Ellington

Mississippi Public Service Commissioners Brandon Presley and Lynn Posey say they want to limit ratepayers funding charitable donations given by utility companies.

Presley said state law allows utility companies like Mississippi Power Company, Entergy Mississippi and TVA to donate money to various organizations, but he complains that it also allows the company to categorize such donations as business expenses, which can be funded through the company's major source of revenue: its ratepayers.

"Companies shouldn't be able to go around spreading goodwill in their name and then turn around and take that money out of the pockets of the ratepayers. It should come from the shareholders," said Presley, who supported the PSC's decision to open a docket to investigate the contribution process this month. "I don't think ratepayers, who have no choice but to pay their bills, should have to pay for these contributions."

Posey said companies dish out charitable contributions, but then approach the commission with reimbursement requests for their donations, paid for through what Posey describes as "minute" rate increases to customers' monthly utility bills.

"The average charitable ... contributions that Entergy makes amounts to about 6 cents per month per 1,000 kilowatt user, I think. Mississippi Power is maybe 7.6 cents. It's a bunch of money, but it's very little per ratepayer. It hardly affects rates, averaging 6 cents per month for a customer using a 1,000 kilowatt hours. It's minute, but we're still getting ready to scrutinize these things even so," Posey said.

Posey said the PSC's sister agency, the Public Utilities Staff, has recommended disallowing contribution reimbursement requests, meaning utility companies are gambling every time they shell out a donation if they expect a reimbursement, but that hasn't stopped them from being generous.

In 2009, for example, Entergy Mississippi invested $100,000 in the statewide early childhood education program Mississippi Building Blocks, which serves about 50 child-care centers and 150 early education classrooms throughout the state. The company plans to invest another $200,000 by 2011. Entergy Mississippi also pledged $500,000 to Jackson State University's College of Science, Engineering and Technology, and delivered another $50,000 check to the university in September. Mississippi Power announced a $500,000 commitment to Mississippi State University's Bagley College of Engineering in September.

MSU announced in October that 100 "economically challenged" students would receive $250,000 in tuition aid courtesy of Entergy Mississippi.

Entergy Mississippi spokeswoman Mara Hartmann said an Entergy contribution committee—composed of employees and some executives—examines contribution requests from non-profits, universities and other organizations, and allots money based on the company's focus of improving education, helping low-income and disabled customers, and improving the environment.

Despite the appeal of the donations, Posey and Presley want the donation process scrutinized and may require companies to fund future contributions through stockholders rather than rate increases.

"With economic times being what they are, we decided to take a closer look," Posey said.

PSC Executive Director John Waites said utility companies also generate revenue through stock sales, and that this is the indirect method through which companies can finance donation costs that are unrecovered by ratepayers.

Theoretically, a stockholder may purchase one share of $20 stock in Mississippi Power's parent company Southern Company. The stock may carry a dividend rate of five percent. Mississippi Power may pay out anywhere from 50 to 60 percent of their net income in dividends to Southern Company stockholders. What the company keeps is called retained earnings—meaning earnings kept by the business to fund reinvestment in things such as electricity poles, power lines, and generators—and contributions. In essence, the business keeps some of its investors' money for operating expenses and capital investments, rather than giving it back to them as 100 percent dividends.

Hartmann said stockholders already covered most of her company's donations last year. "When we took a look at 2009 contributions, it amounted to less than 15 cents per customer per month. We had a total of about $3 million in donations that year and $1.3 million came from shareholders. The other $700,000 was recovered under Mississippi law and with commission approval," Hartmann said. She added that the company never sought to recover $900,000 of the $1.3 million that shareholders carried. The PSC disallowed reimbursement of $400,000 that Entergy requested, so shareholders, she said, funded that amount as well.

While Presley said he would prefer more contributions to come directly from company stockholders, Posey said he is considering the idea of capping the percentage of donations ratepayers must accommodate.

"Our attorneys are working on a proposed rule, and I think they'll have a proposed rule suggestion to make soon. We will have hearings and have the (utility) companies come in and discuss the proposed rule with us," Posey said.

Currently, the PSC has no real precedent by which to determine reimbursement. State law Section 77-3-79 states that "reasonable charitable or civic contributions shall be allowed as cost of service," although these amounts are "not to exceed amounts established by regulations adopted by the commission." However, the commission does not have a blanket regulation governing the size the donations or any circumstances surrounding them. The only PSC rule that addresses the issue is Rule 22 governing charitable or civic contributions.

"Due to the varied sizes and operations of the utilities regulated by the commission, contributions will be studied individually to determine allowance as cost of service," the rule states, without issuing any financial limit or ratepayer commitment cap.

Presley said Mississippi is one of only a few states that allow utility companies to seek reimbursement through rate increases, and cited Louisiana as the only example he knows of a state that allows for the practice. John Bethel, executive director of the Arkansas Public Service Commission, said his agency does not typically include donations in rate increases of any kind.

"Those are typically treated below the line as a shareholder expense. That's been the commission's practice for a number of years," Bethel said. "Typically, donations and charitable contributions are not included in rates approved by the PSC."

Alabama PSC spokesman John Free said his state also does not allow utility companies to charge rate-payers for the cost of donations, while Texas Public Service Commission spokesman Terry Hadley said his state already follows Posey's donation cap suggestion and does not allow any utility company's donations to "exceed three-tenths of 1 percent" of the company's gross receipts.

"With that kind of cap, I can't see customers paying even six cents of their monthly bill to donations," Hadley said.

Hartmann would not say if limiting contributions to stakeholders or capping contributions would have an impact on local recipients, but said the state needed all the patronage it could get, especially considering its economic environment.

"Our state has great needs. We're the poorest state in the country," Hartmann said.

"We feel it is very important that we and other businesses contribute to the communities we live in. This is corporate responsibility. It's not about slapping our name on a sponsorship. It's about trying to meet very real, very serious challenges."