Plant Ratcliffe in Kemper County, Miss. Source: Associated Press |
State regulators on Feb. 6 approved an agreement between Mississippi Power Co. and numerous parties that resolves all issues related to the utility's troubled Kemper project.
Under the settlement's terms, Mississippi Power will now collect $99.3 million annually from customers to fund Kemper's natural gas facility, which has been running since 2014. That amount is down from the $126 million per year that the utility previously recovered from ratepayers.
Mississippi Power's return on equity for Kemper will be 8.6% for 2018 and 2019, with future years calculated using a performance-based ROE percentage.
The Mississippi Public Service Commission's unanimous vote concludes a nearly decadelong saga in which the Southern Co. subsidiary struggled to show the commercial viability of "clean coal" at Plant Ratcliffe in Kemper County, Miss. The plant was initially intended to run on synthetic gas derived from onsite lignite.
After years of schedule delays and billions of dollars in cost overruns, the company in June 2017 suspended the project's gasification operations and has since taken a $6 billion pretax loss on the endeavor. Southern disclosed in Form 8-K, filed Feb. 6, that its fourth-quarter 2017 pretax loss from Kemper will be $78 million. The company holds an earnings call Feb. 21 to discuss its fourth-quarter 2017 results.
Not included in Kemper write-offs, Southern Chairman, President and CEO Tom Fanning has said, is $100 million to $200 million in cancellation costs.
Mississippi PSC general counsel Frank Farmer confirmed during the Feb. 6 hearing that to date, none of the gasifier costs have been paid for by customers, and they will not be charged in the future. He also said Mississippi Power has agreed to sell the Kemper land used for mining lignite coal and pass the proceeds back to ratepayers.
'It's been a long time coming'
Commissioners during their meeting reflected on the Kemper project, which has been a central issue at the PSC since Mississippi Power applied for a construction certificate in 2009. Initial filings projected a November 2013 commercial operation date and $2.2 billion in costs.
Kemper eventually became more than three years behind schedule and more than $4.5 billion over budget.
"I've been here from the first vote; it's no secret that I voted against this project in 2010," Chairman Brandon Presley said. "I think the commission has worked hard over the past year with the failures that we have seen in this project."
"It's been a long time coming," he said of the settlement, which had been negotiated since August 2017. Signing onto the agreement were Mississippi Power, the independent Public Utilities Staff, federal executive agencies, Chevron Corp., Walmart Inc., Chemours Co. and Greenleaf CO2 Solutions LLC.
The Sierra Club and the Steps Coalition did not object to the settlement's terms, Farmer said, adding that the Mississippi attorney general's office and Liberty Fuels Co. LLC were "generally supportive" of the agreement. The lone intervener in opposition was citizen Thomas Blanton, a frequent critic of Mississippi Power.
"After nine years, Kemper began with a promise of producing clean power. Yet regretfully, Kemper lignite produced more problems than power," Commissioner Sam Britton said.
"The company did attempt to try and provide a service. Certainly good people can make mistakes; you can have differences of opinion and things just simply did not work out as originally thought," he continued. "And let's be very aware of Mississippi Power, which has had a bitter pill to swallow" in terms of charges to income.
Commissioner Cecil Brown said Kemper has been "the most expensive public utility project in the history of the state of Mississippi, and I don't think that needs to be lost on us."
"I think it is clear today that there is strong leadership by this commission," he added. "We have been able to essentially work to make a silk purse out of a sow's ear."

