Mississippi Power on Wednesday filed two documents asking for a 4.5 percent fuel adjustment rate increase and another 4 percent to cover the cost of doing business.
The combined 8.5 percent increase has nothing to do with the Kemper energy facility, said President Anthony Wilson, but the timing is “unfortunate” given Mississippi Power’s date with the Mississippi Public Service Commission on Dec. 4.
That hearing in Jackson is to resolve the final issue with the Kemper County energy facility, and Wilson said he expects it to last about three days.
“Kemper is completely separate and aside,” he said. “There will be no further rate increases associated with Kemper. Period.”
Under these filings, a residential customer using 1,000 kWh of electricity per month would see an increase of $11.45 per month, or less than 40 cents per day, the company said in a press release.
The 4.5 percent fuel adjustment hike is an annual “pass through” increase to cover the cost of fuel the utility uses to produce electricity. Mississippi Power does not earn a profit on these costs and over the past four years as natural gas prices fell, Mississippi Power’s rates decreased to where they now are below 2009 levels.
Mississippi Power has filed three fuel adjustment increases since 2009. Fuel costs have decreased approximately $189 million since then and the rates are adjusted by the PSC during the year when the weather is mild, as it was last year. Wednesday’s fuel filing shows $8.1 million was under recovered during the last year.
Mississippi Power also filed a Performance Evaluation Plan requesting a 4 percent rate increase to cover the company’s core business costs, such as buildings, transmission wires and salaries. Over the last 10 years the company received a 3.9 percent increase while the inflation rate’s been 17 percent, Wilson said. The last increase the company received was 1.9 percent four years ago.
Neither of these filings come as a surprise to the PSC, Wilson said. Mississippi Power already cut expenses aggressively, greatly reduced tree trimming and maintenance to facilities over the past two years, he said, but now needs to catch up so reliability isn’t affected.
“I’m confident when I say if we don’t get that relief this year we can’t maintain the service levels that we have today,” Wilson said. He talking about the reliability of the power grid, he said, and the size of the staff that provides customer service.
“We reduced our employee count about 12 percent in the last two and a half years years,” he said. Staffing declined from 1,288 in October 2015 when he became CEO to 1,150 now, he said. Those numbers don’t include the 200 layoffs at Kemper after lignite operations discontinued.
The fuel cost increase should go into effect in January, Wilson said, and he expects the PSC will review the PEP request in early 2018.
Before that Mississippi Power will go before the PSC on Dec. 4, unless an agreement is reached before that, and present its case on the cost of Kemper.
In August, Mississippi Power and its parent Southern Co. filed a settlement agreement with the PSC and agreed to write off more than $6 billion of the cost of Kemper. The companies also agreed to run the facility in Kemper County strictly on natural gas, to not raise rates and to remove all costs of the lignite portion of the plant from rate payers.
The Public Utilities Staff, an agency separate from the PSC, objected to the settlement.
“We’ve never given up trying to get an agreement. We’re still trying to get an agreement,” Wilson said, and is working on it every day.
The Public Utilities Staff continues to request another $200 million write off on the portion of the plant running on natural gas since 2014, he said. Their argument is it cost Mississippi Power more to build that portion of the plant than it would cost today, he said.
“Yes it did,” he said, and the PSC and Public Utilities Staff reviewed the process at every step.
“That’s kind of like looking in your rear view mirror and making decisions,” he said. It takes a huge capital expense and years to build a power plant, he said, and no utility would ever build a project again if they had an agreement when they started but when the got to the end the commission said they were holding the company accountable to whatever the cost is today.
“It’s unprecedented,” he said.
Talks have dragged on for months in the hopes a settlement could be reached.
“It is in the public interest of the state of Mississippi for this case to come to a close,” said Brandon Presley, PSC chairman. He told a group in Gulfport this month that he hopes a decision is reached in January that will resolve the issue, remove uncertainty and be fair to all parties.