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Mississippi Power's Justification for Higher Rates Based on Out-Dated Fuel Cost Information
Any Rate Increase Based on Fuel Costs Unwarranted

by Keith Burton - GCN   1/1/09   Update 1/11/09

The rapid decline in the world's economy and the effect that is having on energy costs worldwide seems to be ignored in Mississippi Power's proposed 9.2 percent rate increase it is asking to pass on to its customers.

Mississippi Power was quoted in a WLOX news report recently saying that Mississippi Power company is projecting much higher fuel costs for the new year. And that means customers can expect to pay more in their monthly electric bills.

"Unfortunately, as we've all seen, fuel prices on a global basis have reached unprecedented levels during the 2008 calendar year," said David Mauffray. He's the man responsible for buying the coal and natural gas Mississippi Power uses to produce electricity. He projects the utility will spend significantly more on fuel next year," reported WLOX.

But that is not the case. Coal and natural gas prices have plummeted along with oil and gasoline prices in the last quarter of 2008. As natural gas trade is linked to the price of oil, which has fallen from a high of nearly $140 a barrel this past summer to under $40 a barrel, natural gas prices are also sharply down.

In a story published by Fort Worth, TX Star Tribune, Energy experts say, "There’s no question we’re in for some fairly low natural gas prices, probably through 2009," said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University.

Coal prices have also plummeted since their highs during the summer of 2008. Barron's reports that:

"The leading U.S. coal companies are trading just as cheaply or at sharper discounts than the smaller publicly traded operations. The top four U.S. coal miners -- Peabody Energy (BTU), Arch Coal (ACI), Massey Energy (MEE) and Consol Energy (CNX) -- are trading at their lowest valuation multiples since they went public over the past decade or so," reported Barrons.

Coal industry experts expect coal prices to continue to decline through 2010.

Mississippi Power sought to make its case for a rate increase during a lightly attended public hearing called by the Mississippi Public Service Commission December 29 in Gulfport, just days after Christmas and during a time when residents are busy with families and the holidays. The timing of the public hearing couldn't be worse for electricity consumers and calls to question the whole process used by the PSC to regulate the industry.

What is clear is that energy costs based upon the peaks of last year are not going to happen and represents a corporate mindset that is outdated based upon the current situation. Across the country, energy experts anticipate that energy use will continue to decline. This decline also impacts jobs as businesses and factories slow activity. If anything, the PSC should be watching to protect consumers as  the stresses of the period ahead are likely to be a hardship on Mississippi families. Adding nearly a ten percent increase in electrical costs now, on top of recent property tax increases for homeowners, and higher food costs are not warranted.

It seems that Mississippi Power's rate increase is more inline with trying to protect the pocketbooks of their stockholders instead of the public. Just look at this increase as just another bailout for business when it is not needed and irresponsible.

The Public Service Commission will make a decision on the rate increase request “probably in the next week or so,” said Public Service Commission Leonard Bentz in a Sun Herald report. If the increase is approved, it will be reflected in power bills for February. Both the Sun Herald and WLOX are recipients of Mississippi Power's advertising dollars, which may reflect why those organizations failed to offer a critical report on the rate increase.

Update: 1/11/09 - As of this date, the PSC has not issued an order to approve the rate increase requested by Mississippi Power, according to PSC officials contacted by GCN.

More Information:

Coal Producer Plans Reduction - trib.com
UBS slashes coal price forecasts for 2009, 2010 - uk.reuters.com
Energy Demand is Down Sharply – and Could Stay that Way - star-telegram.com
Production Cuts Likely As US Coal Cos Look To Support Prices - money.cnn.com

Comment to the Public Service Commission - (email form)


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