Abby L. Harvey
GHG Monitor
8/28/2015
An emergency temporary 18 percent rate increase for Mississippi Power Co. (MPC) approved by the Mississippi Public Service Commission on Aug. 13 faces an immediate challenge in the form of petition to the Mississippi Supreme Court. The petition from a local businessman asserts the new emergency rate increase is in violation of a February court decision.
The emergency rate increase would replace a rate hike overturned by the state Supreme Court in February that was intended to help fund the company’s Kemper County Energy Facility. The Kemper project, a first-of-its-kind new-build coal-fired power plant that will employ carbon capture and storage technology, has been plagued by cost overruns and delays.
Due to this financial hardship, and the fact that the Kemper facility, though not yet at full operation, has been supplying the surrounding community with electricity generated with natural gas, the Public Service Commission found the emergency rate increase justifiable.
“The undisputed evidence reveals that MPC stands on the brink of bankruptcy. Equally compelling, the evidence reveals that MPC has had assets in service since 2013 that are used and useful and that the combined cycle facility has provided substantial savings to customers in the year since going into operation. Given the evidence of MPC’s near insolvency, the Commission finds that MPC is in a state of financial emergency and that its rates are insufficient, justifying providing interim and emergency relief of $159 million to prevent further injury,” according to the rate order.
Under the overturned 2013 rate order, the commission approved a 15 percent retail rate increase for roughly 186,000 ratepayers in March 2013, and a 3 percent boost effective January 2014, totaling approximately $257 million over the two years.
According to the February state Supreme Court decision, “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, approved in 2008, states that the Public Service Commission can include in a utility’s rate base and rates, “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.”
However, the Mississippi high court ruled the commission never found that the costs were prudently incurred. It ordered Mississippi Power to refund money collected under the rate increase.
In an Aug. 21 petition filed with the court, local businessman Thomas Blanton charged that the new rate increase violates the February decision, which ordered that the public service commission “grant no further rate increases until there is full compliance with the Court’s decision.”
“The only basis for granting the interim rate increase is that according to Mississippi Power Company, it has a desperate need for money. The company claims it is going broke and blames its perilous financial circumstances on the Supreme Court’s decision, never taking full responsibility for its massive miscalculation regarding Kemper IGCC,” Blanton wrote.
Furthermore, Blanton noted the Public Service Commission has yet to determine the prudence of the project, though a hearing is scheduled for Nov. 10. “This Court should direct the Public Service Commission to rescind the August 13, 2015 interim rate increase and disallow any rate increase by Mississippi Power Company until there has been a prudence finding,” Blanton argued.
