Blanton, Court Make Higher Rates Likely for MPC Customers

For years, communities, businesses, and consumers in southeast Mississippi have counted on Mississippi Power Company for far more than electricity. The company has been a valued partner in economic development projects, disaster recovery (especially after Katrina), fights to save military bases, and more. Further, company leaders frequently provide effective leadership for statewide initiatives.

For Hattiesburg oilman Thomas Blanton and others to gloat because they got an activist supreme court to strike down a rate mitigation plan for the company’s new Kemper power plant, and portray this longtime, good corporate citizen as criminal, is over the top.

Indeed, communities, businesses and consumers may want to take a sober look at what happened.

Blanton intervened in a legal dispute between the company and the Mississippi Public Service Commission about rate increases to fund construction costs for the innovative Kemper lignite plant. The company and the commission negotiated a settlement, but the Mississippi Supreme Court elected to separately consider Blanton’s intervention. Although Blanton’s direct arguments had little merit (see Justice Jess Dickinson’s dissent), Presiding Justice Mike Randolph elected to look beyond those arguments and got a majority of the Supreme Court to rule 5-4 to deny the rate increases. As suggested by the close vote, commission actions cited by Randolph’s stern opinion were debatable. What’s not debatable is the negative impact. While the ruling gives customers a refund and temporary rate relief, it makes higher rates likely, and it undermines the company financially (which handicaps the company’s ability to respond aggressively to disasters or economic development opportunities).

The high cost of the Kemper plant, named Plant Ratcliffe, has concerned many. The company’s parent, Southern Company, has had to write off $2 billion from cost over-runs, and lend the company cash after South Mississippi Electric Power Association decided not to purchase 15% of the plant.

Despite concerns, Plant Ratcliffe is a reality and customers must appropriately fund it… that’s the law. The dispute in court was not over building the plant, but about increasing rates to cover costs during construction, a move intended mitigate rates over the long haul.

Plant Ratcliffe is now coming online (just as two Plant Watson units get retired), so the company may use conventional, post-construction rate filings to recover capital investments and operating costs.

Part of the plant already generates electricity from natural gas. The company said it will seek an interim rate increase of 18% related to these costs. The part of the plant that will burn synthesis gas derived from lignite coal will come online early next year. The company said it will, then, seek an additional rate increase.

Hopefully, the commission and the company will negotiate, as they did before, a rate plan to mitigate the impact on customers. The alternative may be a 40% rate increase in the near future.

A financially weak utility, requiring higher rates than those negotiated previously, benefits nobody. Customers should look to Blanton and the court if that happens.

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