Whether CWIP constitutes a tax takes up most of Kemper hearing in front of Supreme Court
by Clay Chandler
Published: February 1,2013
Most of last Monday’s hour-long Kemper coal plant hearing at the Mississippi Supreme Court centered on two questions:
If the Mississippi Public Service Commission allows Mississippi Power Co. to charge its ratepayers for the facility’s construction, will it constitute a tax, or will it simply be a rate assessment?
If it is a tax, does it render the Baseload Act unconstitutional?
Mike Adelman, an attorney who represents Thomas Blanton, says the Baseload Act — a 2008 law that authorized utilities, with PSC permission, to collect construction-work-in-progress funds from ratepayers — is unconstitutional because it violates the Constitution’s 14th Amendment, which prevents confiscatory taking of property without due process.
“It’s a tax on electricity that has not yet been provided,” said Adelman, whose client is a Hattiesburg resident and one of Mississippi Power’s roughly 186,000 ratepayers.
Blanton’s claim was originally part of the rate dispute between commissioners and Mississippi Power. The dispute arose over the summer when commissioners denied a 13 percent rate increase that would have generated about $58 million to put toward the coal plant’s construction. Commissioners said then they would not entertain anymore rate increase requests related to the plant until the Mississippi Supreme Court had ruled on litigation brought against the plant by the Mississippi Sierra Club. That litigation is separate from last Monday’s proceedings.
The PSC’s stance changed last week, when commissioners and Mississippi Power Co. agreed to a settlement whose terms will allow the utility to ask for CWIP recovery in exchange for the hard cap on the project being lowered from $2.88 billion to $2.4 billion, and ratepayers being granted an ownership share in the plant’s TRIG technology.
Adelman, in his argument against the Baseload Act, equated CWIP with a tax, something he said the PSC does not have authority to levy. Even if lawmakers intended to convey that authority in the Baseload Act, Adelman said, the language in the law does not do that.
The law essentially forces Mississippi Power customers to become investors in the project, Adelman said.
“There is a recognized constitutional right — a right that is recognized by this court — that rates cannot be assessed for power that is not being delivered,” Adelman told the seven justices. Chief Justice Bill Waller Jr. and Associate Justice Leslie King were not in attendance.
Mississippi Power attorney Ricky Cox said that law allows for utilities to increase rates for “used and useful” services. “And CWIP is a used and useful service,” he told the court.
“These facilities (which are eligible for CWIP funds) have unique characteristics,” Cox said. “They run 24 hours a day and provide dependable power. That’s the benefit customers are getting.”
Blanton’s argument that the Baseload Act is unconstitutional is moot and should be dismissed, Cox said, because the Baseload Act has not been applied.
Justin Matheny, representing the PSC, echoed Cox’s assertion that ratepayers do receive a tangible benefit in exchange for paying CWIP.
“In this case, they’re helping to build a new plant and helping to continue to provide electricity into the future.”
The small amount of back and forth between justices and lawyers related to the original rate dispute centered on whether the settlement was final, and rendered the case closed.
Presiding Justice Jess Dickinson during the hearing expressed skepticism that it was, since the settlement kicked proceedings back to the PSC. Any dispute arising out of the new proceedings, Dickenson said , would likely land back before the high court.
Justices will issue a written decision, something Dickinson told lawyers he hoped would happen soon.
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