What is the main purpose of this 8-K filing?

The main purpose of this filing is to inform investors that Mississippi Power Company, a subsidiary of Southern Company, has submitted three alternative rate proposals to the Mississippi Public Service Commission (PSC) for recovering costs associated with the Kemper Integrated Gasification Combined Cycle (IGCC) facility. It outlines the potential impact of these proposals on customer rates.

What are the three rate proposals for the Kemper IGCC facility?

The three proposals are: 1) The Traditional Proposal, which seeks a significant rate increase based on traditional ratemaking principles; 2) The 2017 Rate Mitigation Plan (2017 RMP), which spreads the rate impact over two years; and 3) The 2019 Rate Mitigation Plan (2019 RMP), which aims to keep rates stable for over four years and may include securitization of costs.

Which proposal does Mississippi Power prefer, and why?

Mississippi Power favors the 2019 Rate Mitigation Plan (2019 RMP). This proposal is preferred because it offers the lowest initial rate increase for customers and provides the longest period of stable rates, aiming to mitigate the immediate financial burden.

What are the key uncertainties or risks for investors regarding the Kemper IGCC cost recovery?

The key uncertainties include the final decision from the Mississippi PSC, the outcome of a pending motion for rehearing on a Mississippi Supreme Court decision, and the possibility that collected funds (Mirror CWIP) may need to be refunded. The ultimate ability of Mississippi Power to recover the full costs of the Kemper IGCC is not guaranteed and is subject to these regulatory and legal proceedings.

SOUTHERN CO 8-K SEC Disclosure

Summary

This 8-K filing from Southern Company (SO), filed on May 15, 2015, primarily concerns Mississippi Power Company's (a subsidiary) notification to the Mississippi Public Service Commission (PSC) regarding proposed retail rate increases for the Kemper Integrated Gasification Combined Cycle (IGCC) facility. The filing details three alternative rate proposals aimed at recovering costs associated with the under-construction Kemper IGCC. These proposals offer different pathways and timelines for rate adjustments, reflecting varying approaches to mitigate the immediate financial impact on customers while seeking to recover the significant investment in the project. Investors should note the considerable uncertainty surrounding the ultimate rate recovery for the Kemper IGCC. The filing highlights the dependence on the Mississippi PSC's decision, potential legal challenges (including a pending motion for rehearing on a Supreme Court decision), and the complex interplay between rate proposals, regulatory approvals, and customer impact. The company favors a longer-term mitigation plan (2019 RMP) which offers more stable initial rates, but its implementation is contingent on several factors, including the availability of certain collected funds and PSC approval. The ultimate financial outcome for Mississippi Power and, by extension, Southern Company, remains subject to regulatory and legal determinations.

Key Highlights

1Mississippi Power filed three alternative rate proposals with the Mississippi PSC on May 15, 2015, to recover costs for the Kemper IGCC facility.
2The proposals vary in their approach to rate increases and mitigation periods, ranging from traditional rate recovery to multi-year mitigation plans (2017 RMP and 2019 RMP).
3The Traditional Proposal suggests an initial ~11.8% increase ($114 million) effective June 1, 2015, with a potential further ~12% increase ($120 million) in 2016, subject to additional rate cases.
4The 2017 RMP proposes a ~2.6% increase ($25 million) effective June 1, 2015, followed by a larger ~19% increase ($197 million) in 2016.
5The 2019 RMP proposes stable rates at the current Mirror CWIP level ($156 million annually) from June 1, 2015, through December 31, 2019, and may involve securitization of up to $1 billion in costs.
6Mississippi Power favors the 2019 RMP due to its lower initial rate impact and rate stability for customers.
7The ultimate outcome of rate recovery is uncertain and dependent on Mississippi PSC approval, legal decisions (including a pending motion for rehearing on a Supreme Court decision), and the potential refund of collected funds.

SOUTHERN CO 8-K Report, Corporate Update (May 15, 2015)

Summary

Key Highlights

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