BREAKING: Southern Co. Suspends Kemper "Clean Coal" Project, Warns Investors It May Recognize Losses up to $3.4 Billion

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In a major blow to proponents of โ€œclean coalโ€ technology, Southern Co., parent company of Mississippi Power, announced in a Securities and Exchange Commission filing today that it’s throwing in the towel on efforts to generate electricity from coal and will instead use only natural gas at its flagship Kemper County, Mississippi powerย plant.

The project, which relied on a โ€œgasifierโ€ to turn a cheap and common grade of coal into fuel, is over, at least for now, Southernย said.

โ€œOn June 28, 2017, Mississippi Power notified the Mississippi PSC that it is beginning a process to suspend operations and start-up activities on the gasifier portion of the Kemper IGCC.โ€

Further, Southern warned that it may record a $3.4 billion loss for the project in the second quarter of 2017, depending on how negotiations with state utility regulatorsย unfold.

If โ€œMississippi Power does not ultimately obtain rate recovery of the $3.4 billion โ€ฆ , Southern Company and Mississippi Power would be required to recognize a charge to income in the second quarter of 2017 for those unrecovered costs, in addition to any other costs required to be incurred,โ€ the SEC filingย says.

The filing comes on the heels of a historic vote by Mississippi’s state regulators that rejected asking the 187,000 customers who may get electricity from Kemper to pay for the long-delayed and far over-budget โ€œclean coalโ€ experiment. The 582-megawatt plant, initially projected to cost $1.8 billion, has so far run up a bill of over $7.5 billion in construction and engineering expenses. In comparison, a typical 700-megawatt natural gas plant would have cost rougly $700 million to build, according to the Wall Streetย Journal.

Earlier this month, Southern told investors that vital machinery for the coal-powered section of the plant had started leaking, and would take 18 to 24 months toย repair.

Mississippi Power Co. still plans to try to recover some or all of the $3.4 billion from power customers, Southern Co. said in its SEC filing. The company will pursue that through settlement negotiations and โ€œany available settlement alternativesโ€ and other options to recover itsย costs.

The state regulators have been gearing up for the potential legal battle, expanding their legal budget from $200,000 to up to $2.5 million and hiring two large law firms with experience in utilities law, as the Climate Investigations Center recently reported.

โ€œThe ultimate outcome of these matters cannot be determined at this time,โ€ Southern Co. said in its 8-K filedย today.

Over a Decade ofย Delays

Kemper was supposed to be the nation’s first new โ€œclean coalโ€ power plant, capable of taking the world’s dirtiest but most abundant kind of coal, lignite coal, and turning it into a dirt-cheap fuel providing electricity while churning out roughly the same carbon emissions as a power plant burning natural gas โ€“ a plus for the power bill as well as theย planet.

Plans for the Kemper project were first announced by Southern Co. in December, 2006. Over a decade later, the power plant is still not fully up and running and its price tag has spiked from $1.8 billion then to $7.5 billion now โ€“ making it one of the most expensive power plants per megawatt ever built in the U.S.

Earlier this month, Mississippi officials sent a clear message to the plant’s builders: when it comes to โ€œclean coal,โ€ we’re not buying what you’re selling anyย more.

โ€œMississippians donโ€™t want to pay for a ticket on a plane that isnโ€™t going to fly,โ€ Paul Patterson, a utilities investment analyst, told the Wall Streetย Journal.

Instead, the Kemper power plant โ€œshould operate using only natural gas,โ€ the Mississippi Public Service Commission announced, adding that it was commencing negotiations with Mississippi Power Co. to figure out how to protect the state’s electricity customers from having to pay for a plant that seems to have been better at burning through capital thanย coal.

In its SEC filing today, Southern Co. said that while the โ€œclean coalโ€ portion of the plant is suspended, Kemper will indeed keep running on natural gas, but added that it planned to dispute some of the $3.4 billion in costs โ€“ meaning that legal battles may be only justย beginning.

โ€œWe are committed to ensuring the ongoing focus and safety of employees while we consider the future of the project, including any possible actions that may be taken by the [Mississippi Public Service] Commission,โ€ Southern Company Chairman, President and CEO Thomas A. Fanning said in a statement. โ€œWe believe this decision is in the best interests of our employees, customers, investors and all otherย stakeholders.โ€

The Kemper project has suffered from a long string of delays and cost-over runs. The most recent setback, which was made public by Southern on June 5, will require builders to rip through a dense labyrinth of steel pipes to replace crucial equipment that’s already started leaking, adding up to two years of additional work at a cost of $164ย million.

Company records, recorded phone calls and other testimony provided to the New York Times last year by a whistleblower showed Southern Co. officials may have deceived investors and the public by knowingly concealing problems along the way. Last May, the Securities and Exchange Commission launched an investigation into thoseย concerns.

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Sharon Kelly is an attorney and investigative reporter based in Pennsylvania. She was previously a senior correspondent at The Capitol Forum and, prior to that, she reported for The New York Times, The Guardian, The Nation, Earth Island Journal, and a variety of other print and online publications.

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