JACKSON, Miss. (AP) — A bond-rating agency downgraded Mississippi Power Co.'s debt to the lowest investment-grade level, saying the election of two new members of the state Public Service Commission "increases regulatory uncertainty."
Moody's Investors Service cut the debt rating Thursday on the unit of Atlanta-based Southern Co., its second downgrade in two months. Another downgrade would push the utility's debt into junk status. That means buyers limited to investment-grade securities couldn't buy its bonds, raising borrowing costs.
The move comes before Tuesday's hearing by current commissioners on whether Mississippi Power spent prudently on $1.1 billion in equipment at its $6.4 billion Kemper County Power plant. That includes turbines that have been generating power since last year using natural gas. Mississippi Power wants commissioners to make permanent an 18-percent emergency rate increase.
Moody's said it's concerned that Democrat Cecil Brown of Jackson and Republican Sam Britton of Laurel could be less supportive of the Kemper plant than outgoing commissioners Lynn Posey of Union Church and Steve Renfroe of Moss Point.
Brown's election makes it likely that returning commissioner Brandon Presley, a Nettleton Democrat, will become the commission's president. Presley has been a consistent critic of the Kemper plant.
"The election of two new commissioners increases regulatory uncertainty and heightens the risk that the utility will not obtain full and timely rate recovery," Michael Haggarty, an associate managing director at Moody's, said in a Thursday statement.
Current commissioners plan to vote on the 18 percent rate increase in December. Ratepayers could eventually be on the hook for as much at $4.2 billion of what Mississippi Power has spent on what it calls Plant Ratcliffe in Kemper County.
The plant is designed to gasify lignite coal, burn the gas to generate electricity and strip out byproducts including carbon dioxide. It's a key bet by Southern Co. on the future of burning coal as the federal government seeks to cut carbon dioxide emissions to combat global warming.
The plant's cost has ballooned, with its completion date pushed back repeatedly. Mississippi Power has had to borrow money from its parent company to stay afloat, and won an emergency $159 million rate increase from the commission. On Tuesday, commissioners will begin a prudency hearing to decide whether the company can keep collecting that money, examining $1.1 billion in spending by Mississippi Power on turbines, land, power lines and other costs. Mississippi Power says it should be able to collect for those costs because the Kemper plant has been generating electricity for more than a year.
"Any prolonged period without rate recovery associated with the Kemper project jeopardizes the company's ability to access the funds needed for normal business operations and for completion of the Kemper project," spokesman Jeff Shepard said in a statement. "A permanent rate solution is still needed and we will discuss that before the PSC Nov. 10. Reduced financial strength increases company borrowing costs and therefore further increases costs to customers."
The Public Utilities Staff has filed testimony questioning whether the company should be able to collect for everything it is asking. Various other opponents are also expected to question company witnesses and put on their own testimony including Hattiesburg oilman Tom Blanton, a Democrat who lost the race for the commission's Southern District seat to Britton.