Southern Company Lowers Kemper Project Cost, Reduces Rates

Electric utility firm The Southern Company (NYSE:SO) finally reached a settlement with the Mississippi Public Utilities Staff regarding the rate issue concerning the controversial Kemper Project. Mississippi Power, subsidiary of Southern Company and in charge of the Kemper Project, has agreed to lower the price tag of the Kemper Project by $85 million. This will help to lower the amount the company needs to recover from customers by $13.4 million.

Looking Back

The Kemper plant had been central to ex-President Obama’s Climate Plan and was designed to reduce up to 65% of carbon dioxide emissions. Notably, the project also received the support of President Trump.

However, the project has been facing continuous criticism owing to its poor execution, cost overruns and multiple delays. The plant is already three years behind schedule and is over $4 billion beyond the stipulated budget. The overall cost of the plant was estimated to be around $3 billion in 2010. However, with several delays adding to the project’s cost, the current price tag of the plant has ballooned over $7.5 billion. In the past 18 months, the company has announced 10 delays due to project management problems. The project found it difficult to get its two gasifiers to operate consistently. Mississippi Power has been unable to make the project economically viable in the face of volatile natural gas prices.

In June, Mississippi Public Service Commission (MPSC) issued an ultimatum ordering Southern Company to redesign plans and run the Kemper Project solely on natural gas. Thereafter, the company suspended all coal gasification operations at its Kemper plant.

Mississippi regulators, who do not wish ratepayers to incur additional costs, ordered the company not to increase the rates for Mississippi Power customers. In fact, they want the company to lower the rates, if feasible.

Recent Updates

Mississippi Power’s settlement deal has resulted in the rate reduction for the customers from $126 million to $112.6 million. The move entitles customers to pay $1 less every month than what they are currently paying.

The company believes that it has complied with all the requirements of Public Service Commission including the rate reductions and the operation of the plant solely as a natural gas facility. The company now thus wants the MPSC to re-evaluate the settlement agreement. The final decision on which is expected by January.

Zacks Rank

Southern Company is one of the largest generators of electricity in the nation along with the likes of Exelon Corporation (NYSE:EXC) , Atlantic Power Corporation (NYSE:AT) and RWE AG (OTC:RWEOY) among others.

Southern Company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Southern Company (The) Price

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