Dive Brief:

• Southern Co. officials say a drop in the forecasted price of natural gas means the company's integrated gasification combined-cycle and carbon capture plant in Kemper County, Mississippi, will struggle to be profitable under most scenarios.
• The plant was originally forecast to cost less than $3 billion to construct, but delays and overruns more than doubled the price tag to nearly $7 billion. The plant is generating electricity, but full integration of coal gasification is still in progress as the utility keeps pushing back deadlines. 
• Southern Chairman, President and CEO Thomas Fanning told reporters and analysts that Mississippi Power will file a rate case in the coming months, seeking to balance "the interests of customers and investors alike."

Dive Insight:

Southern Co.'s earnings call this week focused on the company's Kemper coal plant, and how gas price projections had impacted potential profitability. And as Fanning explained, the company now sees fewer "green boxes."

The Q&A section kicked off with a question about an economic viability analysis, a report the company has been filing since around 2009. Up until the most recent analysis, Fanning said six of nine scenarios in a 3x3 analysis were green—showing Kemper would be profitable at those has prices. 

A "new gas price forecast reduced the number of green boxes to three," Fanning said. "If you had not had the reduction of long-term gas price forecast in this current edition, we would have been back to around six green boxes."

Operating costs have also risen about $40 million a year since 2015, he said.

If gas prices stay low, it could be cheaper for Mississippi Power to run the plant on natural gas instead of gasified coal, the Associated Press notes. Southern officials said they still plan to use lignite mined at the Kemper site to generate electricity, but the plant is also connected to a natural gas pipeline. 

Fanning said from the start, the Kemper project "was a gas hedge and, in fact, it remains a gas hedge. There are still green boxes on the economic viability analysis which would indicate that under certain scenarios, this is a very economic thing to do. And let me remind you, if you had 2015's gas forecast instead of 2016/2017 gas forecast, you would have six green boxes."

Kemper's struggles led to Moody's downgrading Mississippi Power's credit rating to one step above junk after an election of the Mississippi Public Service Commission. 

Southern declined to get into specific gas-price impacts on the plant. According to the U.S. Energy Information Administration, gas prices will rise from $2.50/million British thermal units this year, to $3.12/MMBtu in 2017. The long-term forecast does not top $5 until around 2030.