The Securities and Exchange Commission (SEC) last week reportedly closed an investigation concerning costs and delays at Mississippi Power’s now-abandoned Kemper integrated gasification combined cycle (IGCC) project without recommending an enforcement action.
Mississippi Power on December 1 also reached an amended settlement agreement with key stakeholders on the remaining costs associated with the $7.5 billion Kemper County Energy Facility. If approved, the company said the agreement would help it move past the exorbitantly costly carbon-capturing gasifier project it scrapped in June.
SEC Said to Close its Investigation
At the time, Southern Co. said that while it was fully cooperating with the SEC, it believed the investigation was “focused primarily on periods subsequent to 2010 and on accounting matters, disclosure controls and procedures, and internal controls over financial reporting associated with the Kemper IGCC.”
In a December 1 financial filing, Southern Co. said that SEC staff had notified the company it has concluded its investigation and “is closing the investigation without recommending an enforcement action.”
The SEC declined to confirm or deny the existence of the investigation, stressing that all investigations it conducts are private to allow for the fullest development of an inquiry. It only publicly announces conclusion of an investigation if a violation has been found. Companies sometimes disclose SEC probes to investors in the spirit of transparency, the agency told POWER on December 5.
An Amended Agreement
Mississippi Power on December 1 also said in a financial filing that it reached an amended settlement with the Mississippi Public Utilities Staff (MPUS)—a state agency that represents utility customers along with state agencies and public utilities—oil products manufacturer Chevron Products Co., global chemical company Chemours Co., and federal executive agencies. Southern Co. said it anticipates other parties will file joinders in support of the amended agreement.
The agreement amends a prior settlement proposed in August, revising the annual revenue requirement—which is necessary to cover the power company’s expenses and have the opportunity to earn a fair rate of return—from $126.4 million to $112.6 million for costs related to the Kemper natural gas facility. Under the amended agreement, retail customer rates would be effective in January 2018, reflect a reduction of about $13.8 million annually, and include no recovery for costs associated with the gasifier portion of the Kemper facility at any future date.
Significantly, the agreement also proposes to modify the 2010-awarded certificate of public convenience and necessity to limit the facility to operations of the natural gas combined cycle power plant, which was completed in 2014.
The 582-MW Kemper County energy facility was designed as an IGCC to convert locally mined lignite to synthesis gas, using novel TRIG technology to capture up to 65% of its carbon emissions. But owing to a number of technical hurdles, the project had been delayed nearly three years. It was originally projected to be placed into service in May 2014. Total costs, meanwhile, exceeded $7.5 billion, a figure that factored in mine, carbon dioxide pipeline, and other accounting costs.
On June 28, Mississippi Power announced construction of the nearly complete IGCC portion would be suspended immediately. The Southern Co. subsidiary then said it would continue running a combined cycle gas turbine plant that was completed as part of the project three years ago, pending the MPSC’s decision on future operations.
On August 21, Mississippi Power reached a settlement agreement with Denbury Resources—the company under contract to buy all the project’s captured carbon—along with three advocacy groups.
The amended agreement reached on December 1 meets directives issued by the MPSC, but it still needs approval from the MPSC, Mississippi Power said. The MPSC’s final order on the amended agreement is expected in January.
However, it represents “significant compromise from all parties involved,” said Mississippi Power President and CEO Anthony Wilson in a statement. “Putting the gasifier portion of Kemper that did not meet our expectations behind us is in the best interest of our customers, company and the state.”
Wilson also added that if the agreement is improved, Mississippi Power expects “significant changes” to its business. “As we adjust to this considerable loss of revenue, our top priority will be to maintain safe and reliable service to our customers,” he said.
—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)