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Kemper County power plant hearing postponed

kemper-update-logo-large_rgb-300x247The question of who should foot the bill for a new and controversial power plant is on hold.

Upcoming hearings on whether Mississippi Power Co. should be able to get customers to pay for its Kemper County power plant have been postponed.

The Mississippi Public Service Commission yesterday delayed prudency hearings from May 19 until at least August. Those hearings are supposed to examine the more than $2.75 billion that Mississippi Power, a unit of the Atlanta-based Southern Co., spent through March 31, 2013. Another prudency hearing for remaining costs would follow after the plant goes into commercial operation, scheduled before year’s end.

The price tag for the power plant, a lignite mine and associated pipelines is expected to run to $5.2 billion overall, up from an original estimate of $2.8 billion. Mississippi Power plans to absorb $1.3 billion in overruns.

The Public Utilities Staff, a separate agency from the commission, sought the delay. The commission asked the staff, Mississippi Power and others to see if they could settle any issues before a hearing. Staff Executive Director Virden Jones says he wants to discuss a settlement not only of spending prudence, but also of Mississippi Power’s seven-year rate proposal to recover costs.

Jones said he questioned the wisdom of a rate plan that allowed for no adjustments for seven years, even if ratepayers were paying far too much or too little for the plant. Most rate mechanisms in Mississippi are adjusted yearly.

Jones said the staff and Mississippi Power are “not close at this point” to any settlement.

Jones also said there was a backlog of filings and the staff concluded there wasn’t enough time for witnesses to prepare for hearings. He also said a delay should allow the Mississippi Supreme Court to rule if it’s constitutional for Mississippi Power to recover costs before the plant is running. Earlier this week, the court asked parties for more briefing about certain issues.

Prudency is a key step in Mississippi Power collecting from its 186,000 ratepayers to pay for the plant, even though rates have already risen 18 percent. If regulators decide Mississippi Power wasted money, they can bar the company from charging ratepayers for those costs.

The delay comes after separate engineering monitors hired by the commission and the staff filed reports in recent weeks questioning the prudency of some Kemper spending.

Though the two reports differ, both criticize Mississippi Power’s decision to start construction when little engineering work was complete. They also question sticking to an accelerated construction schedule to finish the plant in time to claim federal tax credits. The company sacrificed the credits when delays ballooned. Both reports also say Mississippi Power didn’t set aside enough money for contingencies, especially when Kemper’s coal gasification technology has never been deployed at so large a scale.

Those reports might not lead the commission to rule the whole project was imprudent, as opponents want the PSC to do. One firm, New Jersey-based Burns and Roe, estimates the problems, at least in this prudency round, cost Mississippi Power $85 million to $123 million, less than 5 percent of the amount under review.

Mississippi Power thus far defends all spending.

“Great effort was made to make the best and most prudent decisions in light of the prevailing circumstances at the time,” testified John Huggins, vice president of generation development, in a December filing.

 

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