Mississippi Power petitions for rate hike to pay for Kemper plant
Published: June 14,2012
KEMPER COUNTY — Mississippi Power Co. wants a 6 percent rate increase to pay for the coal-fired power plant it is building in Kemper County.
Jeff Shepard, a spokesman for the Gulfport-based unit of Southern Co., said yesterday that would increase the company’s overall revenue from its 193,000 customers by about $50 million.
The Mississippi Public Service Commission could consider the rate increase at a June 22 meeting. For a typical residential customer it would amount to about $15 a month for the remainder of 2012, Shepard said. Mississippi Power would have to make a new filing in 2013 to keep collecting money to pay back what it’s borrowed to build the plant.
Mississippi Power originally projected that it would need to raise rates by a cumulative 33 percent from 2011 to 2014 and then gradually ease rates as it paid off the debt. It’s unclear if the PSC’s delay in approving rate increases has affected those projections. Opponents have cited figures showing rates could go up even more.
It’s also unclear whether Mississippi Power’s announcement that the plant’s price tag has increased to $2.76 billion will affect the PSC’s action. That’s $366 million more than the original $2.4 billion estimate, and only $110 million short of the $2.87 billion cost cap imposed by the commission.
The increase was disclosed May 10 to the firm hired by the PSC to monitor construction. That disclosure, in turn, was passed on to state regulators in the monitor’s most recent report. The Associated Press obtained a copy of the report Tuesday.
“It’s not a cost overrun,” Shepard said. “It’s an updated estimate.”
He said the company had to make the preliminary estimate before it completed detailed engineering drawings, which are now 70 percent complete. He also said additional workers hired when construction was falling behind schedule added to costs.
“We’re committed to getting it online underneath the cost cap,” Shepard said. “$2.4 billion was the original goal, with $2.88 (billion) in the background.”
What Mississippi Power calls Plant Ratcliffe is supposed to burn a soft form of coal called lignite that will be mined nearby. The plant will convert lignite to a gas to be burned to generate power and capture carbon dioxide to be pumped underground.
So far, the plant is 22 percent complete and it’s supposed to start operation in May 2014.
Northern District Commissioner Brandon Presley, a Democrat who has opposed the plant as too expensive for customers, says he believes Mississippi Power hid the overrun to get a needed approval from the three-member utility regulator in April.
“I think there’s a great, extremely high likelihood that they’re going to exceed the cap,” Presley said.
Southern District Commissioner Leonard Bentz, a Republican, said he believed that the company could find a way to cut the price.
“They said they can build the plant for $2.4 billion and I think that’s what’s going to happen,” said Bentz. He has supported the project along with Central District Commissioner Lynn Posey, also a Republican.
Environmentalists have fought the plant, mainly because they’re opposed to mining and burning coal because it produces more carbon dioxide than natural gas. Carbon dioxide contributes to global warming, scientists say. Opponents expressed hope that regulators would order Mississippi Power to abandon its plans to mine, gasify and burn lignite, instead ordering the facility converted to burning natural gas
“We’re hopeful that the light bulb will go off in one of the two commissioners,” said Louie Miller, state director for the Sierra Club.
That seems unlikely, though. Bentz said he’s still firmly committed to the concept that regulators can’t rely on natural gas prices to stay low for a decades-long period. He also said he supports the idea of allowing Mississippi Power to start collecting money from customers now to pay off the debt for the Kemper County plant. Bentz says that will keep interest charges on the debt from building up during construction.
“I’m not running from the financing costs,” he said. “It’s the right thing to do.”
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