The Arkansas Public Service Commission (APSC) was created by the General Assembly, which delegated to the Commission the power to regulate the service and rates of those utilities subject to its jurisdiction. The Commission's primary responsibilities involve ensuring that service is safe and adequate and that rates are just and reasonable. Regulation of public utilities requires a balancing of interests - the APSC must allow the utility an opportunity to earn a fair return on investment, but must likewise see that the public does not pay more than necessary to provide that fair return. The current delegation of legislative authority to the APSC is the product of legislative evolution.
In 1899, acting pursuant to an amendment to Ark. Const. Art. 17, Section 10, the legislature created the Arkansas Railroad Commission. Though relating only to railroads and express companies, the act creating the Railroad Commission charged it with the duty to ensure that rates were just and reasonable. Since then, this has been the cornerstone responsibility of the APSC. Likewise, the duty to file an annual report originated with the 1899 Act, as did the Commission's obligation to hear complaints from the public about rates.
In 1919 the Arkansas Corporation Commission was created as the successor to the Railroad Commission. Its regulatory powers were extended to services and facilities and its jurisdiction was enlarged to include regulation of telegraph and telephone companies; pipeline companies for the transportation of oil, gas and water; gas companies; electric lighting companies; hydro-electric companies for the generation and transmission of light, heat or power; and water companies, furnishing water. This enlarged jurisdiction was in addition to the transfer of the Corporation Commission's jurisdiction over railroads and express companies. Additionally, the Corporation Commission was given authority over new construction and additions to plants by the requirement that "certificates of convenience and necessity" be obtained for such construction.
In 1921, the Corporation Commission was abolished and the Railroad Commission was recreated. In the process, the Corporation Commission's original jurisdiction over utilities operating within the limits of any municipality was removed and that regulatory jurisdiction was placed with the municipalities.
In 1933, the Arkansas Corporation Commission was reestablished. The Commission was vested with the powers of several other commissions which were abolished, including the Railroad Commission.
A comprehensive 1935 Act created the Department of Public Utilities within the Arkansas Corporation Commission. The Corporation Commission's powers over utilities were transferred to the Department. Since the adoption of this Act, regulated utilities have paid an annual fee based on gross earnings to finance the APSC's operations. The 1935 Act gave the Department and municipalities concurrent and original jurisdiction over public utilities operating within the limits of a municipality. Municipalities were also authorized to extend service into contiguous rural territories and to set rates for such service subject to the Department's approval.
In 1937, electric cooperatives were exempted from Department jurisdiction in all respects except one. The cooperatives were still required to obtain a Certificate of Convenience and Necessity from the Department before constructing or operating any equipment or facilities for supplying electric service in rural areas.
In 1945, the Arkansas Corporation Commission was renamed the Arkansas Public Service Commission. The new Commission was vested with the authority and powers of the Corporation Commission and the Department of Public Utilities, which were abolished.
In 1951, telephone cooperatives were made subject to APSC regulation to the same extent as telephone companies. Allocated territories for telephone companies were also established by reference to then existing service areas. Similarly, in 1957, the legislature provided explicit protection for territories allocated to electric cooperatives pursuant to a Certificate of Convenience and Necessity.
Also in 1957, the powers and duties of the Arkansas Public Service Commission, with respect to transportation by air, rail, water, carrier pipe lines, and motor carriers, were transferred to the Arkansas Commerce Commission, which in 1971 was renamed the Arkansas Transportation Commission. Since this separation, the APSC's activities have primarily been limited to regulating jurisdictional public utilities. That jurisdiction has been subsequently altered at various times by the legislature.
In 1967, the legislature made electric cooperatives subject to APSC regulation in the same manner as public utilities. The legislature also provided for allocation of territories for electric public utilities, just as it had earlier provided allocated territories for electric cooperatives. Twenty years later, in 1987, the legislature reduced APSC jurisdiction over rural electric distribution cooperatives by providing that such cooperatives are not subject to APSC rate case procedures, except under certain circumstances.
In the 1971 reorganization of state government, the Arkansas Public Service Commission was transferred to the Department of Commerce and located in the Division of Utilities and Transportation. The APSC retained its powers, authorities, duties and functions. However, its budgeting, purchasing and related management functions were placed under the supervision of the Director of the Department of Commerce.
In 1977, except for municipally-owned or operated utilities, the General Assembly restored exclusive ratemaking jurisdiction to the APSC. In 1985, this municipal exemption from APSC regulation was extended to electric service supplied by a municipality to a contiguous rural territory. Consequently, with the exception of the Commission's authority under the Arkansas Natural Gas Pipeline Safety Act of 1971 to promulgate and enforce compliance with minimum safety standards for the transportation of gas and pipeline facilities, the APSC does not have any jurisdiction over utilities owned or operated by municipalities.
In 1983, the Department of Commerce was abolished. The Arkansas Public Service Commission was restored to its status as an independent state agency, authorized to function as it had prior to its 1971 transfer to the Department of Commerce.
In 1987, small water and sewer utilities were removed from the Arkansas Public Service Commission's jurisdiction. However, in 1988 and 1989 the legislature provided exceptions. Under certain circumstances, the exceptions allow either the customers of the company or the company itself to petition the Commission to exercise regulatory jurisdiction over that particular small water or sewer utility.
In 1991, the General Assembly transferred to the Public Service Commission the regulatory authority over pipeline companies as common carriers which had previously been exercised by the Arkansas State Highway and Transportation Department. In the same session, the General Assembly amended the statutory definition of "public utility to exclude providers of cellular telecommunications from price or service regulation unless the Commission, after notice and hearing and upon substantial evidence, determines otherwise.
On February 4, 1997, the Telecommunications Regulatory Reform Act, Act 77 of 1997, became law and significantly altered the regulation of the telecommunications industry in Arkansas. Act 77, in combination with the Federal Telecommunications Act of 1996, provided for the introduction of competition in the local exchange market. For incumbent local exchange carriers (ILECs), Act 77 provides three forms of regulation: traditional rate base rate of return regulation, a form of price cap regulation, and a rural carrier option. Act 77 also established the Arkansas Universal Service Fund which provides replacement for ILECs’ lost revenues from certain sources and also provides financial support for ILECs providing service to high cost areas. Following the passage of Act 77, most of the ILECs in Arkansas elected one of the forms of alternative regulation. Consequently, the Commission no longer regulates the rates for basic local exchange service and most other telecommunications services. The Commission continues to regulate the quality of service of all local exchange carriers.
In 1999, the General Assembly enacted The Electric Consumer Choice Act of 1999 (Act 1556) which provided for the introduction of retail competition into the electric utility industry, the regulation of new energy service providers, and the recovery of stranded costs. Act 1556 provided for a competitive retail electric market that gave retail customers the opportunity to choose a provider of electricity and that encouraged full and fair competition among providers of electricity to be established by January 1, 2002, but not later than June 30, 2003. Following the passage of Act 1556, the Commission initiated numerous rulemaking dockets and other proceedings required to fulfill the requirements of Act 1556.
On November 29, 2000, the Commission issued its Progress Report to the General Assembly on the Development of Competition in Electric Markets and the Impact on Retail Customers. In that report, the Commission observed that it did not appear possible to implement retail open access on the schedule mandated by Act 1556 of 1999 and provide benefits to Arkansas retail electric customers. Consequently, the Commission recommended that the General Assembly take action to delay the implementation of retail open access during the 2001 legislative session.
In 2001, the General Assembly, passed Act 324 which amended Act 1556 of 1999. Act 324 delayed the implementation of electric retail open access from a window of January 1, 2002 through June 30, 2003 to a later period of October 1, 2003 to October 1, 2005. In its report to the General Assembly, pursuant to Act 324, on the Development of a Competitive Electric Market and Possible Impact on Consumers, submitted on December 20, 2001, the Commission recommended that the General Assembly consider either a repeal of the statute or a complete repeal of the statute for a considerable period of time, perhaps going out to 2010 or 2012. The Commission noted that there did not appear to be any opportunity to implement electric retail competition for the foreseeable future and provide any benefits to customers in Arkansas.
In 2001, the General Assembly enacted Act 1842 which established the Arkansas Extension of Facilities Fund and the Rural Saver Optional Calling Plan. Act 1842 designated $500,000 annually from the Arkansas Intrastate Carrier Common Line Pool (AICCLP) for the Extension of Facilities Fund which provides grants of up to $250 per customer toward the cost of extending facilities into rural areas without wire line telecommunications service. Act 1842 designated $4,500,000 annually from the AICCLP for the Arkansas Calling Plan Fund which provides funding to provide optional calling plans in rural areas.
In 2003, the General Assembly enacted the Electric Utility Regulatory Reform Act of 2003 (Act 204) which provided for the repeal of retail electric competition as originally authorized by Act 1556 of 1999 and Act 324 of 2001. In addition, Act 204 authorized the Commission to adopt rules for transactions among or between regulated electric public utilities and their unregulated divisions, components, and affiliates; to provide for recovery of transition costs incurred as part of the preparation for retail open access; and to adopt rules for comprehensive electric utility resource planning. Act 204 also required the Commission to study the feasibility of a large user access program for electric service choice and report to the General Assembly by September 30, 2004. On September 30, 2004, the Commission provided a report to the General Assembly and advised that there did not appear to be an opportunity for the foreseeable future to implement a large user access program in Arkansas that would provide benefits to large users or that would not shift costs to other classes of customers.
In 2003, the General Assembly enacted Act 1764 which established the procedures for customers of incumbent local exchange carriers (ILECs) to petition the Commission to establish extended area service. Act 1764 directed the Commission to adopt rules that would govern the process for customers to request an EAS route; for the ILEC to provide information to its customers regarding the cost of the requested route; and the procedures for a customer election regarding whether they are interested in the proposed EAS route at a rate that will recover the cost of providing the service.
In 2003, the General Assembly enacted Act 1788 which established the rates for the Arkansas Intrastate Carrier Common Line Pool (AICCLP) and addressed the distribution of AICCLP revenues among the incumbent local exchange carriers. Act 1788 specified what minutes of use would be reported to the AICCLP for the purpose of assigning responsibility for those charges.