Senate Bill 2/26/13

Published 12:00 am Tuesday, February 26, 2013

Power plant purchaser opposes Hale bill, offers $2 million gift

By Billy Davis
and Rupert Howell

A Mississippi Senate bill that would ensure Panola County receives tax monies from the new owner of LS Energy is awaiting its fate in the Senate Energy Committee, said state Sen. Steve Hale.

The fate of the bill is unknown and Hale said he’s unsure if it will emerge from the Energy Committee for a full vote.

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Hale authored Senate Bill 2251, which would require Hattiesburg-based South Mississippi Electric Power Association (SMEPA) to pay ad valorem taxes in Panola County.

SMEPA opposes the bill because it would create an annual tax liability of $10 million, said a spokesman for the electric cooperative.

SMEPA’s purchase of LS Power last year was viewed as an unwelcomed purchase by local officials, because the non-profit electric cooperative is exempt from county ad valorem taxes and school taxes.
Hale’s proposed legislation, if passed, would apparently rectify those concerns.

LS Energy was renamed “Batesville Generating Station” after a bankruptcy sale to SMEPA was approved last year by a U.S. Bankruptcy Court judge. SMEPA paid $286 million for the LS Energy facility.

Batesville Generating Station is located in the Harmon Industrial Park, where turbines utilize natural gas-heated water to produce electricity from steam.

The facility was on the county books for $200 million according to the county’s tax assessor’s office.
Commercial and industrial property is assessed at 15 percent of value, which equals a loss of a $30 million asset to the county for taxing purposes.

LS Energy had enjoyed 10 years of tax exemptions and was on the county rolls for the first year, in 2010, prior to declaring bankruptcy in 2012. It was approximately $4.5 million in arrears for local taxes.   
 Hale said last week his bill recognizes that SMEPA, although a non-profit electric cooperative, owns a power-generating facility that allows SMEPA to sell power to other cooperatives.

The SMEPA Web site states that it services more than 400,000 homes and businesses in 56 of 82 counties in Mississippi, which includes most of South Mississippi and the Mississippi Delta.

“When the state statute created electric cooperatives in 1942, they were written for distribution,” said Hale. “Nobody back then could have conceived of a power-generating facility.”

Hale said he met recently with representatives from SMEPA about the proposed legislation. “They were very receptive,” he said.

A SMEPA spokesman provided The Panolian a copy of a February 6 letter sent to Board of Supervisors President Kelly Morris and Mike Foster, the interim South Panola schools superintendent.

In the letter, SMEPA general manager James Compton reminds Morris and Foster that the electric cooperative paid $9.3 million in past-due ad valorem taxes and paid approximately $3.7 million to Panola Partnership to settle a contract.

Compton also announces in the letter that SMEPA plans to make a one-time payment of $2 million to county government ($500,000) and South Panola ($1.5 million).

Elsewhere in the letter Compton states that SMEPA is “certainly aware” that its tax-exempt status will impact tax revenues, but he further suggests that SMEPA will be a “better owner and employer” than the previous owner, citing its financial stability among other reasons.

County Administrator Kelley Magee said Monday, before The Panolian received the letter, that SMEPA had committed to paying $2 million this fall — a year beyond its obligation — as a compromise with the county. 

South Panola schools would receive approximately $1.5 million and county government would receive $500,000, she said, mirroring the promises in the letter.

Magee credited Hale and his bill for nudging the electric cooperative, and also praised SMEPA for suggesting the one-time payment.

“That was not requested,” she said. “That was their idea. They did it voluntarily.”

Despite SMEPA’s stated cooperation, Magee said she supports Hale’s legislation.