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Natural gas could cost less than coal for Kemper plant

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(file) Kemper County Energy Facility
MPB News

Associated Press

   JACKSON, Miss. (AP) - Mississippi Power Co. says the power plant it's building in Kemper County will be cheaper to run on natural gas than on its planned fuel of lignite coal unless gas prices are high.

   That's likely to be used be ammunition by critics who want state regulators to force the unit of Atlanta-based Southern Co. to absorb more of the cost of the $7 billion plant. They argue the coal-fueled plant was a mistake from the outset, and that Mississippi Power should have built a conventional natural gas plant except for overly high estimates of natural gas cost.

   But Southern CEO Tom Fanning told investment analysts Wednesday that it would be unfair to penalize the company, because Mississippi regulators agreed with the proposal and ordered Mississippi Power to build the plant.

   "As a matter of fairness, I cannot imagine that the company is going to be held responsible for changing gas price forecasts," Fanning said.

   He indicated the company still wants to mine lignite, gasify it, and capture carbon dioxide, as originally planned. But because a pipeline was built to the Kemper site, the company could run it on natural gas, which might lower operating costs.

   On Wednesday, the utility announced it still needs more time to complete the plant, now three years behind schedule and more than $4 billion over budget. Mississippi Power says shareholders will lose another $35 million from the delay as it removes coal ash from one of the gasifier units. Customers could also be asked to pay more in carrying costs.

   On Wednesday, Southern began to lay out its strategy to recover the plant's cost from ratepayers. The company said that it wouldn't seek to recover $80 million associated with part of the plant it once planned to sell to Cooperative Energy. The Hattiesburg-based entity, formerly South Mississippi Electric Power Association, annulled the deal, citing Kemper's ballooning costs.

   The company said it would file two separate rate plans by a June 3 deadline - one that would likely require a sharp, immediate rate increase, and a "rate mitigation plan" that might cushion rate increases. The Public Service Commission granted Mississippi Power a rate increase in 2015 covering $840 million worth of assets that are generating electricity.

   Southern said the traditional case would ask customers to pay $3.2 billion to cover additional costs. But before Mississippi Power can collect any money, public service commissioners must decide if the company has spent prudently. Southern said it would seek to negotiate an agreement and that "it is reasonably possible that full regulatory recovery of all Kemper IGCC costs will not occur."

   Stock filings show Mississippi Power will need to borrow more than $2 billion by 2019, and one credit-rating agency has warned that it could cut Mississippi Power's rating below investment grade. Fanning pledged Southern will financially prop up Mississippi Power, and won't let the subsidiary go bankrupt.

   "It's our belief that we will maintain our support for Mississippi Power in the manner that we have described," Fanning said.


   An earlier version of this story was been corrected to show the loss amount from the further delay is $35 million, not $25 million.


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