Mississippi Power Co. − a wholly owned subsidiary of electric utility Southern Company (SO) – has received approval from the Mississippi Public Service Commission (:PSC) to increase customer rates by 15%. As a result Mississippi Power will be able to recover the construction cost of a new power plant in Kemper.
The new integrated gasification combined-cycle (:IGCC) plant is under construction at Kemper County and will have a capacity of 582 megawatt. Management forecasts construction costs of roughly $3.5 billion, up from $2 billion projected earlier.
Mississippi Power had requested the commission to increase the customer rate by 21% annually, in order to recover the financing cost of the new plant. But the state regulator has approved to increase the rate by only 15% for this year. However, as per the commission’s order, Mississippi Power will charge $156 million annually from its customers from 2014 through 2020.
For those customers using 1.000 kilowatt-hours of power, the commission has approved a 12% to 13% hike in rates. This would come to a $16 increase in the monthly bill from Apr 2013 onwards. Monthly bill will rise by additional 3% in 2014.
Mississippi Power – one of the four electric utilities that make up Southern Company – is engaged in providing retail and wholesale electric services to approximately 200,000 customers in 23 counties from the Gulf Coast to Meridian. It owns or has major ownership interests in six generating facilities with net dependable generating capacity of 3,166 MW.
Headquartered in Atlanta, Georgia, Southern Company is one of the largest generators of electricity in the nation, along with the likes of Exelon Corporation (EXC) and Duke Energy Corporation (DUK). Southern Company serves both regulated and competitive markets across the southeastern U.S.
Southern Company’s heavy reliance on coal-generated energy supply and a lack of meaningful contribution from renewable energy is a matter of concern. In the current age of growing emphasis on ‘environment friendly or green’ energy, the company may be forced to divert cash flows to ensure regulatory compliance, which can adversely impact profitability.
Southern Company currently carries a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one-to-three months.
In the electric utility space Brookfield Infrastructure Partners LP (BIP) displays better fundamentals and currently holds a Zacks Rank #1 (Strong Buy).
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