Arkansas Public Service chair comfortable in new role, seeks workable solutions

For those familiar with the inner workings of the state Public Service Commission, there may not be a better equipped person than Ted. J. Thomas to handle the rigors, complexity and oversight of what many consider to be the state’s most important regulatory body.

Appointed by Gov. Asa Hutchinson in January to chair the state department that regulates the intrastate rates and services of the public utilities operating in Arkansas, Thomas’ background matches the qualities the governor said he was looking for in an appointee for the post.

“This appointment is a critical one – both in terms of economic development and consumer protection – and striking the right balance is key,” Hutchinson said in January. “Ted recognizes how important this balance is and understands the significant role it plays as we attempt to create a strong environment for economic growth in Arkansas. In addition, Ted is one of the brightest people I know, and I am confident he will make our state and people proud in his new position.”

LEGAL BACKGROUND
Thomas, a graduate of the University of Arkansas School of Law, is a former state representative from Little Rock. He served in the Legislature from 1995-1999, where he chaired the influential State Agencies and Governmental Affairs Committee during his final term.

He also sat on the staff of former Gov. (and current Republican presidential candidate) Mike Huckabee as a budget aide, which prompted some political speculation that he would be named by Hutchinson to oversee the Department of Finance and Administration.

Thomas also played an important role as a political strategist in the recent wins that gave the Republican Party all the constitutional offices and a majority in both the House and the Senate for the first time in state history.

But it is Thomas’ legal background that makes him comfortable in his position. The Conway native graduated with “high honors” in political science from the University of Arkansas at Fayetteville in 1986 and two years later received his Juris Doctorate from the university’s School of Law. He is licensed to practice law before every level of the nation’s court system, all the way up to the U.S. Supreme Court.

Not only has he served as the chief deputy prosecuting attorney for the 20th Judicial District, he spent seven years working as an administrative law judge at the very body that he now oversees.

In a wide-ranging interview about his interesting and varied public service background, Thomas said he had eschewed a possible more lucrative career path in the corporate world for a calling in government because it “gets him up each morning” knowing the work he does will make a difference.

“It is an honorable thing to be in the corporate world, and at times you can probably make more money doing that, but the focus and motivation that I get from public service is more gratifying,” he said. “It is that motivation that you are helping people that makes you do a better job.”

COMMISSION EXPERIENCE
Although all those earlier preparations and career stops were excellent groundwork for his current role as PSC chairman, Thomas said it was his past time served at the commission that has allowed him to get back up to speed at a regulatory body where dockets include complex and voluminous rate case filings involving billions of dollars that sometimes take years to work through.

The former lawmaker said there is less of a “learning curve” now because he is already familiar with the rules and day-to-day operations of the commission and has relations with most of the PSC staff.

“The seven years I was here before was a positive professional experience. And a lot of the folks here are the same, although there has been some turnover and retirement, but part of my view coming in was that it was a good place to work. There are good folks here,” said the Republican-appointed chairman, adding that he has a great working relationship with fellow PSC commissioners (and Democratic appointees) Lamar Davis and Elena Wills.

FINDING WORKABLE SOLUTIONS
By definition, the PSC regulates the intrastate rates and services of the public utilities in Arkansas that provide electricity, natural gas, water, telephone service and pipeline safety. The tax division of the PSC also determines ad valorem assessments for property tax purposes on public utilities and carriers, including telecommunications providers, electric, gas and water utilities, pipeline companies, railroads, airlines, barge lines, cable television providers, motor carriers and bus lines.

And even though the agency is almost always involved in adversarial cases with multiple parties and petitioners seeking an outcome that benefits their interests, Thomas said he enjoys sifting through all those varied viewpoints and coming up with workable solutions.

“For me, I enjoy studying and reading, and getting as many perspectives as I can get a hold of, including those that I tend to agree with and those that I might disagree with, to try to get as much information and sort through it,” Thomas said. “At this stage in life, I am fairly confident that when I have the time to do all of that, I feel I can find a reasonable answer.”

Thomas said that he first sees his role as a PSC commissioner as working within the framework of Arkansas law. “While we have the authority to set rates, it is not a blank sheet of paper. The rates have to be set on the basis of costs.”

Although Thomas cannot speak publicly about rate cases that are before the PSC, he is fully aware that one of the first major issues he will oversee is Entergy Arkansas’ recent rate case filing in April. Public hearings on the state’s largest utility’s request to recoup $167 million in new revenue for costs associated with upgrading the state’s electric grid will begin in early January 2016.

In speaking generally about electric utility rate cases that come before the PSC, Thomas said there are usually two sides to the rate-making process. Primarily, there are proceedings where the PSC hears and takes testimony and then gathers information from the utility and the varied consumer interests. “That’s a proceeding to get the total amount of dollars that the utility is entitled to.”

Secondly, the commissioners then have to figure out how to split out those costs between residential and commercial interests, he said. “Electric rates are an important factor in economic development, and we have to keep that in mind. But at the same time, when you drive through the cities and towns in Arkansas, you don’t see a lot of rich folks that can take a large increase in their electric bill.”

CONFLICTING REGULATIONS
When asked to name some of the key issues ahead for the state regulatory body, Thomas did not cite any specific cases or trends on the horizon. However, he said that the “volume of change” in the industries that the PSC regulates is impactful on every decision.

“There is so much going on, and that makes it a challenge,” Thomas said, specifically citing conflicting regulations by the U.S. Environment Protection Agency that could have a huge effect on future electric rates in Arkansas.

For example, under the so-called Best Available Retrofit Technology, or BART, the EPA has mandated that the state must come up with a plan that makes “reasonable progress” toward protecting the Arkansas Buffalo National River, Ouachita National Forest and Caney Creek wilderness area from haze and the harmful effects of pollution. The proposed guidelines also address “downwind” haze problems from Arkansas power plants and factories that cross statelines.

To meet BART plan mandates, the state Department of Environmental Quality has proposed retrofitting nine units and six mills and power plants across the state to meet the EPA requirements to reduce 71,500 tons a year of sulfur dioxide emissions and up to 15,000 tons of nitrogen oxide annually.

Under those EPA rules, the Domtar Paper Company in Ashdown will have to retrofit two boiler units at its Ashdown Mill where the company is making $160 million in capital improvements to convert a machine assembly line into a “high quality fluff pulp line” that will produce a number of paper products.

The EPA haze rule also affects two of the state’s oldest coal-fired facilities, White Bluff Electric in Jefferson County and the Independence Steam Electric Station near Newark in Independence County. At an EPA meeting held in Little Rock in April, utility officials said adding scrubbers, or pollution control devices, on smokestacks at the White Bluff plant alone would cost more than $400 million.

Thomas said those aging facilities are also on the EPA’s list for possible shutdown under the president’s Clean Power Plan that would cut carbon emissions at existing power plants by 2030.

“You’ve got to have a right answer. You can’t invest that kind of money in a plant and then turn around and shut it down,” Thomas said. “There is so much velocity of change in the energy business, and some of it is technology driven. And when you are dealing with 30- or 40-year lives of these [power plants], you have to make a decision. And when you zigzag in policy, there are all kinds of opportunities to have lost investments.”

IN A HOLDING PATTERN
Thomas also said the PSC is anxiously waiting for the EPA to issue final draft rules on President Obama’s signature climate change initiative to cut carbon emissions at existing power plants later this summer. He said federal environmental officials have indicated that they expect to issue final draft rules on the EPA’s draft 111(d) rule by mid-August.

Thomas said he and ADEQ Director Becky Keogh have had discussions with Gov. Hutchinson concerning the EPA rule since comments were submitted to federal officials in December following several stakeholder meetings called by former Gov. Mike Beebe.

Thomas said once a final EPA rule is issued in 2015 and it has been reviewed, the ADEQ and APSC will restart the meetings with stakeholder groups to develop a state implementation plan that would then be submitted to the EPA for approval.

“We are in a holding pattern now until we get final rules,” Thomas said. “The process will begin again once we get a final rule. We have discussed it with the governor and there is legislation (Act 382) that essentially mandates that we submit a plan, or decide whether to file a plan or not.”

Still, Thomas has very strong views about the climate change debate and the EPA’s Clean Power Plan mandate. He said while there is some evidence of human contribution to increasing temperatures, “I also believe this is the wrong question to ask.

“The real question is whether humans can lower the temperature and if so, what is the cost?” Thomas said. “The first question that needs to be answered is what must be done to lower the temperature of the earth by one degree, and at what price.

“Until that question can be answered, the science is incomplete,” he said of the ongoing climate change debate.

He also said that the EPA Clean Power Plan’s impact on global temperature is so small that it can’t be measured. “Electric rates could go up from 10% to 25%, and the impact on the problem they are trying to solve is minimal,” he said “The suggestion that objective science mandates a policy that costs money but does nothing is false.”

The PSC chairman added that he believes some of the municipal utilities and electric cooperatives “will get hammered” by the EPA’s carbon emission-cutting plan that could shut down the state’s entire coal-fired power plant fleet.

Additionally, Thomas said lower natural gas prices that have resulted from fracking have given the U.S. an advantage over other nations in energy costs. “To begin to throw this cost advantage away in pursuit of a policy that has no impact on global temperatures is both tragic and ignorant.”

He also took a shot at politicians who say they advocate for the middle class, saying they should explain to Americans why their electric bills will go up under the EPA mandate. “In my view, a candidate cannot be both for the American middle class and for a proposed ‘Clean Power Plan,’ (which) will cause the middle class to pay higher utility bills, yet have no impact on the global temperature.”

PERSONAL PHILOSOPHY
Although sounding much like a politician, Thomas would not say if he had future aspirations for a higher political office, or was interested in a possible appointment to a post on the Arkansas Supreme Court. For now, he said, the state Public Service Commission is where he wants to be.

“To me, the best way to prepare for what’s out there is not to worry about it, but to focus on doing a good job where you are at now,” Thomas said. “The way I look at it, speculation on the future is entertainment, not work.

“The best thing I can do now is do this job to the best of my ability, and that’s what I am going to do and the rest will take care of itself.”