The Mississippi Supreme Court has invalidated the rate increases related to Mississippi Power Co.’s Kemper County coal plant, and ordered refunds to the utility’s 186,000 ratepayers.
In an opinion handed down Thursday, the court ruled that the rate increases the Mississippi Public Service Commission approved via split vote for 2013 and 2014 be refunded. The utility, through the use of Construction Work in Progress funds, was allowed to recover $125 million via increased power bills in 2013, and $156 million in 2014. Rates jumped 15 percent in 2013, and another 3 percent in 2014. The court ordered PSC to mandate Mississippi Power refund that money. Justices also ordered the PSC to provide notice to Mississippi Power ratepayers before any proceedings in which rate increases were on the agenda. “The increased rates on 186,000 South Mississippi ratepayers fail to comport with the (Base Load) Act or, otherwise, with our law,” presiding justice Mike Randolph wrote in the majority opinion.
A Hattiesburg resident had asked the court to invalidate the increases. They were granted under the Base Load Act, a law enacted in 2008 that allows utilities to pass to ratepayers the cost of building power-generating facilities. The court took issue with the particular mechanism the PSC employed, called “mirror construction work in progress funds,” in which the revenue from the rate increases is held in a regulatory liability account to offset rate increases that otherwise would occur after the plant was in operation. Without mirror CWIP, the rate hikes will occur over a smaller time period.
“It was basically a way to try to minimize the rate impact,” said Central District Commissioner Lynn Posey, whose district includes the plant.
The ruling would seem to put the method Mississippi Power has used to pay for the construction of the plant in jeopardy, at least until prudency hearings are held. The PSC uses prudency hearings are used to determine if costs utilities pass on to consumers were “prudently incurred,” according to the Base Load Act’s language. The court ruled that ratepayers’ due process rights had been violated because notice was not given before hearings and because prudency hearings had not been held before rate increase were approved. The PSC last summer delayed prudency hearings indefinitely.
The court’s opinion also declares unenforceable a 2013 settlement between the PSC and Mississippi Power in which the utility agreed not to charge ratepayers more than $2.4 billion for the cost of the plant. The opinion excoriates the PSC for negotiating the settlement in private, saying “the public has a right to see and hear its business being conducted.”
Southern District Commissione Steve Renfroe believes the cost cap to ratepayers, the vast majority of whom are in his district, will ultimately be allowed to stand, as long as it’s implemented in a way the court doesn’t take issue with procedurally. “That’s what we’re thinking right now,” Renfroe said. “That was one of the first questions I had.”
Renfroe was not a commissioner when the cap was instituted as part of the 2013 settlement, but “I’ve said all along that it’s a brilliant concept because it protects the ratepayers.” Renfroe replaced former Southern District Commissioner Leonard Bentz, who resigned from the regulatory agency in 2013 to become the executive director of the South Mississippi Planning and Development District.