Abby L. Harvey
GHG Monitor
5/22/2015
Mississippi Power last week filed three proposed rate plans with the Mississippi Public Service Commission to recover eligible costs for the construction of the Kemper County Energy Facility, a new build coal plant that will employ carbon capture, utilization and storage technology. The proposals, which could raise customer costs by $6-$37 per month, have been filed in the wake of a Mississippi Supreme Court decision ordering the utility to return to ratepayers approximately $257 million collected since March 2013 for the project. The utility filed an application for rehearing of the case in March, but is considering its options for going forward while it awaits a decision. “We hope to avoid the need to put in place any proposal that will cause more pressure on our customers. We owe that to them and believe we have developed a solution that delivers on that promise,” Mississippi Power President and CEO Ed Holland said in a release. Representatives from Mississippi Power failed to respond to requests for comment this week.
The February decision overturned a 2013 rate order, under which the PSC approved retail rate increases for roughly 186,000 ratepayers of 15 percent effective in March 2013, and 3 percent effective January 2014, totaling approximately $257 million. In its ruling, the Mississippi Supreme Court ordered Mississippi Power to refund the increases stating that “the Commission failed to comply with the language of the Base Load Act, inter alia, and exceeded its authority granted by the Act.” The Base Load Act was approved in 2008 and states that “the commission is fully empowered and authorized to include in an electric public utility’s rate base and rates, as used and useful components of furnishing electric service, all expenditures determined to be prudently-incurred pre-construction, construction, operating and related costs that the utility incurs in connection with a generating facility (including but not limited to all such costs contained in the utility’s ‘Construction Work in Progress’ or ‘CWIP’ accounts), whether or not the construction of any generating facility is ever commenced or completed, or the generating facility is placed into commercial operation.”
Monthly Cost Increases Vary Greatly
Of the three proposed rate plans, the company’s preferred option would keep rates at current levels until the first half of 2016, when the plant is expected to be fully operational. Rates would then be increase $6-9 per month over a four-and-a-half year period. This plan also assumes that the company will be able to use the money already collected under the 2013 rate order. “Our employees have exhausted options for creating and delivering a plan that focuses on minimizing the burden on the hardworking families we are privileged to serve. Implementing a plan that lessens the strain on our customers has always been and will continue to be our intent,” Holland said.
The other two plans would result in higher monthly costs and would span two years. The first is a traditional plan which would increase monthly costs by $17 for the first year and an additional $20 in the second resulting in a total increase of $37. The second plan would result in a $5 monthly increase for the first year and an additional $29 in the second year for a totally of $34.
Mississippi Power has been working with the Mississippi Public Utilities Staff to reach a settlement in the case and continues to await the court’s decision on the rehearing request. Should these measures prove unfruitful however, one of the new cost recovery plans will need to be put in place. This plan will take effect once approved by the PSC. If the PSC does not move on the plans within 120 days the traditional plan may be put into effect temporally.
Independent Monitor Terminates Contract After Acquisition
Meanwhile, Burns and Roe, the Independent Monitor for the Kemper project, has announced it has terminated its contract with the Mississippi Public Utilities Staff as of April 30. The engineering consulting firm cited its acquisition by Power Engineer Inc. as the reason for the termination of the contract. “POWER’s business plan and strategic model differ significantly from those of Burns and Roe’s. Since the acquisition, POWER has been working methodically to realign the Burns and Roe project and services portfolio to better support meet POWER’s strategic objectives. This realignment puts much less emphasis on independent monitoring services, the development and delivery of expert testimony and expert witness services,” Gregory Zoll, Director of Strategic Consulting at POWER Burns and Roe, wrote in an April 1 letter to the Staff.
POWER Burns and Roe have agreed to help find a new Independent Monitor for the Kemper Project. “It is the Staffs intention to work diligently with Power Burns and Roe and the new IM to minimize any negative impact, which might accrue as a result the termination. Since the prudency hearing has been postponed until after the commercial operation date of the Kemper Project, we are hopeful that there will be adequate time to recover from this unfortunate setback,” Virden Jones, Executive Director of the Mississippi Public Utilities Staff, wrote in a letter to the PSC.
Burns and Roe have been critical of the project, noting extreme cost overruns and delays in testimony to the Public Service Commission. “The initial schedule was poorly integrated, the baseline schedule was established late, and activities were not effectively resource loaded. These deficiencies impaired the Project Team’s ability to accurately forecast additional commodity quantities needed and the related craft labor requirements,” Zoll stated in testimony filed July 21, 2014.
Mississippi Power filed its response to this testimony late last week. Testifying on behalf of Mississippi Power, Patricia Galloway, Chief Executive Officer of Pegasus Global Holdings, Inc. said that Zoll’s testimony is unrealistic. “Mr. Zoll’s Surrebuttal Testimony does not fully take into consideration a) the regulatory process under which a regulated utility conducts its decision-making process, b) the circumstances that existed at the time the utility made its decisions, c) that there are multiple options for the actions and decisions that a utility can take to address any given situation or issue, and d) that there are no right, wrong or optimal decisions in the consideration of whether a decision was prudent, but instead whether the action or decision taken fell within a zone of reasonableness,” Galloway wrote.
