Air Force, Chevron oppose Mississippi Power rate increase

Mississippi Power's plant in Kemper County.
Mississippi Power's plant in Kemper County.

Chevron, Greenleaf CO2 Solutions and the U.S. Air Force have asked the state Public Service Commission to reject or lower a rate increase sought by Mississippi Power.

The PSC on Thursday will consider an agreement between Mississippi Power and the PSC staff that calls for a 15 percent rate increase. The PSC earlier this year granted an emergency 18 percent rate increase after the state Supreme Court struck down an 18 percent emergency increase collected under a "construction work in progress" plan that would have paid part of the construction costs as the plant was being built.

Mississippi Power said without that emergency increase, the company would have run out of money by the end of the year. It wanted that increase to be permanent, but after negotiations agreed to a lesser one.

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In a brief filed with the PSC last week, the "joint parties" said the PSC should wait until the entire Kemper Integrated Gasification Combined Cycle plant, which is behind schedule and costs billions more than original estimates, is in operation before considering whether spending on the plant has been prudent. Mississippi Power has asked the PSC to consider whether spending on the gas-fired portion of the plant, which is producing electricity, has been prudent and to grant a 15 percent rate increase if it has been.

"The Kemper project was never intended to operate exclusively on natural gas, and MPC's request for a prudence finding on the natural gas (combined-cycle gas turbine) appears to be an afterthought," the challengers' attorneys wrote in the brief.

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Mississippi Power argues because the plant is making some electricity, the company should be able to recover some costs.

"For more than a year, the Kemper County energy facility's combined-cycle power plant has been generating electricity for the benefit of Mississippi Power customers with no permanent cost recovery," Mississippi Power spokesman Jeff Shepard said. "Cost recovery is appropriate after a facility begins commercial operation.

"The Kemper combined cycle has been in operation since August 2014 and has delivered more than 3.5 billion kilowatt-hours of electricity to customers. The agreement reached by the company and the Public Utilities staff is for in service assets and must still be approved by the Public Service Commission."

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But, the attorneys for the challengers said, if the PSC decides to go ahead with the prudency review, "it should only find prudent the reasonable level of cost required to construct a standalone (Combined Cycle Gas Turbine plant) with comparable generating capacity." That plant, they said, would have cost $614 million but the commission should remove 15 percent of that cost because that is the amount the South Mississippi Electric Power Association would have paid had it not backed out after the plant was delayed and the cost of building it rose.

Because SMEPA backed out, that spending wasn't prudent, the challengers say.

The original rate increase was successfully appealed by Hattiesburg oilman Thomas Blanton. The Supreme Court ruled the PSC improperly granted the 2013 rate increase without conducting a prudency hearing and violated state laws by negotiating a settlement with Mississippi Power in private without notifying other interested parties.

Blanton also is opposing the 15 percent increase. He said the PSC, if it grants the increase, will essentially be the lending agency of last resort for the utility at the expense of ratepayers.

Chevron is one of the largest consumers of Mississippi Power electricity. The Air Force is another large customer at its Keesler Air Force Base in Biloxi, and Greenleaf CO2 sells carbon dioxide for enhanced oil recovery and could be a competitor for that business with the carbon sequestration portion of the Kemper plant. None of their attorneys returned phone calls.

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