Mississippi Power appeals rate hike denial

A few hours after a second overrun for its Kemper County coal plant was revealed, Mississippi Power Co. said last week it was appealing the Public Service Commission’s denial of a rate increase the company had requested to help pay for the facility.

The company appealed the PSC’s order to the Mississippi Supreme Court.

On June 22, commissioners voted 3-0 to deny a 13 percent rate increase the company wanted to employ to help pay for part of the Kemper plant’s financing and construction costs. The decision followed a hearing in which MPC officials said the 13 percent rate increase would have generated about $55 million for the remainder of 2012.

As part of the denial, commissioners said they would not rule on any rate increase requests until the state’s high court had its say on the Sierra Club’s latest legal challenge to the facility. The environmental advocacy organization has opposed the plant from the jump, calling it expensive and unnecessary. The group currently has its second round of litigation before a chancellor in Harrison County, where MPC is headquartered.

Mississippi Power’s appeal includes a motion for interim rate relief, according to a company press release. Company officials have said the PSC’s denial could potentially preclude the recovery of construction costs until after the facility is completed, due to a possibly lengthy litigation timeline.

The company argues in its appeal that the PSC’s order denying the rate increase is not supported by substantial evidence, and that it violates the Commission’s previous orders.

The company also argues that the order denies MPC the opportunity to earn a “fair, just and reasonable rate of return” on Kemper and other properties. That, the company said in court papers, violates the company’s right to due process because it represents a taking of MPC property. The company also asks the court to allow it to pass on the costs of the appeal to ratepayers.

The denial, MPC attorneys write in court papers, is in violation of the Baseload Act, passed in 2008, that allows public utilities financing cost recovery during construction of generation facilities. Because the Baseload Act can only be used during construction, every month rate implementation is delayed MPC loses the ability to collect the money to pay for the plant’s construction. “That cash promised by the Commission cannot be replaced – it is gone forever,” MPC says in court filings.

“The collection of interest costs for the plant during construction will accomplish two important objectives,” Moses Feagin, vice president and chief financial officer, said in the press release. “One, to lower the overall cost of the plant for our customers, and two, to reduce the potential rate shock they would have otherwise experienced.”

The April order that grants another certificate of public convenience and necessity for the plant says that rate increases will peak at 30 percent in 2014, when the plant is scheduled to begin commercial operation, before falling as MPC pays down plant-related debt.

In 2009, MPC filed confidentially rate impact projections that showed rate increases peaking at 45 percent. That number has been in dispute since.

Each of the three commissioners said either in interviews or via spokespeople last week that they hope the state’s high court rules on MPC’s appeal quickly.

“The sooner they can rule, the better,” Central District Commissioner Lynn Posey said. “Quite honestly, I expected them to appeal our decision.”

Last week, Fitch Ratings downgraded MPC’s credit rating from “A” to “A-.” The ratings agency also revised the company’s rating outlook from “stable” to “negative.” The agency said in a press release that the downgrade was in response to the company’s not being able to collect financing costs for the plant.

A MPC spokesperson did not return a message left last week on his cell phone.

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