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Kemper rate mitigation bill similar to 2009 Georgia law

January 31st, 2013 No comments

Kemper-Update-Logo_rgb-300x244Four years ago, lawmakers in Georgia’s General Assembly approved a bill designed to lessen the rate shock for Georgia Power Co. customers related to the utility’s construction of nuclear power units.

Mississippi lawmakers are considering a similar bill for Mississippi Power Co.’s Kemper County coal plant.

The Georgia legislation, which former Gov. Sonny Perdue signed in 2009, allowed Georgia Power  – which, like Mississippi Power, is a subsidiary of Southern Co. – to pass to ratepayers financing costs incurred to build two additional nuclear units at an existing generation plant in the southeastern part of the state.

Starting in January 2011, the law gave Georgia Power five years after the Georgia Public Service Commission approved the project to recover the costs. The law established the financing recovery schedule  separately from the rate base that collected construction work in progress funds. In Georgia, the recovery of CWIP is mandatory.

Georgia Co. officials said while the bill made its way through the statehouse in 2009 that paying financing costs for the $14 billion project as they were accrued would save customers in the long run. The two new units are scheduled to begin producing electricity by 2017, according to recent company projections.

A couple things separate the Georgia law and the proposed legislation here. Georgia’s rate mitigation statute established a five-year recovery window. The Mississippi plan creates a 10-year window, and prohibits the utility from filing to activate the plan until 12 months prior to the calendar year in which the qualifying facility is scheduled to begin operation.

The Kemper plant is supposed to come online in May 2014. That means Mississippi Power can request the plan if and when the law clears the Capitol and is signed by Gov. Phil Bryant.

The Georgia law established a rate schedule specifically for the recovery of financing costs, since the recovery of CWIP was already mandated. The legislation that has cleared the Mississippi Senate’s Energy and Finance committees does not restrict CWIP or financing costs from being included.

The hard cap on the Kemper costs Mississippi Power can recover through ratemaking proceedings at the Mississippi Public Service Commmission was lowered last week from $2.88 billion to $2.4 billion, as part of a rate settlement between commissioners and the utility. A bill that would permit Mississippi Power to issue bonds for overruns – up to $1 billion – sits in the Senate Energy and Finance committees.

Sierra Club: Poll shows customer opposition to rate hikes via Kemper coal plant

January 30th, 2013 4 comments

The Sierra Club was supposed to release last Thursday the results of a poll meant to gauge Mississippi Power Co. ratepayers’ attitudes toward the Kemper County coal plant.

The environmental group delayed the results because of a hearing in which the Mississippi Public Service Commission reached a rate case settlement with the utility.

The delay ended Wednesday morning. The poll, conducted by Fondren Strategies, surveyed by landline and mobile telephone 400 respondents that a press release says were certified to be Mississippi Power customers.

The results say 65 percent of those polled said the possibility of their electricity rates going up approximately 33 percent once the plant is finished erodes their support of the project. About 75 percent of respondents say cost overruns should be paid by utility shareholders.

The poll’s margin for error is 4.9 percent.

Mississippi Power has already filed to recover $172 million in financing costs associated with the project. The filing came one day after last week’s settlement, which lowered the maximum cost recoverable via PSC ratemaking proceedings from $2.88 billion to $2.4 billion.

If the PSC grants the $172 million recovery request, Mississippi Power says rates will go up an average of 21 percent, starting in April and lasting through 2013, for customers who use an average of 1,000 kWh per month.

The project’s overall rate impact, the company said on an analyst call Friday, will hover around 25 percent.

The Sierra Club has opposed the plant since its inception in 2009, calling it an expensive and unnecessary environmental hazard. The club has called for the plant to be converted to a natural gas-fired facility, which it says is cleaner than the lignite coal the plant will eventually use.

The project is on time for a May 2014 completion, Mississippi Power said recently.

The Sierra Club’s entire poll can be seen here.

Whether CWIP constitutes a tax takes up most of Kemper hearing

January 28th, 2013 No comments

Most of 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 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.

Miss. Power, new settlement in hand, files for recovery of $172 million in Kemper costs

January 25th, 2013 4 comments

Thirty hours after it reached a rate settlement with the Mississippi Public Service Commission, Mississippi Power Co. announced it has filed to recover $172 million in financing costs for its Kemper County coal plant.

The $172 million was the maximum allowed for 2013 under the terms of the agreement, which solved a dispute that started when commissioners denied over the summer a 13 percent rate increase that would have generated roughly $58 million. Commissioners said then they would not consider any Kemper-related rate increase requests until the Mississippi Supreme Court has ruled on the litigation surround the project.

Should the PSC grant the recovery – and the terms of Thursday’s settlement said there was no guarantee that would happen – electricity rates for Mississippi Power’s 186,000 customers would go up an average of 21 percent. The company said in a press release that would represent an increase of less than $1 per day for the rest of 2013 for customers who use an average of 1,000 kWh per month.

With the new settlement in place, Mississippi Power anticipates the overall rate impact for the plant to hover around 25 percent.

“This is well under the increase we had anticipated and significantly lower than what opponents to the project claimed,” company CEO Ed Day said in the release, issued just after 6 Friday evening.

In a 2009 filing with the PSC, Mississippi Power said the rate increases associated with the plant would peak at 45 percent. In last spring’s PSC order granting the plant a certificate of public convenience and necessity, rate increases were expected to peak at just more than 30 percent in 2014, when the plant is scheduled to begin commercial operation, before falling.

According to the company, the plant is nearly 75 percent finished. If commissioners approve Friday’s filing for cost recovery, the rate increases would take effect in April.

Despite Thursday’s agreement between the utility and commissioners, the Mississippi Supreme Court ruled Friday afternoon that the oral argument related to the original rate dispute would proceed as scheduled Monday at 1:30 p.m.

Baseload Act challenger hopes high court hearing moves forward in wake of settlement

January 25th, 2013 No comments

Thomas Blanton’s lawyer hopes Thursday’s Kemper rate case settlement between Mississippi Power Co. and the Mississippi Public Service Commission does not kill his client’s opportunity to air his grievances against the Baseload Act before the Mississippi Supreme Court.

The high court had scheduled oral argument for Monday to hear a dispute between MPC and the PSC over rates for the project. The two entities settled that dispute Thursday, in an agreement that lowered the amount the utility can charge its ratepayers for the project from $2.88 billion to $2.4 billion. The disagreement arose over the summer, when commissioners denied a 13 percent rate increase that would have generated about $58 million. Commissioners also said then they would not entertain any more rate increase requests related to construction-work-in-progress money for the coal plant until the Mississippi Supreme Court had ruled on the litigation surrounding it.

The agreement, which allows MPC to ask anew for CWIP funds, still must gain supreme court approval. Justices could still force the parties to appear Monday, or they could cancel the hearing.

Blanton, a Hattiesburg resident, has challenged the constitutionality of the Baseload Act, the 2008 law that granted utilities the authority to ask for CWIP funds. His attorney said Friday morning that he hopes to still be able to argue that point Monday.

“If anything, it strengthens my client’s argument,” Adelman said, referring to Thursday’s settlement. ”It’s based on a statute that’s unconstitutional. I don’t understand what basis there is for the commission to change their position, when they said specifically they were going to deny the rate increase until there was a decision by the Mississippi Supreme Court.”

Attorneys for the PSC and MPC on Friday morning filed motions with the supreme court asking justices to dismiss the rate dispute and Blanton’s claim. Adelman filed a motion to oppose the dismissal. The court had not decided as of early Friday afternoon whether to proceed with Monday’s hearing, which was still scheduled to begin at 1:30 p.m.

Rate case settlement lowers Kemper cost cap (Updated with rate info)

January 24th, 2013 No comments

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.”

Miss. Supreme Court to hear Kemper arguments Jan. 28

January 21st, 2013 No comments

The Mississippi Supreme Court will hear oral argument Jan. 28 related to the Sierra Club’s ongoing legal opposition to Mississippi Power Co.’s Kemper County coal plant.

The hearing, which will start at 1:30, will center on this question: Why should the (MSSC) not reverse the Public Service Commission for its failure to hold the rate case in abeyance until the case of Sierra Club v. Mississippi Public Service Commission currently on appeal in Harrison County Chancery Court is finally decided?

Attorneys for MPC will have six minutes at the beginning to respond to the question. Attorneys for the PSC will have six minutes to do the same immediately afterward.

Attorneys for Thomas Blanton, a Hattiesburg resident who has challenged the constitutionality of the Baseload Act, will then have 20 minutes to make their case against the 2008 legislation that authorized utility companies to pass construction costs on to ratepayers before the generation facilities they were building were operational.

The hearing will conclude with MPC and PSC splitting 20 minutes to respond to Blanton.

The Sierra Club has fought the coal plant from its inception, calling it an expensive and unnecessary environmental hazard. Mississippi Power has said it’s the best way to ensure long-term availability of economical power for its nearly 200,000 ratepayers.

Monitors: Kemper project cost could come in under cap

January 18th, 2013 5 comments

The latest report from the independent monitors the Mississippi Public Service Commission hired to evaluate the Kemper county coal plant shows the project may come in under the $2.88 billion cap.

In its December report, filed with commissioners in early January, URS says Mississippi Power estimates the plant will cost $2.84 billion to build, about $44 million less than the cap the PSC imposed on the project. The filing says the plant is between 70 and 75 percent complete, and that it will, according to MPC, begin commercial operation in May 2014, the original target date.

That lines up with URS’ November report, which estimated there was a 72 percent chance the project would cost $2.88 billion or less.

In its December filing, URS does express concern about different pieces of the construction having to be reworked, due to noncompliance by contractors or design flaws. Monitors also said it was possible the conversion to union labor could increase costs. Union leadership told the Mississippi Business Journal late last year that there would be no significant increase in construction costs due to union workers being hired. The Central Mississippi Building and Construction Trades Council and the Mississippi chapter of the AFL-CIO struck a deal with Southern Co., MPC’s parent, to provide workers for the project.

The cost and timeline estimates in URS’ latest report are different than what was included in the last report filed by monitors hired by the PSC’s Public Utilities Staff. Burns and Roe said in its Nov. 26 filing that there was a 90 percent chance the coal plant’s cost would fall somewhere between $3 billion and $3.15 billion, which has been its estimate for several months. Burns and Roe added that there was an 80 percent chance the plant would begin operation on or before Dec. 20, 2014; a 50 percent chance it starts on or before Nov. 29, 2014; and a 20 percent chance the same happens by Nov. 6, 2014.

Mississippi Power spokesperson Jeff Shepard told the MBJ late last year that the company anticipates the plant’s cost coming in at $2.88 billion or under, and that it will start producing electricity on a commercial scale in May 2014.

The Kemper facility is still the subject of litigation between Mississippi Power and the Sierra Club, which opposes the project. A Harrison County chancery judge ruled for the project late last year, after the Sierra Club had challenged the validity of the second certificate commissioners had issued it. Lawyers for the environmental advocacy group have already appealed that decision to the Mississippi Supreme Court.

Commissioners ruled over the summer that they would not entertain any rate increase requests related to the project until the state’s high court had its say on the matter. That decision came after Mississippi Power had asked for a 13 percent rate increase that would have generated about $58 million.

Judge affirms certificate for Kemper County coal plant

December 18th, 2012 No comments

A chancery judge in Harrison County has affirmed that the certificate of public convenience and necessity for the Kemper County coal plant is valid.

The Sierra Club had argued that it was not, and that the Mississippi Public Service Commission should conduct a full round of evidentiary hearings before deciding whether to issue another one. The Sierra Club’s action was in response to the Mississippi Supreme Court’s kicking the issue back to the PSC earlier this year because justices said the original certificate, issued in 2010, did not cite sufficient evidence from the record of proceedings.

Commissioners issued a second certificate over the summer. Construction on the plant, which began in 2010, has continued while the litigation unfolded.

“Mississippi Power customers are the ones who will benefit from this important decision,” Ed Day, president and CEO of Mississippi Power, said in a statement Tuesday morning.

The Sierra Club will appeal Monday’s ruling, state director of the Mississippi chapter Louie Miller said. “We’ll probably ask for an expedited appeal,” Miller said in a phone interview, referring to the possibility that the appeal could languish at the supreme court for several months.

Public service commissioners ruled over the summer that they would not entertain any rate increases associated with the plant until the Mississippi Supreme Court had ruled on the latest round of litigation surrounding it. That ruling came after a hearing in which Mississippi Power asked for a 13 percent rate increase that would have generated about $58 million. Monday’s chancery court ruling now opens the door for the litigation to proceed to the high court.

Rate increase estimates attached to the plant have varied. Documents Mississippi Power filed with the commission in 2009 said rates would go up an average of 45 percent. In the order granting the second certificate, commissioners said rate increases would peak at 33 percent before going back down.

Day said earlier this year that the sale of the plant’s by-products would generate more revenue than originally anticipated, keeping rate increases under 30 percent.

The $2.88 billion plant is scheduled to begin operation in May 2014.

Workers’ rights groups forge deal with Southern Co. for Kemper plant

December 11th, 2012 No comments

The Mississippi AFL-CIO and the Central Mississippi Building and Construction Trade Council have forged an agreement with Southern Co. that will have members from both organizations working on the Kemper County coal plant.

Mississippi Power Co., a subsidiary of Southern Co., is building the plant.

Neither the AFL-CIO’s Robert Shaffer nor the CMBCTC’s David Newell would give many details about the deal. Newell said the agreement is “to finish the project.”

They both urged the Sierra Club to drop their opposition to the project. The environmental advocacy group has long fought the coal plant, calling it dirty, expensive and unnecessary.

Tuesday morning’s announcement contrasts sharply with what Newell told the Mississippi Business Journal earlier this year. Newell said during the summer that Southern Co. had reneged on a similar deal, and that the plant was likely to be poorly built and well over budget because the company was not using his membership. Philadelphia-based Yates Construction Co. and Texas-based KBR, who were the project’s original contractors, took exception to that. Each said its history of delivering quality work on time and on budget was proof that it could do the same with the Kemper plant.

“I don’t know” what made Southern Co. reverse its position on dealing with the two organizations, Newell said. “Maybe they need our skills now more than ever.” Newell said the current deal had been in the works about three months.

Shaffer said the AFL-CIO had been in negotiations with Southern Co. since construction started on the plant in 2010. “You never know why corporations do certain things, because you’re dealing with so many different people, you never really know who’s pulling the strings,” he said.

Workers from both organizations are already on site. Shaffer said the number of workers would likely “start to build up pretty rapidly after the first of the year.” Newell said whether existing workers will have to join either the AFL-CIO or the CMBCTC “has not been decided yet.” It was also unclear how forcing them to would violate Mississippi’s right-to-work statute.

Independent monitors hired by the Mississippi Public Service Commission and the Public Utilities Staff have issued different estimates recently that put the cost of building the plant between $2.88 billion and $3.15 billion. A Mississippi Power spokesperson said last month that the company still expects the project to cost $2.88 billion or less. Public service commissioners have capped at $2.88 billion the costs Mississippi Power can pass to its ratepayers. Any pass-through costs above $2.4 billion must meet prudency requirements before commissioners will approve them.

Commissioners over the summer denied Mississippi Power’s request to raise rates about 13 percent to generate $58 million for the plant. Commissioners said then they would not consider anymore rate increase requests related to Kemper until the Mississippi Supreme Court had ruled on the latest round of litigation involving the company and the Sierra Club. A Harrison County chancellor is currently considering the issue. Whoever is on the losing end of that ruling will almost certainly appeal to the state’s high court.

The plant is scheduled to begin commercial operation in 2014.