Court tells Southern unit to refund Kemper charges

OREANDA-NEWS. The Mississippi Supreme Court yesterday reversed a state utility order that allowed Southern Co's smallest unit to raise rates to recover early costs of an over-budget coal-gasification power plant under construction in Kemper County.

The supreme court ruled that the Mississippi Public Service Commission in 2013 exceeded its authority under the state's Base Load Act by granting Mississippi Power a 15pc rate increase, with a subsequent 3pc additional rise, to pay for financing costs for the 582MW Kemper County integrated gasification combined-cycle plant.

The court ordered the commission to direct Mississippi Power to refund roughly \\$280mn to its customers and to lower rates to their 2013 level.

The plant's price tag, initially set at \\$2bn, has ballooned to nearly \\$6.2bn, according to Southern. Kemper is now scheduled to go into service next year, two years behind schedule.

In a footnote in its order, the court noted that Kemper's price tag now exceeds Mississippi's state budget for fiscal 2014 and 2015.

Kemper has been closely watched by industry because the plant will capture a majority of its carbon dioxide emissions. It was cited as a model for future coal-plant design by the US Environmental Protection Agency, which has proposed strict limits on carbon pollution from coal-fired power plants.

The state commission allowed Mississippi Power to recover \\$125mn in 2013, climbing to \\$156mn from 2014 until 2020.

The court said state utility regulators failed to fulfill their duties and obligations in dealing with Mississippi Power. The court said that state law permits the commission to allow early project costs only if they have been determined to be "prudently incurred."

The commission deferred a prudency review under a settlement agreement with Mississippi Power that the court lambasted.

"The commission does not have unbridled authority to adopt recovery mechanisms which are not authorized by existing law," the order stated. "An analysis of these proceedings leads to the inescapable conviction that the commission failed to fulfill its duties and obligations pursuant to statutory directives and our existing law."

Mississippi Power said it is currently reviewing the ruling "to determine the company's options."

Southern Co executive outlined three milestones for Kemper this year: a first firing of gasification equipment to occur this spring, followed by production of syngas over the summer and reliable delivery of the syngas to each combustion turbine in the fall. The combined cycle portion of the facility has been operational since August 2014, Mississippi Power said.

Mississippi Power is Southern's smallest utility with less than 200,000 customers.

Consumer groups, led by the Sierra Club, opposed construction of Kemper, until a settlement was reached last year.