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Expert: High Mississippi Power rates cost Coast billions in lost economic activity

CRUISING: Economic activity could be cruising away from the Mississippi Gulf Coast because of artificially high utility rates. Photo by Steve Wilson

An expert witness told the Mississippi Public Service Commission that accepting the proposed rate deal from Mississippi Power could result in $5.9 billion in lost economic activity over the 40-year life of the Kemper Project.

David Dismukes, an economist and the executive director of the Center for Energy Studies at Louisiana State University and a consulting economist with the Acadian Consulting Group, filed his testimony with the PSC this week as the commission evaluates a possible rate settlement for the Kemper Project.

He said 640 jobs could be lost annually in Mississippi Power's 23 county service area if the utility's deal is accepted by the commission. Dismukes calculated his numbers using a computer model originally developed by the U.S. Forestry Service known as IMPLAN, which uses data from a number of sources including the Census Bureau, Bureau of Labor Statistics and the Bureau of Economic Analysis.

The company wants to continue its present $126 million increase, passed in December 2015 by the outgoing commission, for the next 20 years to cover regulatory costs such as legal fees. It also wants more in capital costs to cover Kemper's turbines and associated equipment.

The staff wants rates lowered after five years of collecting regulatory costs from ratepayers in the form of higher electricity rates.

According to Dismukes' testimony, Mississippi Power's 10-year average of $65.33 per megawatt hour for residential rates is noticeably higher than other peer utilities, whose average rate is $56.34 per megawatt hour.

Dismukes said in his testimony that the Mississippi Public Utilities Staff, a separate agency from the PSC, told him that the utility plans to file "relatively substantial increases" in the company's annual Performance Evaluation Plan. These increases are capped at 4 percent per year, but Dismukes said a bigger total rate hike could be phased in over several annual filings.

Dismukes also discussed the company's excess generation capacity. The company will have 187 megawatts or 27 percent more generation capacity with Kemper and he says it will give the company an opportunity to shutter old, less efficient plants and reduce its high operating costs.

The $7.5 billion plant was originally designed to be fueled by lignite coal converted into synthesis gas, but will now to become a natural gas power plant after the company decided to abandon the gasifier units after three years of trying to get them operational. The plant was originally supposed to be operational by May 2014 and the company has already written off more than $6 billion in gasifier costs.

The PSC will conduct hearings starting December 4 and the commission hopes to have a decision by January.

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