difference between imaginary rates with and without data centers. The error bands are probably bigger than the imaginary savings. But there will be less Boogeyman anyway.
Feel better now?
Kelley Williams, a Northsider, is chairman of Bigger Pie.
