AG's flip-flop on gas company settlement symptom of larger problems - Arkansas Times

Oct 18, 2024

It must be exhausting to be Attorney General Tim Griffin. In addition to constantly attacking direct democracy and pointlessly tilting at technological windmills, there are the hours spent trying to get more bodies and money for grandstanding lawsuits. There is also the “trying to disenfranchise Arkansans in lawsuits to which he’s not a party” thing, wasting time making cringey videos about his legal arguments (only to have the Supreme Court reject them) and repeatedly punching down to bully marginalized groups for political clout.

Despite this unrelenting schedule, Griffin still somehow found time last week to:

He even tried to spin his change of heart as a strategic win, because acknowledging he made a mistake is about the only thing Griffin won’t find time to do.

Griffin’s jellyfish impression is embarrassing, but it is merely a symptom of two related, larger problems: Summit Utilities’ subpar record in Arkansas and the Arkansas Public Service Commission’s lax oversight of utilities generally under chairman Doyle Webb.

Summit Utilities announced in April 2021 it was purchasing CenterPoint Energy gas supply systems in Arkansas and Oklahoma for $2.15 billion. The sale officially closed in January 2022. In documents regarding the approval of this sale, Summit asserted they would charge rates similar to what CenterPoint charged and that their revenue, fixed charges and operating expenses would be similar to CenterPoint’s.

Notably, then-Attorney General Leslie Rutledge opposed the sale in proceedings before the Public Service Commission unless multiple protections for customers were included. Commission staff similarly raised concerns and suggested protections specifically about limits on rate changes. These concerns and protections were addressed by the parties in negotiations, and they were included in some form in the final settlement approved by the commission.

Customers were switched to Summit account numbers beginning in November 2022. The following month, when an arctic blast sent overnight temperatures in Little Rock into single digits, Summit customers in parts of West Little Rock reported gas outages. Summit said this was due to “the freezing temperatures affecting one of its regulator stations.”

A month later, in January 2023, Summit customers began complaining about drastically higher charges on their monthly gas bills. Summit blamed the higher gas prices on the December cold snap. Thousands of customers, however, were sent incorrect bills, some for hundreds of dollars more than was actually owed. That same month, Gov. Sarah Huckabee Sanders named Doyle Webb to replace Ted Thomas as chair of the Public Service Commission.

By March, Attorney General Griffin opened an investigation into “over 2,800 complaints” from Summit customers about the amounts they’d been billed. A class action lawsuit was also filed in March against Summit based on their billing practices, and a circuit judge entered a restraining order, prohibiting Summit from disconnecting gas service to anyone who refused to pay his or her bill while the billing matter was being litigated. The case was voluntarily dismissed a few weeks later, after Griffin referred his findings to the Public Service Commission and the class action plaintiffs requested to join their arguments with the commission’s proceedings.

In May, the commission ordered Summit to continue abiding by the circuit court’s restraining order for at least two months, following a request from Griffin. Two months later, in July, Summit announced they would begin normal collection efforts in September, including shutoffs for non-payment.

The commission cleared Summit in August of wrongdoing regarding billing practices and passing costs to customers.

While the investigations and litigation were unfolding, Summit adjusted the cost of gas on April 1. They do this twice per year, on April 1 and November 1. The rate in November 2022 was $1.22 per 100 cubic feet of gas. On April 1, 2023, Summit reduced it to $0.70 per 100 cubic feet, a 45% decrease.

They increased the cost on Nov. 1, 2023, to $0.80. This was still nearly 35% lower than the previous November. In January 2024, Summit opened a “rate case” with the Public Service Commission, seeking to increase their overall residential billing rate by 29.4%. This would have increased the average residential customer’s bill by more than $18 per month.

Summit Senior Vice President Fred Kirkwood said in January that the need for an increase was “largely driven by inflation, economic conditions and capital investments in our system.” At the time, the inflation rate was 3.1%, less than half of what it was in January 2022 (7.5%), when Summit closed the sale with CenterPoint. Gross domestic product was $28.4 trillion, up from $24.9 trillion in January 2022. Gas prices were, by Summit’s own admission, more than 30% lower than they’d been a year earlier.

As for “capital investments in our system,” Kirkwood’s explanation came barely two years after state regulators approved the sale to Summit based, at least in part, on Summit’s assertions its fixed charges and operating expenses would be similar to CenterPoint’s.

Contrary to Kirkwood’s public assertions, the requested $104.7 million base-rate increase was not earmarked for capital improvements, but was primarily to eliminate “the regulatory lag between the establishment of interim rates and the determination, in this proceeding, of the company’s true cost of service,” according to Summit’s filing. In other words, it would protect Summit from the unspeakable horror of occasionally having to operate under existing rates during the ten or so months it takes for the Public Service Commission to rule on future requests for rate changes.

Other money would go to capital investments to improve its distribution system, the company’s filing said. Overall, according to Summit, because of this increase, customers would see improved response times, more access to emergency dispatch and response, “smart technology” for monitoring systems and more staff and customer service operators.

Griffin immediately chimed in. After noting it would ultimately be up to the commission whether to grant the requested increase, Griffin said he was “reviewing Summit’s filing to protect Arkansas ratepayers from excessive utility rates.”

Groups representing hospitals, the University of Arkansas system and commercial gas customers intervened in the commission proceedings. At some point late last month, those groups, along with representatives of Summit Utilities, the attorney general’s office and commission staff entered into negotiations. The parties reached an agreement earlier this month, setting the rate increase at 23.4% instead of the requested 29.4%. This negotiated rate, submitted to the Public Service Commission for consideration on Oct. 6, would increase the average residential customer’s bill by $15.43/month.

While Griffin bragged about what he said was a solid compromise, some legislators saw it differently.

As it happened, two days later, the Public Service Commission’s budget was scheduled to be heard by the Legislature’s Joint Budget Committee. At that meeting, on Oct. 8, Rep. Jeff Wardlaw (R-Hermitage) said some of his constituents had received letters from Summit saying the rate increase had been approved. Wardlaw accused the commission of not holding Summit’s feet to the fire. “You guys are letting [Summit] run rampant,” he said.

Commission spokesperson Danni Hoefer said the settlement had been agreed to by the parties, but had not yet been approved by the commission. This did not placate Wardlaw, who asked why Summit sent out a letter saying it had been approved. Hoefer did not have an answer.

Wardlaw also took issue with Hoefer’s statement that commission staff seek to “balance” the need for reliable gas service with the goal of keeping the utility in a strong financial position so service is not interrupted. “Twenty-three percent is ‘reasonable’?” he asked. Hoefer replied that it would be up to the commission to decide that question.

Rep. Brian Evans (R-Cabot) noted the groups of intervenors in the rate case did not represent the residential customers and asked who did. The attorney general, Hoefer said.

Rep. Fran Cavenaugh (R-Walnut Ridge) accused Hoefer of “talking out of both sides of [her] mouth” by saying commission staff had approved the settlement but that the commission hadn’t. Rep. DeAnn Vaught (R-Horatio) asked why the commission would approve a 23% increase for the utility when her constituents call the commission “all the time” with electrical service issues and get no relief.

Ultimately, the legislators decided to hold the commission’s budget until a future date. They also referred the settlement and the rate increase to the Joint Insurance & Commerce Committee for further inspection.

On Oct. 9, Griffin crawfished. He said he no longer supported the settlement and asked the commission to reject it and order the parties to “return to the table” and continue negotiations.

“Last week,” Griffin said, “I believed the savings we secured amounted to the best possible deal we could get for ratepayers at that time. Since then, public input through the legislature has created a more favorable environment for ratepayers, and I see an opportunity to secure even more savings for Arkansans.”

The Public Service Commission will now determine whether to approve or reject the settlement. While it seems likely, based on the legislators’ animus toward the agreement, the commission will find a reason to reject it, that is far from certain given the commission’s industry-friendly track record since Webb took the helm.

Last November, the commission accepted a settlement with Entergy over operation of a nuclear power plant in Mississippi. The settlement was nearly identical to one the commission had rejected as “a low-ball amount” the previous year, when Thomas was still the chairman. As a result of this settlement, Arkansas received $142 million, far less than the $418 million the state stood to receive if they’d continued litigating a case experts said they had a strong chance of winning.

Then, in May, it came to light that Webb’s wife, Arkansas Supreme Court Associate Justice Barbara Webb, received nearly $15,000 in debt-retirement contributions from energy-related donors following her unsuccessful run for chief justice, most of which came from people associated with Entergy. In July, Saline County Justice of the Peace-elect Stephanie Johnson, a Republican, filed an ethics complaint against Doyle Webb over this appearance of impropriety. That complaint remains pending with the Arkansas Ethics Commission.

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Three-time Hater of the Year. Missouri boy, toiling in the word mines of Arkansas. Send cool/fun/interesting things to [email protected]. More by Matt Campbell