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With rare exceptions, session that just wrapped unkind to tax credits

May 4th, 2012 No comments

Each session, Secretary of State Delbert Hosemann submits a bundle of legislative proposals that seek to reform one way or another the state’s business laws.

The session that ended Thursday was no exception. Hosemann had some success — bills that would do everything from change the valuation process for public improvement districts to creating a single entity to govern registered agents were signed by Gov. Phil Bryant – but what didn’t pass is probably more notable.

Every single piece of legislation Hosemann proposed that offered a tax credit that was not already on the books failed. Perished bills would have offered tax credits to businesses either relocating their headquarters here or expanding existing headquarters; they would have offered a 7 percent credit to businesses that enter into a written research agreement with a Mississippi university; and they would have offered businesses the option of passing through a job-creation tax credit rarely used by start-ups to employees.

Each died in the Senate, which is important to note. All session, it was known around the Capitol that any kind of tax credits would have a hard time in the upper chamber. One very large exception to that was the passage of the inventory tax rebate system, which will phase out the unpopular tax over the next five years. Groups like the Mississippi Manufacturers Association had pushed for the phase-out for what seemed like forever.

Moving forward, tax credits might meet equal resistance in the House, based on what Appropriations Chairman Herb Frierson, R-Poplarville, told the Stennis Capitol Press Corps April 23.

Frierson said lawmakers will have to make themselves “reign in” their instinct to pass every business-related tax credit in future sessions.  The state’s budget, which still hasn’t fully recovered from the worst of times in 2008 and 2009 and will have enormous holes to fill with the loss of various sources of federal money, demands that happen, he added.

“There’s going to be a great debate over this,” Frierson said. He was quick to point out that no reasonable person could oppose a tax credit if it was proven on the front end that it would eventually create the kind of economic development that could replace the lost revenue.

The vetting process for those kinds of things, though, will only get more rigorous.

Indiana coal plant’s rate impact will be smaller than Kemper’s

May 2nd, 2012 No comments

Mississippi Power Co.’s Kemper County plant isn’t the only coal-fired generation facility the Sierra Club has fought recently.

In Indiana, Duke Energy is building an integrated gasification combined cycle plant that will use bituminous coal, which sits a little deeper in the ground than lignite, which is abundant in East Mississippi and will serve as the main fuel source for the Kemper plant.

The company is catching it from a number of consumer groups, to go with the Sierra Club.

Duke Energy recently settled a round of litigation sparked by who would pay for the plant, the company or its ratepayers. Much of the hand-wringing had to do with who would foot the bill for $920 million in cost overruns on the roughly $3 billion project.

The settlement terms spelled out the rate impact for Duke customers: Electricity bills would go up 14.5 percent as the plant’s costs (at least some of them) were passed through. Various media reports in Indiana said that without the settlement, ratepayers’ bills would go up 22 percent.

Why that’s interesting is lignite coal is cheaper to recover, because its beds are generally closer to the surface than those of traditional coals like bituminous, making it easier to mine. The Kemper plant will use lignite, and like the Indiana plant, its costs — up to $2.88 billion — will be passed through to Mississippi Power ratepayers. It’s worth noting, though, that the ratepayer cost cap for the Indiana plant is $2.59 billion, about $300 million less than the Kemper facility. A really good overview of the plant’s finances can be found here.

The April 24 order the Mississippi Public Service Commission issued granting a new certificate of public convenience and necessity for the Kemper plant said rate increases would peak at 30 percent in 2014, when the facility is scheduled to start commercial operation, before declining as Mississippi Power pays off the plant’s debt. That figure was arrived at after months of proceedings before the plant was approved, litigated and approved again last week.

The 30 percent number differs from documents MPC filed with the PSC in 2009, in response to a set of data requests from Florida-based Entegra, which wanted to know how the plant would affect power bills in South Mississippi. Mississippi Power filed the information confidentially, but the Mississippi Business Journal obtained it via an open records request in 2010.

The rate impact data MPC filed then said hikes would be a touch more than 45 percent. That number has been disputed recently, most vehemently by Southern District Commissioner Leonard Bentz, whose territory includes the vast majority of Mississippi Power’s 186,000 customers.