JACKSON, Miss. (AP) — Mississippi Power Co. customers will pay more for electricity in the near future, but regulators could delay some decisions until a more comprehensive review that could set the pattern for the relationship between the utility and the Public Service Commission following the multibillion dollar Kemper debacle.
The three-member elected commission held a hearing last week on the company's request for rate increases totaling $52 million. That overall amount could increase the average monthly bill for a model residential customer from $127 to $138.
Commissioners approved increases of $11 million to pay for property taxes and energy efficiency programs. Those combined will increase bills by a little more than $1 a month. Left undecided after a sometimes contentious hearing are increases for Mississippi Power's underlying general rates and environmental compliance costs. Those requests would cost $41 million this year and cause rates to rise by nearly $10 a month.
The unit of Atlanta-based Southern Co. said it has gotten only a 3.9 percent increase to underlying rates through the formula known as the Performance Evaluation Plan over the last 10 years while inflation has risen 17 percent. There have been no increases in the last five years, with delays stemming in part from contention over the $7.5 billion Kemper County power plant.
Regulators and the company finally agreed earlier this year that ratepayers would cover $1.1 billion of Kemper costs, while Mississippi Power absorbs $6.4 billion in losses.
Chief Financial Officer Moses Feagin told commissioners last week that the rate increase is partly aimed at rebuilding Mississippi Power's credit rating. Moody's Investors Service, one of the three main rating agencies, cut its view of Mississippi Power to junk status, below investment grade. The other two agencies lowered ratings but kept them in the investment grade range.
"They expect the regulatory environment to start improving after this whole mess we went through on Kemper," Feagin told commissioners.
At the same time, changes to the federal tax law mean the company will be paying less corporate income tax. Those savings will ultimately be passed back to ratepayers, but it means the company will collect less revenue from its operations. Credit rating agencies don't like that, so Southern is asking state regulators to change the capital structure of its electrical utilities to rely more on equity investment instead of debt. Because regulators say utilities are entitled to earn a return on equity, that puts upward pressure on rates.
Regulators in Alabama, Florida and Georgia have already approved some changes for Southern subsidiaries in those states. Mississippi's three commissioners aren't ready to approve yet, though, in part because they're planning an overall rate case to re-examine Mississippi Power operations.
"It seems to me the credit rating issue and the capital structure issue should be part of that," said Central District Commissioner Cecil Brown, a Democrat.
Commission Chairman Brandon Presley, a Democrat representing the state's Northern District, harshly attacked Mississippi Power's request for customers to pay $3 million in private jet expenses, saying customers should pay no more than the equivalent of a coach airline ticket for company business. Feagin said Mississippi Power would withdraw that request, and the next day Presley sent a letter to the company saying he would seek to revise commission rules to prevent such requests.
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