Mississippi Power now expects the Kemper energy plant to be operational using lignite coal by mid-March and then will focus on going to the state Public Service Commission to approve a rate hike.
Southern Co., parent company of Mississippi Power, said Wednesday it will ask the PSC to approve a rate hike of $4.2 billion for Kemper, which now has a price tag of more than $7 billion.
“The company also expects that timely resolution of the 2017 Rate Case will likely require a negotiated settlement agreement,” Southern Co. said on page 31 of a 936-page annual report that mentions Kemper 592 times.
The report said Mississippi Power is developing a traditional rate case requesting full cost recovery, along with a rate-mitigation plan that together represent Mississippi Power’s probable filing strategy.
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Kemper has put a dent in Southern Co.’s earnings report filed Wednesday. Kemper charges have cost the companies $2.76 billion ($1.71 billion after tax), and $35 million more was added to their cost estimate last month.
Progress was made on the plant in the last month — the integrated operation of both gasifiers; the production of electricity from syngas by both turbines; and the capture and placement of carbon dioxide in the CO2 pipeline for use in enhanced oil recovery.
Mississippi Power remains committed to finishing the lignite facility despite a new economic viability analysis of the project. The report just completed by the company shows natural gas prices are projected to stay low in the long-term and the cost of operating Kemper with lignite is expected to be higher than anticipated, providing a negative impact on the plant’s economic viability.
However, Mississippi Power intends to continue startup activities and to complete and operate the project, company spokesman Jeff Shepard said.
The facility has operated on natural gas since 2015, but must produce electricity with lignite coal to recover the remaining construction costs from ratepayers.
Thomas Fanning, chairman of Southern Co., said in a conference call Wednesday he looked back at conditions in 2010 when Kemper was certified by the PSC as somewhat of a “gas price hedge.” Natural gas prices were expected to be much higher than they are now, he said.
When it was approved by the PSC in 2010, the original completion date was May 2014, but the first-of-its-kind technology added to the timeline, the company said.
Wednesday’s report moved the date to mid-March because of issues with the ash-removal system in gasifiers, which the company said has been producing syngas more than 60 percent of the time since early November.
“We just need a little bit more time,” Shepard said.
Associated Press contributed to this report