JACKSON, Miss. (AP) — Fitch Ratings lowered its credit rating for Mississippi Power by one notch from A- to BBB+ Friday, saying there remain "elevated risks" of financial, regulatory and construction trouble at the $6.2 billion Kemper County power plant.
The rating agency, which had warned of the action, said its outlook for Mississippi Power is still negative, raising the risk of a second downgrade later.
Fitch left parent Southern Co. rated at A, but issued a negative outlook. The agency said the Atlanta-based utility giant is being dragged down both by Kemper problems and by issues at two additional nuclear reactors it is building at Plant Vogtle in eastern Georgia.
Mississippi Power still has an investment-grade rating, but lenders can charge higher interest rates for lower ratings. The move reflects the uncertainty swirling around Kemper, which is meant gasify soft coal and remove carbon dioxide from the emissions. The plant is a key bid to maintain the viability of burning coal to generate electricity, but has more than doubled in cost and is running behind schedule, in part because construction started before much design was complete.
"Strong credit ratings directly benefit our customers," Mississippi Power spokesman Jeff Shepard wrote in an email, repeating an earlier statement on the subject word-for-word. "The company has been, and will continue to, take important steps toward long-term rate recovery and low-cost financing for the project for the benefit of our customers."
The Mississippi Supreme Court recently voided the financing plan for Kemper, ordered $337 million that had been collected to be repaid, and ordered the Public Service Commission to roll back an 18 percent rate increase. Fitch said it was concerned about whether Mississippi Power could work out a settlement with regulators, especially in light of elections this year where some Public Service Commission candidates are running on explicit anti-Kemper platforms.
The company has filed three rate-increase plans, all of which would require customers to pay more.
The downgrade was sparked when South Mississippi Electric Power Association pulled out of a planned $600 million purchase of a share of the Kemper plant, leaving Mississippi Power with extra generation capacity that it could have to sell on the less-lucrative wholesale power market. The company also must return a $332 million deposit.
Fitch said that it wasn't sure Southern Co. would keep selling stock to bail out Mississippi Power, saying such support "will be measured and could be withheld in the absence of a constructive regulatory outcome of Mississippi Power's recent rate filings."
It also expressed concern over the new Vogtle reactors, 46 percent-owned by Georgia Power Co. That company, Southern's largest unit, has seen its share of construction costs rise from $6.1 billion to $7.5 billion. Georgia regulators predict costs will creep to $8.2 billion or more.
Like Kemper, Vogtle is a bid by Southern to keep using fuel sources other than natural gas. The company argues both Kemper and Vogtle will shield customers from volatile fossil fuel prices.