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Mississippi Power at odds with regulators on Kemper power plant rates

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JACKSON, Miss. (AP) — Regulators and Mississippi Power Co. disagree over how much money the company should get for the functioning portion of its Kemper County power plant.

In a Monday filing, the unit of Atlanta-based Southern Co. said it wants customers to pay for $277 million more in assets than the Public Utilities Staff believes is justified. Although the difference would initially have little impact on rates, Public Utilities Staff Executive Director Virden Jones said Tuesday that customers would pay substantially more over time under Mississippi Power's plan.

The three-member Public Service Commission in June directed the staff and utility to the bargaining table, with commissioners saying that Kemper should run on natural gas rather than gasified lignite coal, that rates should stay level or fall, and that customers shouldn't pay for the part of the plant that was supposed to gasify coal and remove pollutants.

Commissioners said they will set a status hearing to decide how to move forward if the staff and company can't reach an agreement. Northern District Commissioner Brandon Presley and Central District Commissioner Cecil Brown both said they still hope an agreement can be reached. If Mississippi Power doesn't settle, commissioners could try to revoke the license for the entire Kemper facility, which would mean the utility would collect nothing.

Southern has already absorbed almost $6 billion in losses on the $7.5 billion plant, after suspending efforts to complete the gasifier. The commission allowed the company to raise rates by 15 percent in 2015 to recover $800-million-plus for part of the plant that has been burning natural gas since 2014. But that leaves hundreds of millions of the table to be resolved in a settlement, even discounting the efforts of some Kemper opponents to take back some the money the commission has already approved.

In its proposal, the company agrees to run Kemper on natural gas, says it will keep customers from paying for the gasifier, and says rates will stay level for now. Even under the company's proposal, it told investors Tuesday that it would lose another $100 million to $200 million.

"The company believes this is a fair resolution that will make sure customers are not subjected to a rate increase related to the Kemper gasifier," Mississippi Power CEO Anthony Wilson said in a statement. Several outside groups are supporting Mississippi Power.

Chief Financial Officer Moses Feagin, in prepared testimony, stated the company believes it would be justified in asking for $207 million a year, not the $126 million it's seeking from its 189,000 customers. But the staff, which is independent of the commissioners, said it believes that some costs that Mississippi Power wants to recoup are unjustified.

In the 2015 agreement that allowed the rate increase, the company agreed to shave off some costs of the natural gas turbines. Mississippi Power says those reductions are no longer appropriate, in part because it's absorbed all the risk by writing off the gasifier cost.

But Jones said allowing customers to pay the additional costs will make the plant more expensive than comparable natural gas plants and more expensive than staff consultants believe is proper.

"It just creates upward pressure on rates and the company already has some of the highest costs in the Southeast for residential customers," Jones said.

Feagin described proposals by staff and others as "even more punitive to the company" than the losses Mississippi Power has already absorbed. At June 30, Mississippi Power's current liabilities exceeded assets by $930 million. Southern is keeping the unit afloat, and Mississippi Power argues that it needs enough money to try to begin rebuilding its financial strength and persuading credit rating agencies that it can pay its bills.

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