Mississippi utility inks deal on troubled $7.5B power plant
Regulators have reached a settlement with Mississippi Power Co. on how much customers should pay for a troubled $7.5 billion power plant once touted as a model for the future of coal. The unit of Atlanta-based Southern Co. is agreeing to lower the price tag on its Kemper County power plant by $85 million, its second round of concessions in the last two weeks, after shareholders earlier absorbed $6 billion in losses.
Virden Jones, executive director of the state Public Utilities Staff, said the final parties signed the deal Friday. It was hammered out at the last minute before rate hearings were scheduled to begin Monday. Those hearings will now be postponed to allow people to comment on the plan, with the Public Service Commission likely to decide on the new plan in January.
"I think it's going to save everyone a lot of time and money and give the company a chance to move on," said Commissioner Cecil Brown, a Democrat representing the central third of the state.
The move means residential customers could soon pay about $1 less per month than they're currently paying for the part of the power plant that burns natural gas.
The $85 million cut in the plant's price tag, to $853 million, will push down the amount of money the company collects from retail customers next year to $112.6 million.
"This agreement represents significant compromise from all parties involved, but is an important step to settle all costs remaining on the Kemper project," Mississippi Power President Anthony Wilson said in a statement.
Customers will eventually see their payments for Kemper fall even more, as Mississippi Power had already agreed late last month in a deal with Chevron Corp. and other large customers to pay off some costs over eight years, instead of stretching them out over 20. Cutting that payoff period is worth tens of millions of dollars to customers over time. The company also agreed in that earlier deal to forgo more than $50 million in other costs.
The agreement will likely cap a project that one of the nation's largest utilities launched with the much-hyped promise of burning coal more cleanly while capturing climate-warming carbon dioxide. But Kemper's price ballooned from $2.9 billion originally. The project was dogged by delays and court challenges, and the company never made the first-of-its-kind technology run reliably. Ultimately, political support for Kemper failed, after elections produced a three-member Mississippi Public Service Commission which united in May to tell the company to pull the plug on coal gasification.
Instead, Kemper will keep making electricity by burning natural gas and its 189,000 customers from Meridian to the Gulf Coast aren't supposed to pay for the gasifier's costs.
Mississippi Power had once warned of a total rate increase of up to 40 percent, and customers have been paying 15 percent higher rates since 2015 for the part of the plant that burns natural gas, plus associated infrastructure. Friday's settlement, if approved, would mean a slight monthly decrease in those rates.
"It's a direct result of commission leadership," Public Service Commission Chairman Brandon Presley, a Democrat representing the northern third of the state. "A year ago, I don't think anyone would have talked about stable rates or a rate decrease when you're mentioning Kemper."
The announcement comes after the commission said Tuesday that for legal reasons it would delay a final decision for months more if the company couldn't reach a deal with the staff, a separate agency which advises commissioners. With debt rating agencies calling for certainty, that further delay ratcheted up the pressure on Mississippi Power.
Mississippi Power had faced opponents who wanted it to get even less than it will collect, estimating a built-from-scratch natural-gas plant would cost less than $600 million.
They note that Mississippi Power's rates are still high compared to neighboring utilities. Last year, Mississippi Power charged residential customers 50 percent more for electricity than Entergy Mississippi, the state's other privately-owned electric supplier, according to U.S. Energy Department data.
Also Friday, Southern said the U.S. Securities and Exchange Commission has ended its securities fraud investigation into whether the utility misled investors about progress at Kemper and won't recommend any enforcement action. The company still faces lawsuits from shareholders, a former employee and a former business partner over claims that Southern lied about problems at the plant, concealing delays and overruns.
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