What is the main purpose of the settlement agreement between Mississippi Power and the Mississippi PSC?

The settlement agreement aims to define a process for resolving cost recovery matters related to the Kemper IGCC plant, mitigate risks for Mississippi Power and its customers, and resolve the company's pending rate appeal before the Mississippi Supreme Court.

What are the immediate financial implications for Mississippi Power's customers?

Mississippi Power is expected to file a request for a rate increase not exceeding $172 million within 30 days of the settlement to cover financing costs, which will be recorded to a regulatory liability to mitigate rate impacts when the Kemper IGCC is placed in service. The PSC will decide on this within 50 days.

What is the cost cap for the Kemper IGCC plant, and how will costs be recovered?

The settlement limits the portion of prudently incurred Kemper IGCC costs to be included in the rate base to $2.4 billion (the certificated cost estimate), plus costs for the lignite mine and CO2 pipeline, and other permitted costs. The company plans to file a seven-year rate recovery plan for the plant's initial operation period. Costs exceeding this cap may be recovered through alternate financing, potentially via securitization, or other approved methods.

What are the conditions under which Mississippi Power could terminate the settlement agreement?

Mississippi Power can terminate the agreement if certain conditions are not met, including the passage of multi-year rate plan legislation, the inability to secure alternate financing for prudently incurred costs not recovered in Commission rate proceedings, or if the Mississippi PSC fails to comply with the settlement's requirements.

SOUTHERN CO 8-K SEC Disclosure

Summary

This 8-K filing from Southern Company (SO) on January 25, 2013, details a significant settlement agreement between its subsidiary, Mississippi Power, and the Mississippi Public Service Commission (PSC) regarding the Kemper Integrated Gasification Combined Cycle (IGCC) plant. The agreement aims to define a process for cost recovery and mitigate risks for both the utility and its customers, while also resolving a pending rate appeal. The settlement outlines specific regulatory procedures and timelines for rate filings, cost recovery plans, and prudence reviews for the Kemper IGCC project. Key aspects for investors include the $172 million rate increase request for financing costs in 2013 and the plan to file a seven-year rate recovery plan in 2014. The agreement also establishes a $2.4 billion cost cap for rate base inclusion, with provisions for alternate financing through securitization and for costs related to the lignite mine and CO2 pipeline. However, the ultimate outcome of cost recovery and prudency determinations remains subject to further legislative and regulatory actions, introducing continued uncertainty for investors.

Key Highlights

1Mississippi Power and the Mississippi PSC entered into a settlement agreement on January 24, 2013, concerning the Kemper IGCC plant cost recovery.
2The agreement outlines a process for resolving cost recovery matters and mitigating risks for Mississippi Power and its customers.
3Mississippi Power will file a request for a rate increase not to exceed $172 million for financing costs in 2013.
4A rate recovery plan for the Kemper IGCC for the first seven years of operation, along with a 2014 revenue requirement, is to be filed within three months.
5The agreement limits prudently incurred Kemper IGCC costs includable in rate base to $2.4 billion (the certificated cost estimate), plus mine and pipeline costs, and other permitted costs.
6Mississippi Power may pursue alternate financing through securitization for prudently incurred costs not recovered through the Commission's rate proceedings.
7The company has the right to terminate the settlement if key conditions, such as multi-year rate plan legislation, are not met or if alternate financing is not secured.

SOUTHERN CO 8-K Report, Corporate Update (Jan 25, 2013)

Summary

Key Highlights

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