Justice Randy Pierce questions Ricky Cox, an attorney for Mississippi Power regarding their contention that the 2008’s Baseload Act allows utilities to raise rates for power plants before they start making electricity, Monday, Jan. 28, 2013 in Jackson, Miss. At the heart of the hearing is whether Mississippi Power can raise rates to pay for the $3 billion-plus Kemper County Coal Plant while under construction. (AP Photo/Rogelio V. Solis)
JACKSON, Miss. (AP) — As Mississippi Power Co. draws closer to collecting for the $3 billion-plus Kemper County plant it’s building, a customer of the company wants the [auth] state Supreme Court to rule utilities can’t raise rates for power plants before they start making electricity.
Thomas Blanton, a Mississippi Power customer from Hattiesburg, said 2008’s Baseload Act is an unconstitutional tax.
“We’re putting up money and receiving nothing in return, and that’s not what the American way is supposed to be,” Blanton said after Monday’s hearing. He said an increase could cost his oil and gas business more than $10,000 a month.
Blanton’s lawyer, Mike Adelman, argued before seven Supreme Court Justices that it’s unconstitutional for the state to require customers to pay for power plant construction, “to take the place of what traditionally should be the investor,” when there’s no guarantee the plant will work as planned.
Blanton got his day in court after intervening in a case Mississippi Power filed seeking Public Service Commission approval to raise rates. The regulatory body denied the company’s request last year to begin collecting money for the plant, and Mississippi Power then appealed to the high court. But the PSC and Mississippi Power settled Thursday, with the commission agreeing to consider a new request to raise rates during construction. Mississippi Power asked for a 21 percent rate increase Friday. That’s $172 million a year, which would raise the typical residential rate by more than $20 a month.
The commission isn’t obligated under the settlement to grant the increase, but agreed to rule on it within 80 days of it being filed.
The company and PSC told justices that it was too soon to rule on Blanton’s challenge because he wasn’t paying for the plant yet.
They also argued that the act is legal because rates can be collected not just in exchange for power, but for any service, such as building a new plant. They argued it doesn’t matter that Blanton might die or sell his business before Kemper starts operation, or that the plant might never work at all.
“It is the money for any service provided by the utility,” said Ricky Cox, a lawyer for Mississippi Power.
Blanton argued that if justices declare the charges a tax, they have to throw out the law. But several justices asked questions about why the Legislature couldn’t allow the PSC to impose a tax.
“It’s clearly given the Public Service Commission authority to do what it contemplated,” Presiding Justice Jess Dickinson said.
Mississippi Power has already spent almost $2 billion on what it calls Plant Ratcliffe. The plant is supposed to take lignite mined nearby, turn the ground-up soft coal into a gas, and burn the gas for power, capturing carbon dioxide and other harmful chemicals. The plant itself is currently estimated to cost $2.8 billion, while the company currently says the lignite mine will cost $245 million. Associated pipelines will cost $132 million.
Under the settlement, the mine, pipelines and first $2.4 billion of the plant would be paid for through traditional rates that would allow Mississippi Power to make a profit on its investment. Mississippi Power would set up a subsidiary to borrow money to pay for the rest of the plant, and customers would only pay enough to repay those bonds with interest. The company would get no profit on the amounts beyond $2.4 billion. Such an arrangement would require a special law, and state lawmakers have drafted a bill to allow the company to borrow up to $1 billion
It’s the second trip to the high court for the Kemper project, and a third could be in the offing. The Supreme Court ruled last year in favor of the Sierra Club that the PSC didn’t adequately explain why it changed its mind to increase a construction cost cap. The third challenge is another appeal by the Sierra Club of the plant’s license, which was reissued after the original high court ruling. A Harrison County chancery judge ruled for Mississippi Power.