By Data Stream
By JEFF AMY
JACKSON – Regulators want the Mississippi Supreme Court to block Mississippi Power Co.’s attempt to raise rates.
Mississippi Power has appealed the Public Service Commission’s denial of a rate increase that would allow it to begin paying off the interest costs of the $2.8 billion power plant it’s building in Kemper County. The company is seeking permission to collect the increase during the appeal, with a promise to repay if it loses.
If the Supreme Court doesn’t rule by Aug. 8, the unit of Atlanta-based Southern Co. can impose half the $55 million rate increase it seeks. If the court doesn’t rule within 180 days of the July 9 filing of the suit, Mississippi Power would be allowed to impose all of the rate increase. The average residential customer would pay about $20 a month more under the proposal.
Both the state and the company have urged the court to act on the rate increase without a hearing.
The PSC commission unanimously denied the rate increase earlier this month, saying they wanted to wait until the Sierra Club challenges to the PSC’s decision to build the plant run their course.
The Sierra Club opposes it because it says burning coal would contribute to global warming, even though the plant plans to capture carbon dioxide and pipe it to oilfields to be injected into the ground. The case is currently in Harrison County Chancery Court and appeals could run past the plant’s scheduled completion in early 2014.
State lawyers argue in a Tuesday response that, contrary to company claims, the firm hasn’t proved it has suffered “irreparable injury” or “undue hardship.” Mississippi Power must meet those legal thresholds to collect the money.
Mississippi Power said the commission’s action flew in the face of the PSC’s previous pledges to allow the company to collect money from its 185,000 customers while it’s building the plant, as well as the evidence in the rate case.
The company argues that it’s being harmed in part because credit rating agencies look negatively on it having to borrow so much money to pay for the plant. The price tag of the plant has risen by $400 million in recent months, nearing the cap imposed by the Public Service Commission.
Fitch Ratings cut Mississippi Power’s rating by a notch this month, citing its inability to win a rate increase, and warned of more cuts. Moody’s Investor’s Service and Standard amp& Poor’s, the other largest credit raters, have warned of downgrades but have yet to act. Mississippi Power, which serves parts of 24 southeastern counties from Meridian to the Gulf Coast, borrows money under its own name even though it’s part of the much larger Southern Co.
The state argues, though, that ratings downgrades do not constitute undue hardship, saying the downgrades stem in part from the cost overruns and the continued litigation.
Lawyers for the attorney general’s office also rebutted claims that the company and its customers are losing a one-time-only opportunity to cut interest costs. Mississippi Power claims that raising rates now would save $500 million to $600 million in interest costs over the life of the plant.
“That is not guaranteed savings,” the state wrote. “Customers simply keep their money now, with a possibility of paying later.”
The state said the PSC is not required to grant the company’s request under the 2008 law that allowed rate increases to pay debt during construction.
“The benefits of the Mississippi Baseload Act are not a matter of right,” the state wrote.
The PSC’s lawyers also rejected Mississippi Power’s arguments that waiting to raise rates until the plant comes on line will lead to such a big increase in bills that customers will experience “rate shock.”
“The commission will ultimately regulate when the rate increases take place and how much rates increase,” the state said. “The timing or amount may not produce ‘rate shock.”‘