Southern Co replaces executives in wake of Kemper cost overrun

HOUSTON Mon May 20, 2013 6:39pm EDT

HOUSTON May 20 (Reuters) - Southern Co's smallest utility unit, Mississippi Power, named a new president on Monday in response to pressure from state regulators concerned about cost overruns at a controversial coal-gasification plant under construction in Kemper County, Mississippi.

Mississippi Power said its board elected G. Edison "Ed" Holland president and chief executive officer, replacing Ed Day who was named to the job less than three years ago.

Mississippi Power said Day retired and that the change was effectively immediately.

Tommy Anderson, Mississippi Power's vice president of generation development, who oversaw the Kemper project, has also left the company, a Mississippi Power spokeswoman said.

Anderson's replacement has not been named.

Last month, Mississippi Power said the cost to build Kemper, a 582-megawatt, integrated gasification combined-cycle (IGCC) plant, had risen by $540 million to more than $4.2 billion. That amount includes the cost of a coal mine to supply the plant, a carbon dioxide pipeline, financing and other costs.

Leonard Bentz, chairman of the Mississippi Public Service Commission, said Monday's abrupt management change took place after he called Southern Co Chairman Tom Fanning about two months ago when his "communication relationship had broken down with Mississippi Power."

"I just hit a brick wall and I had some concerns," Bentz told Reuters.

Southern said Kemper's higher price tag was the result of a decision to use higher-quality pipe and to add additional workers to complete the cutting-edge plant by a 2014 deadline.

Bentz said the commission will continue to scrutinize Mississippi Power and how it provided information to regulators regarding Kemper project costs.

"We are going to circle back around on everything that has been addressed and I think there are also some other communication breakdowns within Mississippi Power Co and we are going to find out where they are and address those," Bentz said.

Mississippi Power's Holland apologized for the company's action.

"Information was asked for by the commission and unfortunately we did not provide that information in the detail requested," Holland said in an email. "I will see that it never happens again."

Bentz said he has a "wait and see" attitude following Monday's management shake-up. "I don't think an issue gets much larger than the president and CEO of the company abruptly leaving."

Bentz complimented Fanning's response but said the commission will continue to hold Mississippi Power to the $2.4 billion cap it set for Kemper.

Mississippi Power's 185,000 customers saw bills jump 12-percent, or nearly $19, on an average monthly bill, tied to early recovery of Kemper costs.

Fanning told investors last month that the Kemper experience was "not representative of the kind of performance that Southern Co delivers year in and year out."

"This is unusual performance for us and it's something that we are going to work very hard not to repeat," Fanning said in April.

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