Electricity rates rising as demand outstrips supply

By STEVE BRAWNER

Sen. Jonathan Dismang, R-Searcy, is a numbers guy, and he says electric power rates will increase and must increase. The question is, what’s the best way of doing that?

Dismang, a CPA and Senate chair of the Joint Budget Committee, announced the filing of Senate Bill 307, the Generating Arkansas Jobs Act of 2025, on Wednesday along with some of his fellow legislative sponsors and economic development officials. The House sponsor is Rep. Les Eaves, R-Searcy.

The bill would let electric utilities and electric cooperatives apply to the Public Service Commission for a rider so they could raise rates annually for a “strategic investment.” The rates would rise annually before a new plant is fully capitalized – in other words, recorded as an asset and not an expense. The current system enacts a larger rate increase near the end of the process.

Annual rate increases would be limited to the point that the final rates are 10% below the national average, unless the Public Service Commission has evidence that higher rates would attract or retain economic development opportunities and would be in the public interest. The annual rate increase limits of 4% for investor-owned utilities would remain when not related to a strategic investment. The allowed rate increases for electric cooperatives would change from 8% over 24 months to 5% over 12.

Dismang said the bill would raise rates higher for a few years for an investment, but the long-term result would be lower rates because public utilities would be borrowing less. Plus, it would prevent the sticker shock of a bigger rate increase at the end of the process. 

This would allow rates to increase incrementally, which is one of the reasons cited by another sponsor, Sen. Stephanie Flowers, D-Pine Bluff. She is not typically associated with bills supported by big business. Another Democrat who represents a lower-income area, Sen. Reginald Murdock, D-Marianna, is also a sponsor. 

A common theme of Dismang’s and others in the press conference was that rates are destined to increase. That’s because of two factors: supply and demand. First, two major coal-powered plants, in Redfield and Newark, will be going offline between now and 2030. The loss of those plants will reduce the state’s power output by 3,300 megawatts, said Jonathan Oliver, chief operations officer for Arkansas Electric Cooperative Corporation. At the same time, AECC members have seen requests for new loads totaling more than 4,000 megawatts.

“No matter what we do, with or without this bill, there is an increased demand for energy, which will drive up prices,” Dismang said. “That’s just the reality. What this bill is looking to do is mitigate that increase as much as possible.”

Others echoed that thought. Governor Sarah Huckabee Sanders said available power generation is one of the number one topics prospective employers ask her about. Randy Zook, president and chief executive officer of the Arkansas State Chamber of Commerce, said electricity demand is growing fast, but Arkansas does not have slack capacity. Demand will be driven by energy guzzling data centers, manufacturing companies, vehicle electrification and population growth. Dismang noted that artificial intelligence is a big power user.

Jay Chesshir, president and CEO of the Little Rock Regional Chamber of Commerce, said if energy capacity is lacking, potential big employers won’t consider Arkansas. Economic developers – again, there were many in the audience – don’t know which projects they have lost because employers marked the state off the list.

The 62-page bill is pretty technical. Dismang said it would get through the Senate Insurance and Commerce Committee, but he’s not speculating about what will happen from there.

For everyday Arkansans, there were two takeaways from the press conference. One is that your electricity bill is about to increase. There simply aren’t enough plants to meet demand. 

The other is related: Power, typically not a focus of the media, is becoming a much bigger story in Arkansas. Rate increases are coming, and the availability of power will determine how competitive Arkansas will be with other states. AECC’s Oliver said legislation similar to SB307 has been passed in Mississippi, Missouri, South Carolina and Georgia.

Meanwhile, Arkansas may be first in line, or near it, in capitalizing on power storage opportunities. The Smackover brine formation in south Arkansas is home to rich deposits of lithium, which supposedly can be extracted more economically and more cleanly there than in many other places. Companies including Exxon are investing hundreds of millions of dollars. 

In other words, get ready to read more about electricity – in the media, and when you receive your electric bill.

Steve Brawner’s column is syndicated to 17 outlets in Arkansas. Email him at brawnersteve@mac.com.