Boston (Platts)--4Aug2014/339 pm EDT/1939 GMT

Mississippi Power said Monday it will convert a total of four coal-firedunits at Plant Watson and Plant Greene County to natural gas as part of a comprehensive settlement agreement it has reached with the Sierra Clubregarding the utility's integrated gasification combined-cycle project inKemper County.

Under the settlement, which must be approved by the Mississippi PublicService Commission, Mississippi Power will convert Plant Watson units 4 and 5to gas firing by April 16, 2015, and convert Plant Greene County units 1 and 2to gas firing by April 16, 2016.

The Plant Watson units have a combined capacity of 775 MW, andMississippi Power's 40% ownership interest in the Plant Greene County unitstotals 207 MW. Alabama Power, another Southern Company subsidiary, owns thebalance of Plant Greene County.

Also, the settlement gives Mississippi Power until December 31, 2018, toeither retire Plant Sweatt units 1 and 2 -- two older gas-fired units totaling94 MW -- repower them with more advanced technology, or convert them to analternative non-fossil-fuel source.

Mississippi Power spokesman Jeff Shepard said that with changesanticipated by the settlement, Mississippi Power's energy mix is expected tobe 60% powered by natural gas in 2020.

"This further illustrates the importance of the Kemper [IGCC project] -- which will use locally mined, low-cost lignite, in maintaining a diverse fuel mix for our customers," he said.

Other elements of the settlement call for Mississippi Power to"actively pursue a wind or solar power purchase agreement" and to "make ...good-faith efforts to obtain an arrangement with approximately 100 MW innameplate capacity and for a term of at least 10 years."

Mississippi Power is permitted to seek cost recovery for the PPA.

The utility also committed itself to contribute a total of $15 million toenergy efficiency programs to be implemented by the Gulf Coast CommunityFoundation. Finally, the utility agreed not to challenge net-metering rulesthat will allow for expanded use of rooftop and other solar power in itsservice territory.

In exchange, the Sierra Club agreed to drop its regulatory and legalchallenges regarding the Kemper IGCC project and the addition of scrubbers atMississippi Power's Plant Daniel.

"With this agreement, we are building a future where dirty, expensive andunnecessary projects like Kemper ... will be things of the past," said LouieMiller, state director of the Mississippi chapter of the Sierra Club. "Majornew investments in energy efficiency and clean energy will help hard-working,low-income Mississippi families better weather Kemper's cost impacts."

He added, "The Kemper plant's total cost now stands at $5.6 billion, morethan twice its original projected price of $2.4 billion for 582 MW of powergeneration. ... The Kemper County coal plant is the only coal-fired plant tobreak ground during the Obama administration, and due to the increasing costof coal and rapidly declining costs of clean energy, is likely to be the lastcoal-fired power plant ever built in the United States."

--Housley Carr, newsdesk@platts.com
--Edited by Jason Lindquist, jason.lindquist@platts.com

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