* Utility to refile request for higher rates tied to Kemper
* Settlement calls for future royalty payments to customers
By Eileen O'Grady
Jan 24 The Mississippi Public Service Commission
on Thursday approved a settlement with Southern Co's
Mississippi utility that will allow the company to seek higher
rates for costs tied to a $3 billion coal-gasification power
plant under construction in Kemper County.
Mississippi Power Co is building a 582-megawatt, integrated
gasification combined-cycle (IGCC) plant scheduled to begin
operating in May 2014.
Thursday's settlement gives Mississippi Power Co another
chance to request a rate hike of as much as $172 million this
year and calls for the commission to act on the request within
50 days of the utility's request.
Last June, the commission denied the utility's request for
$55 million over six months, saying customer rates should not be
raised until a legal challenge from an environmental group, the
Sierra Club, was resolved. The Mississippi Supreme Court also
denied the utility's motion to charge interim rates while the
Kemper certificate was under appeal.
Louie Miller, the Sierra Club's state director, said the
settlement offers no benefits to Mississippi Power customers and
was approved only to help the utility which he said is
"They (Mississippi Power) bit off way more than they can
chew" with the costly Kemper project, said Miller.
"Today's reckless actions by the commission have opened the
door for Mississippi Power to charge their customer base for the
boondoggle Kemper County Coal Plant while it's under
construction, with no guarantee that the plant will ever produce
a single megawatt of electricity," Miller said.
In the settlement, the commission acknowledged that
uncertainty over the rate issue has hurt Mississippi Power's
credit rating. It also cited "a high likelihood" that the Kemper
County certificate will withstand the ongoing court appeal.
The commission voted 2-to-1 to approve the settlement at a
special meeting called a day earlier. No details of the proposed
settlement were discussed before the commission held an
executive session which was closed to the public.
The pact also sets up a framework to establish cost-recovery
for the Kemper plant over the first seven years of its
operation, if allowed by the state legislature.
In return, Mississippi Power customers will receive a credit
for 10 percent of any royalties Southern derives from future
sale to other utilities of the gasification technology being
used at Kemper.
"The settlement today further puts into place the
protections of the ratepayers by affirming the cost cap for the
Kemper Project at $2.4 billion," said PSC Chairman Leonard Bentz
in a statement.
Mississippi Power officials did not return calls for
comment. The utility is Southern Co's smallest with just 185,000
customers, so the rate impact of the costly Kemper facility is
of concern to regulators and consumer groups in the state.
Under the Mississippi Baseload Act, the utility planned to
begin charging customers for certain costs related to Kemper
while the plant was under construction, but its efforts were
blocked by the state's highest court.
Thursday's special meeting precedes scheduled oral arguments
on Monday at the state supreme court related not only to
Mississippi Power's appeal of the rate denial but to the larger
question of whether the state law under which Mississippi Power
would raise customer rates during construction is
Michael Adelman, an attorney representing some of the
utility's customers in the appeal, said the oral arguments
should go forward.
"I'm going to be at the court at 1:30 Monday, unless told
otherwise," he said. "We believe there are serious
constitutional problems with that statute."
Adelman said the settlement "kicks the can down the road in
an attempt to create some aura that they have reached an
agreement, but they have not reached any more of an agreement
than in all the months we spent before the hearing last June
when they denied any increase."
The settlement keeps intact the commission's $2.4 billion
approved cost for the plant plus contingency costs.
Additional costs, including $240 million for a nearby mine
to supply lignite to the plant and a $140 million pipeline to
transport carbon dioxide emissions from the plant, will push the
total Kemper price tag above $3 billion.