By Rebecca Smith
Southern Co. will take a $380 million charge in the first
quarter to reflect the rising cost of its "clean coal" power plant
under construction in Kemper County, Miss., bringing total
shareholder loss on the project to about $1.6 billion.
When it starts full operations, the Kemper plant will convert an
inexpensive grade of local coal into a flammable gas that can be
used to generate electricity. But the power project has been
plagued by delays and construction problems, pushing the cost to
more than $5.5 billion.
Mississippi consumers are somewhat protected from Kemper's cost
overruns thanks to an agreement between the utility and state
regulators that caps the amount customers can be charged for the
project. But the plant's costs still are expected to push up rates
in coming years.
"We're trying to come up with a rate plan that works for
everybody," said utility spokeswoman Christy Ihrig.
Southern said Tuesday it won't be able to get the coal gasifier
in working condition this year--its goal--and will have to forfeit
federal tax benefits valued at between $120 million to $150
million. The company hopes to begin making electricity at the plant
with conventional natural gas sometime this summer.
As costs rise, the utility is fending off criticism and legal
attacks from consumer advocates and others who are opposed to the
expensive project, which many believe is the most costly
fossil-fuel burning power plant ever built in the U.S.
Last week, the company suffered another setback when the
Mississippi Public Service Commission approved a motion filed by
commission staff that asked for a delay in hearings about the
Kemper plant's expense. In order to charge customers for the plant,
the utility must demonstrate it has spent money wisely. Those
hearings now are delayed until at least August.
Southern is confident "all cost incurred in the construction of
Kemper is prudent," Ms. Ihrig said.
The Mississippi Supreme Court earlier this month asked the
public service commission for additional information about Kemper
approvals. The court's request comes in response to a customer
lawsuit that argues the regulator shouldn't allow the utility to
charge consumers anything related to the power plant until it is
furnishing customers with electricity. Some financing costs already
are being included in customer bills.
Write to Rebecca Smith at rebecca.smith@wsj.com
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