Dive Brief:

• Last week, Mississippi Power reached a settlement agreement with Public Service Commission staff and other parties over the the remaining costs associated with the Kemper County coal-gasification facility.
• Over the summer, Mississippi Power asked for $250 million more than the PSC was willing to approve in a settlement agreement, leading to a series of negotiations that appears to have concluded. Regulators must still approve the settlement.
• In a statement, Mississippi Power said the settlement removes risk to customers for the costs of the gasifier and related assets, ensures there will be no rate increases and continues operation of Kemper as a natural gas facility. The company said it is expecting a final order to be issued in January.

Dive Insight:

If approved, Mississippi Power officials say the company will be making changes to how it operates as it adjusts to a significant loss of revenue. 

“If this stipulation is approved, we expect significant changes to our business,” said Mississippi Power President and CEO Anthony Wilson. “As we adjust to this considerable loss of revenue, our top priority will be to maintain safe and reliable service to our customers.”

Wilson said the settlement required "significant compromise" from all parties. Others involved in the settlement include Chevron and Federal Executive Agencies.

"Putting the gasifier portion of Kemper that did not meet our expectations behind us is in the best interest of our customers, company and the state," Wilson said. "We are pleased to continue operating an efficient natural gas facility at Kemper which has been serving our customers for more than three years.”

Under terms of the settlement, the parties are stipulating to a revenue requirement which is estimated to result in an overall retail annual revenue requirement of approximately $112.6 million, "resulting in a reduction in revenue requirement from the current rates in place for the Kemper CC."

Stipulated total company Kemper CC capital investment, the average net rate base, would be almost $854 million.

In a major blow to the "clean coal" industry, Mississippi Power was not able to get the gasifiers on the 582 MW Kemper IGCC project to work consistently, despite spending $7.5 billion on a project that was originally budgeted at about $4 billion.

The utility, a subsidiary of Southern Co., pulled the plug on the project in late June, saying it would instead run the facility as a natural gas-fired plant and not use the gasifiers that were supposed to convert local lignite into a clean burning synthesis fuel.