Summary
This 8-K filing from Southern Company (SO) on June 28, 2017, primarily concerns the ongoing developments and regulatory uncertainty surrounding the Kemper Integrated Gasification Combined Cycle (IGCC) project of its subsidiary, Mississippi Power. The Mississippi Public Service Commission (PSC) is considering a "Proposed Order" that could establish a regulatory liability account for current rates and initiate a "Kemper IGCC Settlement Docket" to resolve outstanding costs. Key proposals from the PSC include no rate increases for customers, a focus on residential customer rate reduction, removal of all cost risk to customers associated with the gasifier, and modification of the project's certificate to permit operation as a natural gas facility only. In parallel, Mississippi Power is suspending operations and start-up activities on the gasifier portion of the Kemper IGCC due to this uncertainty, while continuing to operate the combined cycle units. This decision is driven by workforce safety, cost management, and the PSC's stated expectations. The filing also highlights that approximately $3.4 billion in Kemper IGCC costs as of May 31, 2017, are not yet reflected in Mississippi Power's rates, primarily related to the gasifiers and gas clean-up facilities. Should rate recovery for these costs not be obtained, Southern Company and Mississippi Power would face a material charge to income in the second quarter of 2017. The ultimate outcome of these matters remains uncertain and is subject to the PSC's jurisdiction and potential settlement agreements.
Key Highlights
- 1Mississippi PSC considering a "Proposed Order" to establish a regulatory liability account and a settlement docket for Kemper IGCC costs.
- 2Proposed Order aims for no rate increase for Mississippi Power customers, with a focus on residential rate reduction.
- 3PSC intends to remove cost risk to customers for the gasifier portion of Kemper IGCC and potentially modify its certificate to allow natural gas-only operation.
- 4Mississippi Power is suspending operations and start-up activities on the gasifier portion of Kemper IGCC due to regulatory uncertainty and to manage costs.
- 5Approximately $3.4 billion in Kemper IGCC costs are not currently reflected in Mississippi Power's rates, primarily related to gasifiers and gas clean-up facilities.
- 6Failure to secure rate recovery for the $3.4 billion in unrecovered costs could result in a significant charge to income for Southern Company and Mississippi Power in Q2 2017.