US-based Mississippi Power said it might not pursue the $2.4bn Kemper County advanced coal plant after state regulators issued an order that would have capped the project's construction cost.
The Mississippi Public Service Commission ruled that the unit failed to justify the cost of the plant against its benefit to customers, reports Reuters.
The commission has, however, set several conditions to allow Mississippi Power to proceed with the 582MW integrated gasification combined-cycle (IGCC) plant.
Mississippi Power spokeswoman Cindy Duvall was quoted by Reuters as saying that PSC conditions seem to make it impossible for the utility to finance or construct the Kemper County plant.
The IGCC project had been designed to burn Mississippi lignite coal to meet future electricity demand and provide alternatives for the utility, which is planning to shut or modernise its ageing coal plants to reduce CO2 emissions.