In yet another black eye for the long-delayed and hugely over-budget Kemper County integrated gasification combined cycle plant (IGCC), the Mississippi Supreme Court ruled on Feb. 12 that the Mississippi Public Service Commission (MPSC) erred in granting plant owner Mississippi Power rate increases in 2013 and 2014, and ordered that the increases be refunded to the utility’s ratepayers. It also threw out a 2013 agreement on the total costs that Mississippi Power would be allowed to recover for the plant.
The dispute grew out of decisions by the MPSC to allow Mississippi Power to recover $125 million in “construction work in progress” funds in 2013 and $156 million in 2014. Retail electricity rates increased 15% in 2013 and another 3% the following year. Under the state’s 2008 Baseload Act, the law Mississippi Power has been using to recover its costs in advance of operation, MPSC must find that they were “prudently incurred.” But the MPSC never made such a finding; instead, it deferred hearings on the prudency of the costs indefinitely. That, the court found, violated the law.
“By not conducting prudency hearings,” the court said, “the Commission ignored the dictates of the Act and thus acted arbitrarily.”
This finding means that the MPSC had no legal authority to approve the rate increases. In addition, the Commission placed the funds into a regulatory liability account it controlled rather than using the money to offset financing costs incurred by Mississippi Power, as the law envisioned.
In addition to revoking the rate increases, the court ordered that the $271 million collected under them be refunded to Mississippi Power’s 186,000 ratepayers, an amount that will average around $1,500 each.
The court had other harsh words for the MPSC.
It found that the Commission violated the law by not providing proper notice of the rate increase request to Mississippi Power’s ratepayers, as well as by making information about the request that was required to be public confidential.
“The Commission’s decision to govern in a cloak of secrecy and grant confidentiality to rate-impact information was arbitrary and capricious,” it said.
The decision had another ominous element for Mississippi Power, in that the court also overturned the 2013 consent agreement in which the utility agreed not to charge its ratepayers more than $2.4 billion for the plant. That agreement was negotiated in secret, but Mississippi law requires the MPSC to conduct all communications regarding a contested proceeding in public.
The 582-MW Kemper County IGCC project has been plagued with problems from the beginning. Mississippi Power’s most recent cost projections put the final bill for the plant at $6.172 billion, more than two-and-a-half times the original estimate. Startup has also been delayed years past the initial projection.
The ruling did not bar Mississippi Power from trying to recover its costs in the future, provided that the MPSC complies with the law regarding public notice and prudency of the costs.
—Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).