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Kemper settlement could mean 25 percent rate jump

Published on NewsOK Modified: January 25, 2013 at 8:33 pm •  Published: January 25, 2013

JACKSON, Miss. (AP) — Mississippi Power Co. says it will seek to raise rates 25 percent to cover costs of its $2.88 billion Kemper County power plant.

The company has asked the Public Service Commission for a 21 percent increase starting in April, it said Friday. That would cost the typical residential customer more than $20 a month.

The unit of Atlanta-based Southern Co. said it plans to seek an additional increase of 2 percent to 4 percent later, to repay construction costs in excess of $2.4 billion. Mississippi Power wouldn't be allowed to earn a profit on anything it spends above that cap.

The $172 million request comes one day after Mississippi Power announced a settlement in its lawsuit against the PSC. The suit began when the regulatory body rejected an earlier request to start collecting more from customers before the plant starts operation.

"We have worked hard to keep this increase as low as possible," Mississippi Power CEO Ed Day said in the statement. "This is well under the increase we had anticipated and significantly lower than what opponents to the project claimed."

There's still a chance the deal won't stick. The Supreme Court confirmed Friday that it would still hear oral arguments in the case as scheduled Monday. Hattiesburg resident Thomas Blanton, a party to the suit, wants the court to throw out the settlement and reject Mississippi Power's ability to collect money before the plant begins operation.

The settlement will give customers "certainty" about what their rates will be in the future and avoid an even larger jump in bills when the plant goes into service, Southern Co. CEO Thomas Fanning and Chief Financial Officer Art Beatty told analysts on a conference call Friday.

"Overall, the settlement agreement provides a timeline and much-needed transparency on a path forward for Mississippi Power." Fanning said.

The company's credit rating suffered after the earlier denial.

Fanning and Beatty said Mississippi Power expects to include in a traditional rate structure $2.4 billion of the plant's cost, plus the costs of the adjoining lignite mine and pipelines. Mississippi Power will earn a rate of return — a measure of profit — on the amount included in rates.

The cost for the mine is currently estimated at $245 million, while the pipelines are estimated to cost $132 million. That's a total of $2.78 billion, of which Mississippi Power owns 85 percent. The other 15 percent was sold to the South Mississippi Electric Power Association for $500 million.

Mississippi Power plans to sell bonds to pay for costs incurred above $2.4 billion on the plant itself, collecting from customers to pay principal and interest, but not for any profit. To do that, Mississippi Power will need legislation. Bills have been introduced by Senate Energy Committee Chairman Terry Burton, R-Newton, and House Public Utilities Committee Chairman Jim Beckett, R-Bruce.

Burton's bill (SB 2755) says ratepayers couldn't get out of paying the charges, even if Mississippi changes its monopoly power market to allow small customers to choose another electric company. The bill says up to $1 billion in bonds can be issued, for construction costs approved by the PSC. Mississippi Power said it would set up a special entity to sell the bonds.

Spokeswoman Christy Ihrig said that the company believes a previous $2.88 billion cap on costs no longer exists because of the settlement.

Some studies have warned that the plant's cost could exceed $3 billion. The company says it's spent $1.99 billion through the end of November at the site north of Meridian. The company says all work on what it calls Plant Ratcliffe is 75 percent complete, while construction itself is half done.

Fanning expressed confidence that lawmakers would pass the bonding bill. "We believe the project is good for Mississippi, good for the customers, and has widespread support," he said.

Opponents, though, still exist. Michael Adelman, Blanton's lawyer, wrote in motions filed Friday that the settlement should be tossed because Blanton was excluded from talks even though he's a participant in the case.

Mississippi Power and PSC, in asking the court to dismiss the case, said it's not time to decide the constitutionality of the law, but Adelman wrote that the deal to consider the $172 million rate increase made it "more vital than ever" that the court hear Blanton's argument.

If the court doesn't throw out the settlement, it should at least freeze the rate increase until the court rules on constitutionality, Adelman wrote, calling "the confiscatory aspect" of the charge "more apparent than ever."

The company says the plant will begin operating in May 2014.


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