The three-member state Public Service Commission ruled that the company has demonstrated a need to increase its capacity to generate electricity. The ruling came a month after the PSC held several days of hearings.
The next step in the process begins February 1, when the PSC will begin another round of public hearings to gather more information about the proposed lignite plant that Mississippi Power wants to open by 2014 in Kemper County, near the Alabama state line.
"The first phase was the need phase, and now the question is what meets those needs," PSC Chairman Lynn Posey said.
He said the ruling "does not guarantee that the plant is what we will determine best fits the need.
Mississippi Power, a subsidiary of Atlanta-based Southern Co., says the plant would use a new technology that converts a soft coal called lignite into a gas that would fuel turbines to create electricity. Company officials say the lignite would be locally mined and cheaper than natural gas.
The technology is known as IGCC, or Integrated Gasification Combined Cycle. Southern Co. announced in September that it would build the first IGCC plant in China, with operation expected to begin in 2011.
Mississippi Power spokeswoman Cindy Duvall said in a statement that PSC was "thorough and fair" in the first phase of hearings, and company executives look forward to presenting their case for the IGCC plant in the second phase.
"This will provide our customers with the best possible option for their electric service and the future economy of south Mississippi," Duvall said.
Mississippi Gov. Haley Barbour, in a conference call from Iraq, said the Mississippi Power proposal is "critically important" because it would use an in-state natural resource to generate electricity.
Mississippi Power is the first company trying to use a 2008 state law that allows utility companies to seek rate increases to help pay for construction of facilities before they're open. Under the old law, a company had to wait until a facility was generating power to ask the PSC to approve a rate increase.
Opponents, including the Sierra Club, said the plant north of Meridian is unnecessary and that it would be dirty and expensive. Louie Miller, the Sierra Club's executive director in Mississippi, said his group has filed legal papers asking the PSC to unseal documents showing how much bills might increase for Mississippi Power's commercial and residential customers to help pay for the plant.
"We still maintain, and I think at the end of the day the PSC will agree, this facility is not the most cost-effective way to meet that need" to generate more electricity, Miller said.
Mississippi Power has 23 generating units in south Mississippi. Six of them use coal and 17 use natural gas.
Company president Anthony Topazi told the PSC last month that natural gas prices are too unpredictable. He said the company has secured 20 years' worth of lignite mineral rights at a set price.