GULFPORT — Mississippi Power Co. asked the state Supreme Court yesterday to overturn regulators’ rejection of a rate increase. And while that appeal is going on, the company wants the high court to allow it collect the additional $55 million from customers.
The unit of Atlanta-based Southern Co. would have to refund the money if the court rejects its appeal. Mississippi Power put up a bond to guarantee it could refund the money. It also asked the Supreme Court to take quick action, waiving its right to a hearing on the rate increase request.
The rate increase would pay debt costs on the coal-fired power plant Mississippi Power is building in Kemper County. The Public Service Commission voted 3-0 last month to deny rate increases during construction as long as legal action by the Sierra Club is pending against the plant.
Typical residential customers would pay about $20 a month more during the rest of 2012. Mississippi Power would have to seek fresh authority to raise rates in 2013. The plant is supposed to start operating in 2014.
The appeal came as the company confirmed that the cost of the plant has risen to $2.8 billion. That’s the ceiling of what the Mississippi Public Service Commission has said it might allow the unit of Atlanta-based Southern Co. to charge customers.
An independent monitor now estimates that the plant will cost $2.8 billion, Northern District Commissioner Brandon Presley said. That’s above the $2.7 billion estimate the monitor made last month.
Mississippi Power originally estimated the plant would cost $2.4 billion.
The appeal and new cost estimates mean a new round of drama over the plant, under construction north of Meridian. What Mississippi Power calls Plant Ratcliffe would mine a soft form of coal called lignite, convert it to a gas and burn it to generate power.
A long series of legal and political disputes have dogged the plant. The Sierra Club opposes it because it says burning coal will contribute to global warming, even though the plant plans to capture carbon dioxide and pipe it to oilfields to be injected into the ground.
Mississippi utilities have long been allowed to impose rates under bond while appealing a PSC denial to the Supreme Court, but large utilities have shunned the mechanism in recent decades, commissioners say. But Mississippi Power said the commission’s action flew in the face of the PSC’s previous pledges to allow the company to collect money from its 185,000 customers while it’s building the plant, as well as the evidence in the rate case.
“The commission acknowledged that the size of the Kemper project dictated that (the company) receive cash during construction — the time period in which cash is most needed — in order to ensure that (the company) had the financial ability to undertake the project,” Mississippi Power said in court papers. “It was only based on this commitment and understanding that (the company) moved forward with construction of the project.”
The company said the denial is doing it irreparable injury because it can’t raise prices later to recover revenue it’s losing each month. It also said customers are missing out on $500 million to $600 million in savings on interest costs over the life of the project by not making debt payments now.
“Every day those rates are not in effect, the customers are not receiving those savings,” spokesman Jeff Shephard said. “So we really felt like time was of the essence.”
Finally, the company warned that credit rating agencies could further mark down Mississippi Power’s credit rating, raising its borrowing costs and possibly cutting off access to credit. Fitch Ratings already cut Mississippi Power’s rating by a notch last week, citing the rejection, and warned of more cuts.
Southern District Commissioner Leonard Bentz, a Republican, said that his position hasn’t changed and that he doesn’t want to allow any rate increases until the courts resolve the Sierra Club’s challenge to the plant’s license. Mississippi Power says that’s too long to wait because “construction of the project will in all likelihood be completed before the Sierra Club appeal is finally resolved.”
Bentz said he expects the company to build the plant for the original $2.4 billion price tag, and isn’t ready to allow them to recover any costs above that level.
Northern District Commissioner Brandon Presley, a Democrat, said that the cost overruns just add to his longtime opposition to the project.
“Mississippi Power will stop at nothing to raise people’s rates to pay for this boondoggle,” he said.