Regulators settle with Miss. Power on Kemper plant

JACKSON, Miss. (AP) -- The Mississippi Public Service Commission and Mississippi Power Co. have reached a settlement in the company's lawsuit over a PSC decision to turn down construction charges for a coal-fired power plant in east Mississippi's Kemper County.

Commissioners voted 2-1 Thursday to approve the settlement with the subsidiary of Atlanta-based Southern Co. However, the state Supreme Court must bless the proposed deal before it becomes official.

Republicans Leonard Bentz and Lynn Posey voted for it, while Democrat Brandon Presley voted against it.

"I am pleased we are able to agree with the Public Service Commission on a plan to accomplish what our customers need," Mississippi Power CEO Ed Day said in a statement. "This is truly a win for both this state and our customers."

The agreement caps Mississippi Power's return at $2.4 billion on the cost of building the plant. The actual cost is projected at more than $2.8 billion.

The company also agrees to phase in rate increases over seven years and to credit customers with 10 percent of royalties if Southern Co. can market the carbon dioxide-extracting technology in the plant. Senate Bill 2500, introduced by Sen. Terry Burton, R-Newton, would give the PSC authority to stagger rate increases over time.

Mississippi Power says what it calls Plant Ratcliffe is nearly 75 percent finished and scheduled for May 2014 completion.

Commissioners agreed to consider anew Mississippi Power's request to charge customers for up to $172 million while building the plant, and to reach a decision within 80 days.

It wasn't clear how much such an increase could cost the company's 186,000 ratepayers. Mississippi Power agreed Thursday that if a court overturns its license to build the plant, such construction costs would be refunded to ratepayers.

Commissioners also agreed to review within six months what Mississippi Power has already spent on Kemper through the end of 2012. Approving that spending would mean the company can charge ratepayers for it in the future.

The high court had been scheduled to hear oral arguments Monday on Mississippi Power's lawsuit over the PSC's denial of customer charges during construction. It also was to hear a challenge by Hattiesburg resident Thomas Blanton to the constitutionality of charging before a plant begins operation. It wasn't immediately clear whether those arguments will still happen.

Commissioners in June rejected the company's request for a rate increase to cover such "construction work in progress," denting Mississippi Power's credit rating. They said at the time they wouldn't consider rate increases until a challenge of the plant's license by the Sierra Club was resolved. The environmental group is currently appealing a ruling of a Harrison County chancery judge upholding the license.

The Supreme Court had asked the parties to be prepared to discuss why the PSC shouldn't have frozen the rate request during legal proceedings.

"This is clearly designed to be an end-run around the Supreme Court," said Louie Miller, the Sierra Club's state director.

He said Bentz and Posey had flip-flopped by agreeing to consider up to $172 million in construction charges.

"They've moved back to 'Hey, we're going to give you $172 million in 90 days,'" Miller said.

Bentz, the southern district commissioner, has insisted that the plant would cost ratepayers no more than $2.4 billion, and he said the settlement was vindication.

"This is a victory for the ratepayers of Mississippi," he said.

Bentz predicted that rates would rise in the lower band of a 20 percent to 28 percent range to pay for the plant, or maybe even less. The company has said rates would rise about 33 percent, while opponents have warned it might be significantly higher.

But Presley, the northern district commissioner, said the deal doesn't rule out customers paying for amounts above $2.4 billion.

Mississippi Power is supposed to seek "alternate financing" for amounts above $2.4 billion. Presley said a bill could be introduced in the Legislature to allow the company to sell bonds to cover higher amounts. No such bill had been publicly posted as of Wednesday afternoon. Presley said customers could be charged for the bond payments, including interest, but Mississippi Power wouldn't make an additional profit on its money.

"That's the mother of all exemptions on containing costs," Miller said.

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