Louisiana's Private Power Fight: Who Bears the Cost When Big Loads Leave the Grid

The Louisiana Public Service Commission has opened a rulemaking docket on "private use electrical networks," a regulatory category that would allow large industrial and digital infrastructure customers to generate, store, and transmit their own power without becoming regulated utilities themselves.^[1][2] Senate Bill 490, which proposed the same framework, died in the legislature this spring but has resurfaced at the commission level, where Commissioner JP Coussan directed staff to evaluate the model in June.^[2] The proposal sounds technical. What it reveals is a core problem in rate-of-return regulation: the utility's revenue requirement is fixed to a capital base, not to the utility's actual job.

Here is the mechanism. Under rate-of-return regulation, a utility's allowed profit is a percentage return on its rate base, the value of assets it owns. When a large customer like a data center joins the grid, the utility builds generation capacity, transmission lines, and substations to serve that load, adding those assets to the rate base. The utility then recovers the cost of those assets from all customers who use the wires, spreading it across a larger load. If that data center later leaves and builds its own power network, the infrastructure built to serve it remains; the utility's costs do not shrink. But now they are spread across fewer customers. Predictably, the remaining ratepayers inherit higher bills for assets they did not request and no longer need to use.^[1]

Entergy and other utilities, backed by utility-funded groups like the Consumer Energy Alliance, have opposed private networks on exactly this ground: they warn that allowing existing large customers to depart could "shift reliability and costs onto other customers."^[1] The industrial coalition, the Louisiana Energy Users Group and companies like Meta, argues the inverse: that some departures would spare the grid from billions in new generation costs by allowing the utility to avoid building plants it would otherwise finance and recover through higher rates on everyone else.^[1] Both sides are describing the same mechanism, disagreeing only on which scenario applies.

The regulatory choice is binary and has real distributional teeth. If the LPSC allows large new loads to build private networks, the utility avoids stranded capital costs but also loses the revenue those loads would have generated. Existing residential and small-business customers benefit, because the grid does not expand to serve departing loads and they do not subsidize infrastructure for absent users. If the LPSC prevents existing customers from leaving (as the staff proposal reportedly would), the utility preserves its revenue base and the sunk costs of infrastructure built to serve them are locked into remaining customers' bills. The industrial groups, correctly, say this is inequitable: a customer should not be forced to pay for wires built at a time when the utility promised to serve them, then told they cannot leave when circumstances change.^[1]

What the LPSC faces is not a technical question about grid reliability, private networks can retain grid connection for backup and balancing, but a choice about who bears the revenue risk of utility capital decisions. The utility's preference is clear: it wants the rate base to grow and the revenue requirement to be enforceable regardless of demand, insulating it from the consequence of over-building. A framework that allows customers to opt out forces the utility to justify each capital investment against actual use, a discipline rate-of-return regulation normally escapes. The commission will determine whether that discipline applies.

The concrete alternative is transparent cost-of-service accounting paired with a stranded-cost mechanism with teeth. If the LPSC approves private networks, it should simultaneously adopt a rule that (1) allows new large loads to depart freely, because a utility should not recover costs for infrastructure it chose to build for loads it no longer serves; (2) for existing large loads that built the system, establishes a clear exit fee covering only the sunk costs attributable to their load at the time they joined, not the full system cost; and (3) implements totex regulation for the utility's remaining operations, equalizing the utility's rate of return on capital and operational spending so it no longer has an incentive to build what it could procure or avoid. That design removes the utility's incentive to oppose customer choice while protecting incumbent small customers from cross-subsidization.