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Lawsuit: Mississippi Power’s Kemper Project ‘Fleeced’ the Public

March 9, 2016 By Cheryl Kaften

Just four months after the Mississippi Public Service Commission (PSC) approved an agreement (EC-120-0097-00 ) that has downsized bills and provided an additional credit to Mississippi Power’s 186,000 ratepayers in the southeastern part of the state, the utility has been hit with a lawsuit for “fleecing the public” in building the “goliath” coal gasification power plant.

Kemper County power plant – a state-of-the-art project initiated by Mississippi Power that was supposed to demonstrate carbon capture at a coal-fired facility – is now two years behind on its construction schedule and costs at the site have escalated to $6.5 billion, or triple the original estimate.

The lawsuit (Cause No. A2401-16-45) was filed on March 2 in Harrison County Circuit Court Mississippi, First Judicial District, by three plaintiffs —Biloxi Freezing & Processing, a seafood processing firm; Gulfside Casino Partnership, doing business as Island View Casino; and Gulfport resident John Carolton Dean — alleging the investor-owned utility, a subsidiary of Atlanta-based Southern Company, has avoided accountability for “fraud and mismanagement “while depriving the public of profits.

The December PSC agreement focused on permanent rates associated with parts of Kemper that are already in operation – specifically, the combined-cycle part of the plant. Under the terms defined by the PSC:

  • As of January, Kemper rates were reduced for residential customers by about $4.70 below the current interim rate increase for a residential customer using 1,000 kilowatt-hours (kWh) a month.
  • Mississippi Power would credit back to customers the difference between the interim rates the company has collected since August and the permanent rates in the latest agreement. This will result in an approximate average $22 one-time credit to residential customers’ bills within 90 days.

In the current suit, the plaintiffs are not seeking to change the utility’s rates. According to Watchdog.org – a nonprofit organization that advocates for the electorate at the state government level – the plaintiffs, represented by local attorney Joe Sam Owen and California attorney Michael Avenatti, are seeking economic losses, punitive damages, attorney fees and court costs.

We are aware of the suit filed and believe it’s without merit and baseless,” said Mississippi Power spokesman Jeff Shepard told Watchdog. “It’s unfortunate that others are attempting to discredit Mississippi Power with no legitimate grounds. The company will defend itself in this lawsuit.”

The advocacy group reports that this represents the third lawsuit filed against Mississippi Power concerning the Kemper Project, and it takes a different legal avenue than the others. The Sierra Club filed suit in 2010 (Docket No. 2009-UA-1) over the certificate of convenience and necessity, which was the Mississippi Public Service Commission’s go-ahead to the utility to build and operate the Kemper Project. The Mississippi Supreme Court later threw out the first certificate and a new one in 2012 with a $2.88 billion cost cap was approved by the PSC. The Sierra Club and Mississippi Power settled their lawsuit in 2014.

Second, the group said, Hattiesburg businessman Thomas Blanton filed suit against Mississippi Power in 2012 over the company’s Kemper-related rate increases under the Baseload Act of 2008 – which enabled utilities to recover costs for “prudently incurred pre-construction, construction, operating and related costs.”

That case made it all the way to the Mississippi Supreme Court, which struck down a Mississippi Power rate increase enacted in 2013 to cover the construction of Kemper and forced the utility to issue refunds to customers. The justices ruled the company could not use construction work-in-progress money because the PSC had not ruled on the “prudency” of the plant’s cost.

The complainants now say, “As a result of the perceived financial safety net created by the Baseload Act, defendant has mismanaged the project, leading to significant delays and overruns.”

They note in their filing, “At the same time that it was seeking a rate increase, Mississippi Power sought to disarm the public with misleading and deceptive messages … extolling the virtues of the Kemper Power Plant.” Among the claims:

  • “Kemper was ordered to be built by the Mississippi Public Service Commission after extensive hearings regarding the needs of Mississippi Power customers;”
  • “Kemper is bring jobs, growth, and progress to south Mississippi;”
  • “Energy experts the world over have hailed Kemper as the future of low-cost, clean energy;” and
  • “A recent Supreme Court decision could result in a rate increase of 35 [percent] to 40 percent.”

What’s more, they accuse the defendant of falsely claiming to the commission “that it was running out of cash could no longer borrow on its own, and could not count on its parent, Southern Company.”

The plaintiffs are now asking the court to grant them relief in the form of economic loss suffered, punitive damages, attorneys’ fees, court costs, and pre- and post-judgment interest.

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