Summary
Southern Company's subsidiary, Mississippi Power, has reached a significant settlement agreement with the Mississippi Public Service Commission (PSC) regarding the cost recovery for its Kemper County energy facility. The Kemper Settlement Agreement, approved on February 6, 2018, sets an annual revenue requirement of approximately $99.3 million. This amount is lower than initially proposed ($112.6 million) primarily to reflect the impact of federal tax reform enacted in December 2017. The agreement also includes a disallowance of a portion of Mississippi Power's investment in the Kemper Facility, which the company had already recognized as a charge to income in the fourth quarter of 2017.
Key Highlights
- 1Mississippi PSC approved a settlement agreement for Kemper Facility cost recovery.
- 2Annual revenue requirement set at approximately $99.3 million, reduced due to federal tax reform.
- 3No recovery for costs associated with the gasifier portion of the Kemper Facility is allowed.
- 4Retail customer rates will reflect an annual reduction of approximately $26.8 million.
- 5The agreement specifies the return on equity (ROE) framework for 2018 and future years.
- 6Amortization periods for related regulatory assets and liabilities are set at eight and six years, respectively.
- 7Mississippi Power will modify its certificate of public convenience and necessity to limit operations to natural gas combined cycle.
Frequently Asked Questions
The main outcome is the Mississippi Public Service Commission's approval of a settlement that allows Mississippi Power to recover an annual revenue of approximately $99.3 million for the Kemper Facility. Importantly, this settlement does not permit recovery of costs for the gasifier portion of the facility and will result in a reduction in retail customer rates.
Federal tax reform enacted in December 2017 led to a reduction in the proposed annual revenue requirement for the Kemper Facility. The approved $99.3 million reflects this impact, as it is lower than the previously proposed $112.6 million.
Yes, retail customer rates will reflect an annual reduction of approximately $26.8 million as a direct result of the Kemper Settlement Agreement.
The certificate of public convenience and necessity for the Kemper Facility will be modified to limit its operation solely to natural gas combined cycle. Mississippi Power will also need to file a reserve margin plan with the Mississippi PSC by August 2018.