What is the Kemper IGCC plant and why is it impacting rates?

The Kemper IGCC plant is an integrated coal gasification combined cycle facility under construction by Mississippi Power, a subsidiary of Southern Company. Its construction and ongoing operation are significant capital expenditures, and the company is seeking to recover these costs through rate increases approved by the Mississippi Public Service Commission (MPSC).

How much are Mississippi Power's retail rates increasing due to the Kemper IGCC order?

The MPSC has allowed Mississippi Power an annual rate increase of $125 million for 2013, which is projected to escalate to $156 million in 2014. This translates to a 15% increase in retail rates for 2013 and a 3% increase for 2014.

Will Mississippi Power need to adjust its recovery plan for the Kemper IGCC plant further?

While the MPSC's approved rate for 2013 is lower than Mississippi Power's initial proposal, the company stated that the authorized rate levels for 2013 and 2014 are sufficient to allow them to modify their rate recovery plan for the Kemper IGCC. This modification is expected to prevent the need for any additional revenue adjustments under that plan.

Are there other rate changes affecting Mississippi Power customers?

Yes, in addition to the Kemper IGCC-related adjustments, Mississippi Power received approval for a $15.3 million (1.9%) increase under its Performance Evaluation Plan (PEP). Conversely, there will be a $34.5 million (4.7%) decrease due to an annual adjustment in the retail fuel cost recovery factor. These changes, along with the Kemper IGCC rates, will become effective in April 2013.

SOUTHERN CO 8-K SEC Disclosure

Summary

Southern Company's subsidiary, Mississippi Power, received a partial approval from the Mississippi Public Service Commission (MPSC) regarding rate increases related to the Kemper County integrated coal gasification combined cycle (IGCC) plant. While Mississippi Power initially sought a $172 million annualized rate increase for 2013, the MPSC has authorized a $125 million increase for 2013, escalating to $156 million in 2014. This represents a significant, though reduced, increase in retail rates, impacting customers by 15% in 2013 and 3% in 2014. Despite the difference from its original request, Mississippi Power has indicated that the approved rate levels are sufficient to modify its longer-term rate recovery plan for the Kemper IGCC, preventing the need for further revenue adjustments. The MPSC also approved a separate increase under Mississippi Power's Performance Evaluation Plan (PEP) and a decrease due to fuel cost recovery adjustments. These new rates are set to take effect in April 2013. Investors should monitor the ongoing construction and operational status of the Kemper IGCC project and any future regulatory decisions, as the ultimate outcome of these matters remains uncertain.

Key Highlights

1Mississippi Power received MPSC approval for a $125 million annualized rate increase for 2013 and $156 million for 2014 related to the Kemper IGCC plant.
2The approved 2013 rate increase represents a 15% rise in retail rates, while the 2014 increase is 3%.
3Mississippi Power's initial request for a $172 million annualized rate increase for 2013 was partially approved.
4The approved rates are deemed sufficient to modify Mississippi Power's rate recovery plan for the Kemper IGCC without requiring additional revenue adjustments.
5The MPSC also approved a $15.3 million (1.9%) increase under Mississippi Power's Performance Evaluation Plan (PEP).
6A $34.5 million (4.7%) decrease was approved due to an annual adjustment to the retail fuel cost recovery factor.
7The new rates will become effective with the first billing cycle of April 2013.

SOUTHERN CO 8-K Report, Corporate Update (Mar 6, 2013)

Summary

Key Highlights

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