Kelley Williams, chair Bigger Pie Forum, February 13, 2015 | NorthsideSun.com
The Mississippi Supreme Court voted to rescind Mississippi Power Company’s 18 percent rate increase to prepay for part of its experimental Kemper County Lignite Plant. It also ordered the company to refund $281 million of prepayments to date to customers. The 5-4 vote was on February 12. On that same day in 1878 F.W. Thayer patented the baseball catcher’s mask. Mississippi Power may need several.
Public Service Commission derelict. The court said the Mississippi Public Service Commission, which regulates the company and approved the increase, exceeded its authority and failed to fulfill its duties and obligations. Moreover, the court said it did not balance the ratepayers’ interest with those of the utility as required by law. (Translation: It bent the rules to favor the company.) The court also said the PSC acted in secrecy and that this was “arbitrary and capricious.” (It’s easier to bend the rules when no one can see what’s happening.)
The court noted the $6.2+ billion cost of the plant is more that the state’s $6.1 billion budget for all its operations for 2015. It’s not a piddling matter. It’s a big number. The question is who pays for it. It looked like the PSC and company had teed up the company’s 186,000 retail customers to pay.
Along came Thomas. But then along came Thomas Blanton, a customer from Hattiesburg in Mississippi Power’s service area. Just one man. He took on the company, the PSC, and the political and business establishment backing Kemper. He sued and won enough of the issues raised in his suit to derail the Kemper train.
It’s quite a train wreck for the PSC and the company. So what to do? Seems like a good place to start is with a PSC house cleaning. There are three elected commissioners. One incumbent has consistently voted against Kemper. He has expressed many of the concerns about Kemper raised in Blanton’s suit. He is running for re-election in November. One incumbent has consistently voted for Kemper and is not running for re-election. The third incumbent appointed by the governor to fill an unexpired term said, when appointed, that he would not run for election. So come November there will be some new commissioners to pick up a broom and shovel.
What about the company and its customers? The critical next step for the company and its customers is the PSC vote on prudency for Kemper. According to the unanimous PSC order of August 5, 2014, this vote will not occur until the plant’s experimental gasifier actually operates (used and useful doctrine). The company says the gasifier will operate sometime in 2016. The company does not have a good track record on its predictions. Truth is no one really knows when or if it will operate.
Prudency is the process by which the PSC determines how much of the cost of the plant will go into the rate base and that customers will pay for. The court blasted the PSC for putting the cart before the horse on this. So it’s not likely to happen again. Things could be in prudency limbo for quite a while waiting on the gasifier to operate. Then determining how much of its cost is prudent (fair for customers) could take more time.
Common sense solution. One simple fair way to move things along would be to divide Kemper’s prudency into two steps. Step one, consider prudency now on its turbines already generating electricity from natural gas. Customers are getting this electricity now. It’s cheap electricity. These turbines cost about $900 million. That’s more than it would have cost if they had been built as a stand alone plant. But it’s less than 15 percent of the entire cost of Kemper. And electricity from this plant is a bargain for customers compared to the cost from Kemper if and when. Once this is decided, customers will no longer have the rest of Kemper’s cost hanging over them while the company struggles with the gasifier.
Step two, consider prudency later for the rest of Kemper and its $5.2+ billion cost if and when it operates. The PSC can decide then how much of its extra cost it’s fair to make customers pay for. The PSC will know the resulting rate increase due to the rest of Kemper and will have the benefit of customer feedback to help it make a decision. The court has said customers must be informed about the rate making. No more secret deals between the PSC and the company with customers in the dark.
Poetic justice. The PSC could decide that customers should not pay for any of Kemper’s extra cost. In this case, the company and its parent the Southern Company which dictated the Kemper decision would pay for all the extra cost. Some might call it poetic justice in view of the secret deal making and secret natural gas price projections to railroad the plant. Transparency and full disclosure and open debate might have helped the company avoid the Kemper fiasco.
The incumbent commissioner appointed by the governor has said the PSC was right to cap the cost of Kemper at $4 billion or so and that customers should pay this amount. He was quoted in reaction to the court decision: “It’s pay me now. Or pay me later.” That was the PSC party line on the secret deal. But the court threw out the secret deal. Let’s hope the new party line is: “Pay what’s fair.” It’s not fair to make customers pay for the company’s mistakes.
A good ending. The Supreme Court decision is a good beginning to the end of Kemper. A good ending is for customers to pay only for the turbines running on natural gas. And for the company to pay for the rest. As some wag said: “All’s well that ends.” Hopefully, this is getting near the end.