A Southern Co. (NYSE: SO) subsidiary said July 9 that it has appealed to the Mississippi Supreme Court the state Public Service Commission’s June 22 order denying the company any cost recovery for the Kemper County (also known as Ratcliffe) coal gasification plant until the legal challenges by the Sierra Club are resolved.
The commission decision effectively denies Mississippi Power ability to collect financing costs of the Kemper plant while under construction, making the project significantly more expensive for customers, said the utility. This legal action, which includes a motion for interim rate relief, is necessary to save customers millions of dollars in interest costs, it added.
The appeal will have the same impact to customers as the original request filed with the PSC. “The collection of interest costs for the plant during construction will accomplish two important objectives,” said Moses Feagin, Vice President and CFO. “One, to lower the overall cost of the plant for our customers, and two, to reduce the potential rate shock they would have otherwise experienced.”
The ability to collect financing costs during construction was authorized by the PSC in a 2010 final order granting the certificate to build the Kemper plant. It was this final PSC order that authorized and required Mississippi Power to begin construction. The Kemper plant is in construction and scheduled to be completed by May 2014.
Since the PSC’s cost recovery denial, Mississippi Power said it has received a credit rating downgrade with a negative outlook. Timely recovery of financing costs is critical to its ability to maintain financial health and have access to capital needed in its everyday operations as well as in emergency situations when customers need it most, the utility added.
PSC Chairman Leonard Bentz said in a June 22 statement that he issued an order to deny the rate increase. “I believe it to be prudent for this Commission to deny any means of cost recovery from ratepayers until the Mississippi Supreme Court makes their ruling,” he explained. “I still believe the plant is needed and will benefit the customers of Mississippi. However, it is my decision at this time to deny the request.”
Mississippi Power requested to raise rates for customers for the Kemper County plant through a rate schedule called CNP-A. This is the first rate increase requested by Mississippi Power regarding the 582-MW Kemper County integrated gasification combined cycle (IGCC) plant, which will use locally-mined lignite coal as the gasifier feedstock.
The Sierra Club said April 26 that it has appealed the commission’s April 24 re-approval of the project. The Sierra Club claimed that in a four-minute meeting on April 24, commissioners Bentz and Lynn Posey again refused to allow the public or opponents of the plant to speak, and without explanation reversed key findings of their original April and May 2010 orders approving the $2.8bn power plant. The Mississippi Supreme Court on March 15 had found flaws with the commission’s original approval process, forcing the April 24 re-vote.