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Mississippi Power, regulators reach deal on Kemper Project power plant costs

SOLUTION: Mississippi Power came to an agreement with the Public Utilities Staff on how to pay for the Kemper Project power plant. Photo by Mississippi Power

Mississippi Power and the Mississippi Public Utilities Staff reached a deal Friday that could end the saga of the Kemper Project power plant.

The utility agreed to more concessions than in the deal it reached with Chevron and other intervenors. The Mississippi Public Service Commission postponed the scheduled rate hearings for Monday to allow for public comments on the deal and could approve the deal as soon as January.

Mississippi Power will receive $853 million on capital costs for the combined cycle turbines, transmission lines and other equipment, down approximately $85 million from the deal reached between the Southern Company subsidiary, Chevron, Chemours and several federal agencies such as the U.S. Air Force.

The utility would also reduce what it collects from customers annually to pay for Kemper from $126 million to $112.6 million and will end collection of various regulatory costs such as legal fees after eight years, saving its 187,000 customers in 23 coastal counties tens of millions of dollars.

The deal also includes:

  • The company would receive a smaller guaranteed rate of return on the power plant.

  • The removal of the company's ability to recover costs for the gasification plant from ratepayers

  • Changing the plant's certificate to allow Mississippi Power to operate it as a natural gas plant only.

  • After six months from the deal's approval, the PSC would conduct hearings and investigate issues with Mississippi Power's excess generation capacity, which would be 27 percent more than before with Kemper added to its fleet.

However, Mississippi Power customers could still pay higher rates, as the utility asked the PSC in a filing on November 15 for an 8.5 percent rate hike that it says isn't related to costs on Kemper.

The proposed rate increase would go into effect in 2018 if approved by the commission and would split evenly between what the company claims are higher fuel costs (coal and natural gas) and its performance evaluation plan (PEP).

The $7.5 billion plant was originally designed to be fueled by lignite coal converted into synthesis gas, but will now to become a natural gas power plant after the company decided to abandon the gasifier units after three years of trying to get them operational. The plant was originally supposed to be operational by May 2014 and the company has already written off more than $6 billion in costs related to the gasifier.

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