HOUSTON Aug 1 Southern Co's Mississippi
utility was dealt another legal blow late Tuesday in its attempt
to begin charging customers for costs tied to a $2.88 billion
coal-gasification power plant under construction in Kemper
The Mississippi Supreme Court, in an 8-0 vote, denied the
utility's motion to charge interim rates while the court hears
its appeal of an unfavorable regulatory order denying all rate
increases related to the Kemper County plant until an ongoing
legal challenge from environmental group Sierra Club is
Southern's Mississippi Power unit is building a
582-megawatt, integrated gasification combined-cycle (IGCC)
plant scheduled to begin operating in May 2014.
The three-member PSC denied the utility's six-month, $55
million rate increase request in late June.
However, Mississippi Power in August planned to begin
charging about half the requested amount, subject to refund, to
recover some Kemper financing costs while the plant is under
construction as allowed under Mississippi statute.
The utility said increasing rates now would save customers
millions of dollars in interest costs over the life of the
"We view their decision on our motion to grant interim rates
as a loss for our customers that will result in increased costs
related to the Kemper plant," Mississippi Power spokesman Jeff
Shepard said in a statement.
Lower-than-anticipated financing costs were a bright spot
cited by Southern Co Chief Executive Tom Fanning on a call with
analysts July 25. Fanning said lower financing costs will help
offset rising construction costs, keeping Kemper's final price
tag below the amount approved by the state.
"Our current analysis indicates that the overall cost to
customers will be less than projected," Fanning told analysts.
Mississippi Power is Southern's smallest utility with just
Fanning said the PSC decision to deny recovery of financing
costs during construction, called CWIP, was a "surprise" since
two of three Mississippi commissioners consistently support the
project to help diversify the utility's generation mix. "We
think CWIP is warranted for a project of this magnitude,"
The Kemper plant is running nearly $485 million, or 20
percent, above the $2.4 billion cost approved by the PSC and is
near the $2.88 billion "cap" set by the commission.
Those costs do not include more than $240 million for a
nearby mine to supply lignite to the plant and a $140 million
pipeline to transport carbon dioxide emissions from the plant.
Mississippi Power's credit rating has been downgraded by one
rating agency citing "rising regulatory risks for the company in
addition to the construction and operational risks associated
with the IGCC project."
The Sierra Club, which opposes the Kemper plant due to its
high cost and rate impact, successfully challenged the
commission's 2010 approval of Kemper and has appealed the
commission's move to re-issue Kemper's certificate in April.
Louie Miller, state director of the Sierra Club in
Mississippi, said the ruling was a "victory for ratepayers."
"It's high time to pull the plug on Kemper," Miller said in
Only two U.S. utilities, Southern and Duke Energy,
are pursuing expensive IGCC plants. Many other utilities have
scrapped more than three dozen such plants after they were
delayed by rising capital costs, legislative red tape and
increasing supplies of natural gas.