Miss. SC denies utility’s request for rehearing on refund ruling

By Jessica M. Karmasek | Jun 12, 2015

JACKSON, Miss. (Legal Newsline) - The Mississippi Supreme Court on Thursday denied Mississippi Power Company’s and the state Public Service Commission’s rehearing requests after the court decided earlier this year that customers should be granted refunds.

In February, the state’s high court ruled that more than 180,000 Mississippi Power customers be granted refunds for a rate increase that was wrongly approved by the PSC in 2013.


The court, in its Feb. 12 opinion, concluded that the PSC failed to comply with the language of the Base Load Act and exceeded its authority granted by the law. The state law allows utility companies to charge customers for construction costs before a new plant is finished -- if ever.

“While we are certainly disappointed with the decision, we continue to do everything reasonable to protect the interests of our customers and the company,” the company said of the rehearing decision Thursday.


As a result of the February ruling, the PSC must force Mississippi Power to refund $281 million that it earned in 2013 and 2014 from the rate increases. The commission first approved a 15 percent rate hike, then an additional 3 percent increase, to help build the company’s new Kemper County energy facility.


“One component of the (Base Load) Act is to allow utility companies to collect prudently incurred preconstruction costs, construction costs and finance costs as incurred to reduce the finance costs, which are capitalized in the utility’s allowance for funds used during construction (‘AFUDC’) upon commercial operation,” the justices wrote in the opinion, noting that AFUDC represents interest on borrowed funds, dividends on preferred stock and the imputed return on common stock.


“The Act contemplates increasing rates to pay AFUDC as incurred, which, if done, would mitigate the effect of compounding interest. However, this appeal concerns ‘mirror CWIP,’ resulting in MPC charging increased rates.”


The justices continued, “But the ratepayers’ property (money) is placed into a regulatory liability account controlled by the Commission. Thus, the money exacted is not being used to pay for funds used during construction as expenses are incurred. The ratepayers’ property (money) is being confiscated through governmental decree, by a rate increase imposed by a privately owned corporation that cannot spend it.”


Simply put, there is no authorization to impose “mirror CWIP” in the statute, the court ruled.


“An analysis of these proceedings leads to the inescapable conviction that the Commission failed to fulfill its duties and obligations pursuant to statutory directives and our existing law and that the overwhelming majority of 186,000 ratepayers was not accorded due process from the beginning,” according to the court’s majority opinion. “As such, the Commission did not balance the ratepayers’ interests with those of the utility, as our law requires.


“An affirmation of the Commission’s actions would constitute a grave injustice.”


The court reversed the PSC’s order granting the rate increases and remanded the case to the commission.


In addition to the refunds, the court also ruled that rates must return to those that were in force as of March 5, 2013 -- the date of the PSC order -- and no increases will be allowed until the commission complies with the opinion.


Mississippi Power filed its request for a rehearing in March.


“If the Supreme Court ruling stands, our customers will see a substantial increase in rates,” President and CEO Ed Holland said at the time. “We do not believe that was the Court’s intent.”


The company, noting that rehearings are “rare,” filed rate proposals with the PSC in May in anticipation of the court’s ruling.


The utility said its preferred plan would keep customers’ bills lower over a four-and-a-half-year period. The plan would keep rates at current levels until the entire facility is placed in service, expected in the first half of 2016, after which there would be a monthly increase of about $6 to $9 for a residential customer having a monthly usage of 1,000 kWh.


Mississippi Power also filed two other options -- a traditional plan and a two-year rate mitigation plan. Both plans would increase rates over a two-year time period.


The traditional plan would result in a monthly increase of approximately $17 for a residential customer having a monthly usage of 1,000 kWh in the first year of approval. The second year’s increase, which would require additional rate filings by the company, would result in an approximately $20 monthly increase, for an overall increase of $37.


The two-year rate plan would result in a monthly increase of approximately $5 for a residential customer having a monthly usage of 1,000 kWh in the first year of approval and an additional $29 monthly in the second year, for an overall increase of $34.


The two alternatives assume funds collected from customers over the last two years are refunded under the court’s ruling.


“We will work with the Mississippi PSC to determine the next steps in this process and will continue to work on methods to lower the impact on customer bills,” the utility said Thursday.


“We are reviewing the Court’s decision and will provide updates on any further response from the company as necessary.”


From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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