S&P puts Southern on watch

Standard & Poor's said it placed the ratings on Southern Co., including its A issuer credit rating, on CreditWatch with negative implications.

The agency also said it placed the ratings on Southern's utility subsidiaries, Mississippi Power Co., Georgia Power Co., Alabama Power Co. and Gulf Power Co. on CreditWatch with negative implications, including their A issuer credit ratings.

The Mississippi regulators issued an order July 7 directing Mississippi Power to submit a plan for lowering rates and refunding to ratepayers up to an estimated $350 million collected over the past few years to begin to pay for the 582 megawatt Kemper County integrated coal gasification combined cycle electric generating plant, which now is nearing completion, S&P said.

The negative watch reflects the deteriorating regulatory relationship with the company and commission and raises the probability of lower ratings if the company is required to fully roll back that rate increase and make full, immediate refunds, the agency said.

An extended period of lower rates combined with sizable refunds would dramatically inflate the size of subsequent rate increases needed for Kemper cost recovery, which would put pressure on the company to disallow further costs, S&P added.

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