Mississippi alleges fraud by Entergy, utility says no proof
JACKSON, Miss. — The state of Mississippi opened a trial Monday arguing that the state’s largest private utility defrauded customers by not buying cheaper power from other generators and demanding Entergy Mississippi should be forced to repay up to $2 billion to its customers.
“We’re not here to make a profit,” lawyer Vince Kilborn said on behalf of Mississippi Attorney General Jim Hood. “We’re here to recover, dollar-for-dollar, the overcharges these people paid, plus interest.”
But lawyers for the unit of New Orleans-based Entergy Corp argued before U.S. District Judge Carlton Reeves that there’s little evidence that customers suffered any harm, noting rates were mostly lower than the national average during the 1998 to 2013 period at question in the suit. Entergy argues it bought plenty of power from outside generators, but said it needed to run some of its own older power plants sometime to keep electricity demand and supply in balance, even if that power was more expensive.
“Using our legacy system was a way to keep the lights on for all of our customers, including in Mississippi,” Kathleen Sullivan argued for Entergy.
Reeves, and not a jury, will decide if Entergy is guilty at the end of testimony, expected to stretch over parts of three weeks. If Hood wins, he could force Entergy to issue refunds to 447,000 customers in western Mississippi as the Democratic attorney general runs for governor, although any verdict would likely be tied up in appeals. Some of the private lawyers handling the suit for Hood also sued two Entergy subsidiaries in Louisiana, winning about $100 million in class-action damages. A state appeals court threw out a Texas lawsuit, agreeing with Entergy that the dispute was for a regulator to decide.
Entergy has also asked Reeves to throw out the Mississippi suit, saying the state Public Service Commission or the Federal Energy Regulatory Commission should decide, but Reeves decided he wanted a trial in the 11-year-old case.
“These people have waited an awful long time to be here, your honor, and there wasn’t but one person, Attorney General Jim Hood, who had the chutzpah to stand up against this company all these years and help them out,” Kilborn said.
Kilborn argued that Entergy defrauded the three-member Mississippi Public Service Commission when submitting pass-through charges for fuel because it never disclosed it could have bought power from others. Although Entergy Mississippi was at the time part of a four-state system, Kilborn argued Entergy Mississippi’s primary duty was to its Mississippi ratepayers.
“The Mississippi ratepayers would have paid a lot less,” Kilborn said.
He argued one reason Entergy didn’t buy power from independents was because it was trying to put them out of business to buy their plants on the cheap. Entergy eventually purchased a number of natural gas generating plants at prices far below what it cost to build them.
Sullivan, arguing for Entergy, said Kilborn’s argument ignores important points. She said independent power providers, or IPPs were unable or unwilling to sell power cheaply in the 10-minute increments that Entergy used to balance supply and demand. She said the ability to ramp its own plants up and down played a key role and keeping that balance.
“Does the state have any evidence that we could have bought more energy supply from IPPs at lower cost and at the same extremely high level of flexibility?” Sullivan asked. That evidence will not be there.”
She said the now-defunct system agreement benefited all customers, and letting Mississippi purchase cheaper power on its own would have unfairly harmed customers in other states.
“The idea of the system is everyone bears their fair share of the costs for the flexible energy you need to stay reliable,” Sullivan said
She also dismissed claims that Entergy conspired against independents, saying they stumbled into trouble because they overbuilt and underestimated how volatile power markets could be.
“The idea that the IPPs were financially distressed because of Entergy, that’s just incorrect,” Sullivan said.