Kemper Plant Update: MPC will ask commission for rehearing
Published: May 3,2010
Mississippi Power Company plans to ask the state Public Service Commission for a rehearing regarding its proposed $2.4 billion Kemper County clean coal plant.
MPC will ask for the Commission’s permission to charge rate payers for plant financing costs before the facility produces electricity, a practice called putting Construction Work in Progress (CWIP) in rate base.
The Commission issued an order on Thursday that said the plant proposal did not meet the statutory requirement of “public convenience and necessity” but would allow its construction if MPC submitted to several stipulations. The company was given 20 days from the date of the order to comply.
In the order, the Commission denied the company’s request for CWIP but left the door open for reconsideration. The order states: “The Commission understands that there can be positive benefits associated with CWIP. The Commission therefore invites the Company to submit evidence supporting its request for CWIP…”
Todd Terrell, MPC director of corporate communications, said in a statement, “We testified during hearings that it is impossible for Mississippi Power to finance and construct this plant without the use of CWIP (Baseload Legislation). It was shown by our CFO, as well as the outside financial experts, that without the use of CWIP, Mississippi Power would be downgraded several notches, at tremendous cost to the project. We will certainly ask that the Commission reconsider this.”
MPC has said that CWIP is necessary to retain a good credit rating and have access to capital. A good credit rating would make interest rates lower and save rate payers an estimated $500 million dollars over the 40-year life of the plant.
Mississippi’s three public service commissioners have different views on CWIP.
Commissioner Leonard Bentz said MPC will have to present “a very hard, hard case” to convince him to allow CWIP. He voted for the order approving the plant but disallowing CWIP due to the economy. People are having trouble paying their bills as it is, he said.
“What we’re basically saying is, Mississippi Power Company, finance this project, and when the rate payers are able to flip the light switch on and use that power that’s being generated at that facility, then that’s when the rate payers of Mississippi will start paying for it,” Bentz said.
Bentz represents the Southern District of Mississippi, which includes most of MPC’s 190,000 customers.
Of the three commissioners, Central District Commissioner Lynn Posey is the least opposed to CWIP. Posey voted for the conditional approval of the plant, but said he wish ed the Commission “could have had an order that wouldn’t have been quite so tight on Mississippi Power.”
Posey said: “I think at some point in time … we’re going to have to come back and visit the CWIP provision … I think that’s the way the majority of plants are being built these days. In the long run – it does have some up-front costs – but in the long run, there’s a tremendous amount of savings that can be there. I’m very much for the plant, and hopefully we can get that done.”
Northern District Commissioner Brandon Presley voted no to the order because he believes the plant proposal placed an “inordinate amount of risk” on rate payers and that the project could likely become “too big to fail.” However, Presley didn’t write it off forever. “This project may be perfect for Mississippi Power rate payers in the future,” he said.
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