Dive Brief:
- Mississippi regulators have approved a temporary 18% rate increase to help pay for Mississippi Power's coal gasification plant.
- Under construction since 2008 and plagued with delays, the plant is being built at triple the initial estimated cost.
- The plant, which is already under partial operation, is expected to be fully online by mid-2016.
Dive Insight:
The Kemper plant now is expected to cost more than $6 billion to get online, and the state Public Service Commission voted 2-1 last week to approve the increase. There's a lot at stake: Both the Obama administration and the coal industry want to show that a coal gasification and carbon capture and storage plant is a practical resource.
“The big issue is the coal-to-gas operation, which is the expensive portion that is responsible for the big cost increases,” Paul Patterson, an analyst with Glenrock Associates LLC, told Bloomberg.
The delay-plagued plant has been so expensive to build that Mississippi Power warned it is running out of money. The costs have damaged Mississippi Power parent Southern Co. in the stock and credit markets, with Standard & Poor's putting Southern on "credit watch negative" last month.
The increase is expected to raise rates by $159 million a year. However, it is subject to a refund after the commission reviews the spending to determine if the money was prudently spent. Mississippi Power "stands on the brink of bankruptcy" without the rate increase, according to a staff attorney at the Mississippi PSC.
