AG’s flip-flop on gas company settlement is a symptom of larger problems

It must be exhausting to be that Attorney General Tim Griffin. In addition to constantly attacking direct democracy and pointlessly attacking technological windmills, there are the hours spent trying to get more bodies and money for grandiose lawsuits. There’s also the “trying to disenfranchise Arkansans in lawsuits he’s not a party to,” wasting time making nasty videos about his legal arguments (only to have the Supreme Court reject them) and repeatedly bullying him into to bully marginalized groups for political influence. .

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

He even tried to turn his change of heart into a strategic victory, because admitting he made a mistake is about the only thing Griffin can do. won’t find time to do.

Griffin’s jellyfish impression is embarrassing, but only a symptom of two related, larger problems: Summit Utilities’ poor track record in Arkansas and the Arkansas Public Service Commission‘s lax supervision of utilities, usually under chairman Doyle Webb.

How we got here

Summit Utilities announced in April 2021 that it would purchase CenterPoint Energy gas delivery systems in Arkansas and Oklahoma for $2.15 billion. The sale officially closed in January 2022. In documents approving this sale, Summit claimed that they would charge rates comparable to what CenterPoint charged and that their revenues, fixed costs, and operating expenses would be comparable to those of CenterPoint.

Remarkably, then-Attorney General Leslie Rutledge opposed the sale in a proceeding before the Public Service Commission unless multiple protections for customers were included. Commission staff also expressed concerns and proposed safeguards specifically regarding limits on rate changes. These concerns and protections were raised by the parties during negotiations and are included in some form in the final settlement approved by the committee.

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

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

In March, Attorney General Griffin opened an investigation into “more than 2,800 complaints” from Summit customers about the amounts they were charged. In March, a class action lawsuit was also filed against Summit based on their billing practices, and a circuit judge issued a restraining order prohibiting Summit from turning off gas service to anyone who refused to pay his or her bill while the billing matter was pending was. The case was voluntarily dismissed a few weeks later, after Griffin submitted his findings to the Public Service Commission and requested that the class action plaintiffs join their arguments in the commission’s proceedings.

In May, the commission ordered Summit to comply with the court’s restraining order for at least two months, following a request from Griffin. Two months later, in July, Summit announced that it would begin normal collection efforts in September, including disconnections for non-payment.

The commission cleared Summit in August of wrongdoing related to billing practices and passing on fees to customers.

As the investigations and lawsuits unfolded, Summit adjusted its gas costs on April 1. They do this twice a 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 lowered this to $0.70 per 100 cubic feet, a drop of 45%.

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

Review case procedures and negotiations

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, by Summit’s own admission, were more than 30% lower than a year earlier.

As for “capital investments in our system,” Kirkwood’s statement came barely two years after state regulators approved the sale to Summit, based, at least in part, on Summit’s claims that its fixed charges and operating costs would be comparable to those of CenterPoint .

Contrary to Kirkwood’s public assertions, the requested $104.7 million increase in the base rate was not for capital improvements, but was primarily intended to “reduce the regulatory delay between the setting of interim interest rates and the adoption, in this procedure, to eliminate the actual costs of the company. service,” according to the Summit documents. In other words, it would protect Summit from the unspeakable horror of occasionally having to operate below existing rates for the ten months or so it takes the Public Service Commission to rule on future requests for rate changes.

Other money would go toward capital investments to improve the distribution system, the company’s filing said. Overall, Summit said, with this increase, customers would see improved response times, greater access to emergency services, “smart technology” for monitoring systems, and more staff and customer service representatives.

Griffin immediately intervened. After noting that it would ultimately be up to the commission whether to grant the requested increase, Griffin said he was “reviewing Summit’s application to protect Arkansas taxpayers from excessive energy rates.”

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

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

Coincidentally, the Public Service Commission’s budget was scheduled to be heard by the Legislature two days later. Joint Budget Committee. During that meeting, on October 8, Representative Jeff Wardlaw (R-Hermitage) said some of his constituents had received letters from Summit saying the rate increase had been approved. Wardlaw accused the committee of failing to hold Summit to the fire. “You are allowing (Summit) to 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 appease Wardlaw, who asked why Summit sent a letter saying it had been approved. Hoefer had no answer.

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

Representative Brian Evans (R-Cabot) noted that the broker groups in the rate case did not represent residential customers and asked who did. Attorney General Hoefer said.

Representative Fran Cavenaugh (R-Walnut Ridge) accused Hoefer of “talking out of both sides of (her) mouth” by saying committee staff had approved the settlement, but that the committee had not. Rep. DeAnn Vaught (R-Horatio) asked why the commission would approve a 23% increase for the utility when her constituents are “always” calling the commission with electrical problems and getting no relief.

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

On October 9, Griffin went crawfishing. 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 that the savings we secured represented the best possible deal we could get for taxpayers at that time. Since then, public input through the Legislature has created a more favorable environment for taxpayers, and I see an opportunity to secure even more savings for Arkansans.”

A tangled web

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

Last November, the commission accepted a settlement with Entergy over its operation of a nuclear power plant in Mississippi. The settlement was virtually identical to one that the commission had rejected as “a low amount” last year, when Thomas was still chairman. As a result of this settlement, Arkansas received $142 million, far less than the $418 million the state would receive if it continued to litigate a case that experts said had a strong chance of winning.

Then, in May, it came to light that Webb’s wife… Barbara Webb, Justice of the Arkansas Supreme Courtreceived nearly $15,000 in debt and pension contributions from energy-related donors after her failed bid to become chief justice, most of which came from people associated with Entergy. In July, Saline County Justice of the Peace Stephanie Johnsona Republican, filed an ethics complaint against Doyle Webb over this appearance of impropriety. That complaint remains pending with the Arkansas Ethics Commission.