What is the main impact of the Amended Kemper Settlement Agreement on Mississippi Power and its customers?

The Amended Kemper Settlement Agreement significantly impacts Mississippi Power by disallowing recovery of costs for the gasification part of the Kemper IGCC project, effectively converting it to a natural gas-fired plant. For customers, this means retail rates will reflect a reduction of approximately $13.8 million annually starting in January 2018, and they will not bear the costs of the failed gasification technology.

What financial charges will Southern Company incur as a result of this settlement?

Mississippi Power will record an additional charge to income of approximately $85 million pre-tax ($52 million after-tax) in the fourth quarter of 2017. This charge is due to a disallowance of a portion of Mississippi Power's investment in the Kemper Facility that was requested for rate base inclusion.

What is the status of the SEC investigation into the Kemper IGCC project?

The SEC staff has notified Southern Company that it has concluded its investigation concerning the estimated costs and expected in-service date of the Kemper IGCC. The investigation is being closed without recommending any enforcement action against Southern Company or Mississippi Power.

When is the Mississippi Public Service Commission expected to vote on the Amended Kemper Settlement Agreement?

The Mississippi Public Service Commission (PSC) is expected to vote on the Amended Kemper Settlement Agreement in January 2018.

SOUTHERN CO 8-K SEC Disclosure

Summary

This SEC Form 8-K filing from Southern Company (SO) details significant developments regarding the Kemper County Integrated Coal Gasification Combined Cycle (IGCC) project operated by its subsidiary, Mississippi Power. The primary focus is on an "Amended Kemper Settlement Agreement" reached on November 22, 2017, and finalized on December 1, 2017. This agreement substantially alters the financial recovery and operational scope of the Kemper Facility, transitioning it to a natural gas-fired plant and disallowing recovery of costs associated with the gasification component. Key financial implications include a reduction in the annual revenue requirement from $126.4 million to $112.6 million, a lower expected return on equity, and significantly shortened amortization periods for regulatory assets and liabilities. Furthermore, Mississippi Power will record an approximate $85 million pre-tax charge in the fourth quarter of 2017 related to a disallowance of investment in the Kemper Facility. The filing also notes that the Securities and Exchange Commission (SEC) has concluded its investigation into the Kemper IGCC costs and expected in-service date without recommending enforcement action, providing some closure on that front.

Key Highlights

1Southern Company's subsidiary, Mississippi Power, has entered into an Amended Kemper Settlement Agreement for the Kemper IGCC project, transitioning it to operate solely on natural gas.
2The annual revenue requirement for the Kemper Facility has been reduced from $126.4 million to $112.6 million under the amended agreement.
3The agreement disallows any recovery of costs related to the gasification portion of the Kemper IGCC project, effective immediately and for future periods.
4Mississippi Power will incur an estimated $85 million pre-tax charge (approx. $52 million after-tax) in Q4 2017 due to investment disallowances related to the Kemper Facility.
5The Amended Kemper Settlement Agreement includes a lower initial Return on Equity (ROE) of 8.6% for 2018-2019 and introduces performance-based ROE for future years.
6Amortization periods for regulatory assets and liabilities associated with the Kemper Facility have been significantly shortened to 8 years and 6 years, respectively.
7The SEC has concluded its investigation into the Kemper IGCC project costs and in-service date without recommending an enforcement action.

SOUTHERN CO 8-K Report, Corporate Update (Dec 1, 2017)

Summary

Key Highlights

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