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Mississippi Power says proposed rate hike is not related to Kemper Project plant

Mississippi Power asked the Mississippi Public Service Commission in a filing Wednesday for an 8.5 percent rate hike that it says isn't related to costs on the Kemper Project power plant.

The proposed rate increase would go into effect in 2018 if approved by the commission and would split evenly between what the company claims are higher fuel costs (coal and natural gas) and its performance evaluation plan (PEP).

This rate increase would add to the 15 percent rate hike that was approved by the outgoing commission in December 2015. According to a filing by the Mississippi Public Utilities Staff, the utility's rates are 40 percent more than its regional peers that include Entergy Mississippi.

PEP uses a formula of revenue minus the sum of expenses and return on investment and the company claims it will not be able to provide the same level of service to its customers without the rate hike. Mississippi Power is seeking the maximum rate increase, four percent, under the PEP regime and says it hasn't asked for a PEP hike since 2013.

The company says an average residential customer who uses 1,000 kilowatt hours per month will see a $11.45 increase per month.

One of the factors that might weigh into the debate is whether Mississippi Power has more excess generation capacity than it needs. According to several filings, the company will have 27 percent more generation capacity after Kemper's turbines are added to the rate base.

The commission will take up the matter after it issues a decision on Kemper in January. Hearings on Kemper are supposed to start on December 4.

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, told the commission in testimony that just accepting the company's proposed rate plan to pay for the Kemper Project would result in $5.9 billion in economic losses over the 40-year lifespan of the plant.

Dismukes added in his testimony that if the company gets an additional 10 percent rate hike, economic activity in the 23 counties served by Mississippi Power would take an additional $5.58 billion hit over the next four decades. He also said that Mississippi Power has some of the highest rates and operating costs in the region.

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 rate hike proposal comes amid the battle over how much the company's ratepayers will foot the bill for the Kemper Project, operational on natural gas since August 2014.

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 costs related to the gasifier.

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