25-03-2025
Industrial Only Electricity Deregulation Will Be A Disaster For All Louisianans
The best way to avoid a tariff is to produce steel in the U.S. This picture taken on February 13, ... More 2025 shows the main gate of a factory of South Korea's steelmaker Hyundai Steel in Pohang. (Photo by Jung Yeon-je / AFP) / TO GO WITH AFP STORY Skorea-US-trade-tariffs-steel / REPORTAGE BY Claire LEE (Photo by JUNG YEON-JE/AFP via Getty Images)
Louisiana finds itself at the epicenter of economic development in the Gulf South with two recent mega-projects announced—Meta and Hyundai Steel. At the same time, the LPSC is considering two proposals to 'deregulate' or 'restructure' how power is provided. One proposal is 'full deregulation' that would allow every utility customer in Louisiana to shop around for their electrical supply, and the second is 'partial deregulation' which would only allow the large industrial customers to shop for power supply.
Full deregulation has been tried across the nation, and in nearly every fully deregulated state, customers pay higher electricity rates than those living in regulated states. This is because in regulated states, state agencies like the LPSC can ensure rates are fair and stable, and that utilities build enough power generation to meet every contingency. There is less known about this style of proposed partial deregulation, and only a few states, such as Nevada and Michigan, have gone down that road. Now, rumor has it, the casinos in Nevada who pushed for partial deregulation are looking to end that failed experiment because it has not reduced their electricity costs. In Michigan, the public service commission is fighting to restore resource adequacy after partial deregulation resulted in reliability issues and cost shifts to regulated customers when the unregulated energy providers failed to procure regional capacity.
What would a partial deregulation in Louisiana mean? Increased prices and reduced reliability for all consumers. And it would create an administrative headache for the LPSC that is larger than they can imagine. The Commissioners just need to look around at how well 'deregulation' has worked for other states.
Interestingly, the biggest push for partial deregulation is not being led by the industrial customers like the petrochemical plants operating along the Mississippi River, but rather, by the energy companies that, through partial deregulation, would be allowed to build the power generation that those large industrial customers or data centers would otherwise purchase from regulated utilities.
Amplify Louisiana, the lobbying group of those energy companies hoping to build those facilities, says: 'The LPSC should welcome partnerships with private investment to benefit ratepayers. In fact, some of the largest independent power producers in the U.S. are willing to invest in Louisiana and work with the industrials to serve those needs.'
The first question to be answered, what does this mean for the average Louisianan? The electricity charged to average consumers will not be based on the cost-savings realized by the industrial users with bespoke power plants. By contrast, the Amplify members developers will do very well.
The industrial companies may also think that by bringing generators inside their fences or buying from an independent power producer that they can save money by not paying the usual cost per kilowatt-hour to maintain transmission lines, distribution wires, and the upkeep for the current portfolio of generators. Except these industrial plants want to keep the wires and state's generators as a backup that is subsidized and paid for by all the other consumers. How is that fair?
Electricity infrastructure across the country, including in Louisiana, has needed to be renewed, and upgraded for many years—just like our roadways, water, and sewer services. Removing Louisiana's industrial base from the customer base will disproportionately place the financial burden of maintaining grid reliability on residential and small business customers, and an electricity grid is only as strong as its weakest link. There will be a greater likelihood of a broader grid failure.
More importantly, deregulation will not be a win-win for the industrial customers. Without adequate onsite backup generation equal to what is necessary to run their plants, they will rely upon a weakened grid during their regular maintenance of onsite power plants. If Louisiana adopts a Texas-like deregulation scheme, the industrials could pay as much as 40-times average electricity rates to buy electricity during peak demand—a price spike that will extend across the state. By weakening the larger public grid for their own corporate benefit, the industrials will needlessly endanger the property and lives of their own families and communities. It is a matter of public safety, and with Louisiana's position in the America's energy supply chain, it is a matter of national security.
Finally, since the advent of deregulation, there has been an explosion of 'new products' that seek to give an incentive here or an incentive there with each designed to tweak the regulated market into something resembling what a competitive market provides. That is, the regulators are trying to replicate what a buyer and seller commit to do: a transaction with positive economics and accountability. But deregulation or restructuring has been a disaster across the nation from conservative states to the most liberal like California. In Texas, the agency that manages the electric supply, called ERCOT, has market rules that encompass 2,125 pages and are tweaked almost constantly. To be clear, despite all this bureaucratic oversight, ERCOT has failed miserably killing hundreds during the February 2021 winter freeze and costing the state more than $100 billion in economic losses. Adding insult to injury, the Texas legislature approved billions of dollars in bailouts to the electric utilities that consumers will be paying off over years. In 2023 alone, Texas overcharged consumers $12 billion, and the grid is still not fixed.
The LSPC is not equipped to manage such an unwieldy beast and should not consider allowing this money grab to occur.
In Louisiana, 'partial deregulation' should be a non-starter.
