Rate case settlement lowers Kemper cost cap (Updated with rate info)
Mississippi Power Co. and the Mississippi Public Service Commission have come to an agreement that allows the utility to ask for construction-work-in-progress funds for the Kemper County Coal plant.
MPC had appealed to the Mississippi Supreme Court over the summer after commissioners denied a request for a 13 percent rate increase that would have generated about $58 million in CWIP money. Commissioners said then they would not entertain anymore rate increases related to the plant until the state’s high court had ruled on the litigation surrounding the project.
In the settlement, commissioners made no promise that they would approve CWIP. Settlement terms also lowered the hard cap of the plant from $2.88 billion to $2.4 billion and provided ratepayers a 10 percent royalty share in the plant’s TRIG technology. It also stipulated that, in the event commissioners grant CWIP, that money would essentially be held in escrow, and would only flow to the company if the supreme court clears the way for the project to proceed. If that court strikes down the plant, the CWIP money would return to MPC’s 186,000 ratepayers.
Mississippi Power has 30 days to ask for revenue recovery, the amount of which cannot exceed $172 million.
Southern District Commissioner Leonard Bentz and Central District Commissioner Lynn Posey voted to approve the settlement. Northern District Commissioner Brandon Presley voted against it.
“I’ve stuck to my guns on $2.4 billion from the very beginning,” said Bentz, whose district includes the vast majority of MPC ratepayers. “Short of the sky falling, they won’t get one penny over $2.4 billion.”
Presley expressed concern that the settlement would still force ratepayers to pay for the plant before it was operational. MPC expects the plant to start generation in May 2014.
“It’s the same scenario I’ve had concerns over,” he said. “Ratepayers shouldn’t have to pay for something until it’s useful to them.”
Supreme court justices had scheduled for Monday afternoon a hearing on the dispute between MCP and the PSC. Even though Thursday’s settlement technically ends any disagreement between the two, justices could still decide to move forward with Monday’s oral argument. It was unclear if Thomas Blanton, a MPC ratepayer from Hattiesburg who has challenged the constitutionality of the 2008 law that authorized CWIP, would still get to argue that point Monday.
The head of the Mississippi Sierra Club, which has long opposed the plant and still has active litigation against it, said Thursday afternoon that the settlement does nothing to protect ratepayers.
“If the TRIG technology turns out to be useless, that’s not much of a deal,” said Louie Miller, referring to the ratepayers receiving 10 percent of TIRG royalties over 30 years. “Even Mississippi Power has said they’re not 100 percent certain that the plant’s technology will work on the first day of operation.”
Bentz said Thursday’s settlement could potentially lower the rate impact of the plant. He has said through the process that he expects rate increases to peak between 20 and 28 percent before falling.
“I think this will at least put rate increases at the lower end of that, possibly even lower,” Bentz said.
Mississippi Power filed documents with the PSC in 2009 that said rate impacts would peak at 45 percent. The PSC order granting the plant’s certificate of public convenience and necessity said rate increases would peak at a touch over 30 percent before falling.
Mississippi Power’s most recent rate impact estimates have fallen below that, with the company saying sales of the plant’s by-products have come in higher than originally thought. [Editor's note: Southern Co. officials said on an analyst call Friday morning that if the PSC grants the full $172 million in CWIP funds, it would raise MPC customer rates 21 percent.]
The settlement includes a phased-in rate plan that would run the first seven years the plant was in operation. Common methods of rate recovery allow utilities to recover the bulk of costs up front. Spreading that out over seven years, Bentz said, would minimize the impact to ratepayers.
There was some question Thursday whether current statute allowed a phased-in rate plan, or if legislation would be required to authorize it.
The utility can opt out of the settlement if it is determined the PSC does not have the legal authority to implement a phased-in rate plan. If it’s determined there is a need for legislation to establish that authority, and the legislation fails to become law, the utility can opt out of the settlement.
The company can also opt out if it is unable to secure alternative financing for any project costs not otherwise recoverable by ratemaking proceedings.
MPC CEO Ed Day said in a press release that the settlement was “a win for both this state and our customers.”