Clean Coal Officially Dead in Mississippi as Southern Company Battered by Kemper Fall-Out

Clean coal officially died in Mississippi today as state regulators voted unanimously to issue an official order denying further money for the Kemper coal plant and beginning a settlement process with its builder, Southern Company.

The order provides a legal framework for the state Public Service Commission’s June 21st vote proposing the plant continue to operate on natural gas, as it has since August 2014, instead of spending additional money to try to use Kemper’s non-functional multi-billion dollar gasifier to generate power from lignite coal.

“The commission today is taking firm steps towards resolving all substantive matters associated with the Kemper Project,” says the 35-page PSC order.

The order gives Southern Company subsidiary Mississippi Power, the plant’s owner, 45 days to reach a settlement with the commission about Kemper’s future, followed by a 45-day open comment period and then a final vote by the PSC.

Sources close to the PSC said negotiations are already well along, and Public Utilities Staff Executive Director Virden Jones told the Associated Press he believes the utility is open to an agreement along the lines laid out in today’s order. But should negotiations fail, the PSC warned Southern that it could issue an order to show cause “which could potentially result in the revocation of the Kemper Project certificate,” which would mean the plant could no longer legally operate.

That order very closely followed the PSC’s proposal of last month freezing rates with the understanding that a rollback may be necessary to remove any impact on consumers from some $4.3 billion spent on the coal side of the power plant and a temporary rate increase passed in 2015 to support the natural gas-powered combined cycle equipment which produces electricity.

Officials from Mississippi Power, Southern Company and the North American Coal Corporation,which operates the now-useless lignite mine adjacent to the 582-megawatt power plant, jammed today’s PSC meeting in the state capital of Jackson, taking up most of the seats in the room, according to participants.

Southern has good reason to be vigilant – and worried.

For one, Southern announced it has given Mississippi Power a $1 billion cash infusion to offset money lost on the plant,  which is an extremely complicated piece of engineering designed to gasify coal in a reactor, then capture and store carbon dioxide from the inexpensive but dirty brown lignite and spin off other waste products into industrial-grade sulfuric acid.

For another, the Kemper fiasco, combined with the bankruptcy of the builder of its Vogtle nuclear plant in Georgia, has driven down Southern’s stock price by 7 percent over the last two weeks, wiping out $3.7 billion of the company’s value.

Mississippi oil man Thomas Blanton, who sued and got the state Supreme Court to order a rebate of a large rate increase that was to help pay for Kemper, blamed the company’s current plight on “arrogance.” He warned that “the really hard work has to be done over the next 90 days, which is reducing this whole deal to writing in order to protect the consumers from the horrible mistake that Kemper represents.”

Sierra Club state director Louie Miller praised the PSC’s “strong leadership.”

“I can’t say enough about how these three commissioners put a bullet in the head of Southern Company’s big bet gone bad,” said Miller, referring to the company-authored book Big Bets, a history of Southern that stresses the energy giant’s vaunted willingness to take risks on giant infrastructure projects like Kemper and Vogtle.

But the fact that Southern issued a notice that it was suspending further attempts to operate Kemper’s gasifier just days after the PSC’s June 21st initial decision to deny it funding led one source close to the PSC to suggest that Southern may have welcomed the forced conclusion to the endless money-losing saga of Kemper as a way to save face with investors.

Posted by Dan Zegart