Analysis: Mississippi Power plan’s possible cost

Mississippi Power Co. is encountering resistance to the idea of building a new generating plant estimated to cost its customers a double-digit rate increase, which would be at least partially instituted during the worst economic times since the Great Depression.

If the state Public Service Commission reacts favorably to the company’s application for a $2.4 billion coal gasification plant in Kemper County, that could lead to a 33 percent increase in rates for Mississippi Power customers. It would be phased in over 10 years, the company said.

The plan has brought fire from organizations including the Sierra Club, the senior citizen advocacy group AARP, the NAACP, and Mississippi for Affordable Energy.

A company spokeswoman said this week that Mississippi Power has not officially asked for a rate increase. However, spokeswoman Cindy Duvall acknowledged the utility company did estimate a 33 percent rate increase to pay for the plant when it filed with the PSC for a certificate of public convenience and necessity.

“It wouldn’t just be – boom! – 33 percent,” Duvall said. “It would be a gradual increase.”

Her office did not release a beginning percentage for the rate increase.

A hearing was recently held before the PSC on the company’s certificate application. The commission is expected to decide the issue by May 1. Public comment on the issue was closed yesterday.

Who should pay?

Consumer advocates say authorizing the rate increases would let Mississippi Power finance millions for the new plant on the backs of its customers, with no risks to shareholders of the publicly traded company.

“They have to have a blank check from the rate-payers to finance this,” said Louie Miller, of the Sierra Club.
Mississippi Power is projecting a growing demand for energy in its service area by 2014, and said the coal-powered plant will help avoid paying spiraling costs for other fuels.

In that light, the company maintains that a rate increase is actually a good deal for consumers, because lignite used to power the plant would be mined in Kemper County and purchased on a 40-year contract.

“The IGCC plant will secure a better energy future for our customers,” Duvall said.

“We would work with the PSC to minimize the impact on our rate-payers.”

But opponents to the rate increase have continued to be vocal, as a decision deadline draws closer.

Sherri Davis-Gardner, Mississippi director for the AARP, said her membership objects to building a $2 billion-plus facility at the expense of rate-payers, many of whom are struggling to get by on low incomes or minimal retirements.

“That should be the burden of the shareholders,” she said. “Our members have told us, ‘get in there and fight this, because we don’t want it.'”

How it happened

Debate over the Kemper County plant has been ongoing since at least 2007. The rate increase by Mississippi Power would be possible under a 2008 state law known as Senate Bill 2793.

The bill empowered the PSC to allow utility companies to raise rates, as a way to finance generating facilities. The legislation was eventually passed and signed into law by Gov. Haley Barbour after intense lobbying by the utility industry.

State Sen. David Baria, of Bay St. Louis, was a freshman legislator when Senate Bill 2793 came sailing through. He was uncomfortable over the bill because it allowed power companies to levy rate increases to pay for new generating plant planning, pre-construction and construction, even if a company decides not to build or operate the plant.

“That’s what I didn’t like about that bill,” Baria recalls.

He tried to add an amendment that would require power companies to refund all rate increases paid by customers, if a new generating plant was not built and put into operation. The amended stalled on a 25 to 25 vote and failed. Under Senate rules, Baria could not vote on it.

Baria voted against the full bill, which passed. Now, he said, Mississippi Power’s customers must put their fate in the hands of the Public Service Commission.

“Ultimately, the commissioners will make the decision, because they have all the facts,” he said.

Where is this place?

Mississippi Power says it chose Kemper County as a new plant site after a comparison of various locations. The availability of lignite there was a compelling factor in the decision.

On its web site, Mississippi Power cites a huge estimated economic impact of the generating plant, including 260 new permanent jobs, 500 construction jobs, and revenue that will “enhance local schools and help equip first responders.”

The only fault with that logic, from a rate-payers perspective, is that Kemper County is located nowhere near the Mississippi Coast job market. Situated five counties above Jackson County in east Mississippi, Kemper County is not even in Mississippi Power’s service area.

Jobs at the plant will either go to residents of the Kemper County area, “or from within the company, depending upon qualifications,” Mississippi Power’s Web site says.

In addition, opponents doubt that the new plant is absolutely necessary. The Sierra Club’s Miller says the power company has other options, including programs to better weatherize the homes of current customers to lower electricity use.

AARP sites the results of a survey it conducted on the new plant issue. “Eighty percent of the people surveyed were very clear that they did not agree with this,” Davis-Gardner said.

Linda St. Martin, of Mississippi for Affordable Energy, likens the rate hike to “a Ponzi scheme.”

“They wanted people in the lower 23 counties to not know what was going on,” she said. “It didn’t work.”

BY: J.R. Welsh

The Sea Coast Echo

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