In a historic vote this morning, Mississippi state regulators slammed the brakes on the Kemper coal power plant, saying they will refuse to ask utility customers to pay anything for Kemper’s non-functional multi-billion dollar “clean coal” gasification technology and will re-designate the plant as a natural gas facility.
In a joint press release explaining their unanimous decision, the three Mississippi Public Service commissioners said they seek a solution that “eliminates ratepayer risk for unproven technology and assures no rate increase to Mississippi Power customers,” and that they want Mississippi Power, the Southern Company subsidiary that built Kemper, to consider rolling back existing rates.
“I think it’s high time we finally turn the corner on this project and also strongly protect our ratepayers, who should only have to pay for what actually delivers electricity,” said PSC chairman Brandon Presley in an interview. Presley was, until recently, the lone opponent of a bloated, runaway project that saw costs jump from $2.3 billion in 2010 when work began to $7.5 billion now.
The 2015 PSC election quickly turned into a referendum on the unpopular project. Two new commissioners were chosen, Sam Britton and Cecil Brown, both of whom promised to rein in Kemper and re-examine public support for the project, which was supposed to have gone on-line as a coal facility in the spring of 2014. Instead, the plant has run on natural gas since August 2014.
Important personnel shifts are also part of the new picture at the PSC, as longtime counsel Shawn Shurden has announced he is leaving. Meanwhile, the commissioners said at the meeting today that Frank Farmer, a special assistant state attorney general, is taking the lead on “all pre-hearing matters” regarding Kemper, according to a transcript.
The PSC’s decision on the power plant, located near DeKalb in eastern Mississippi, was hailed by consumer and environmental groups.
“I applaud the commission for doing what needed to be done, and driving a stake through the heart of this so-called clean coal project,” said Louie Miller, the Sierra Club’s statewide director. “I think this is the beginning of the end of a long nightmare for Mississippi Power customers. This is a boondoggle that should never have been built in the first place”
The PSC’s push-back came amidst warning signs that is lawyering up in prepartion for negotiations or even litigation with Southern Company. On June 6th, the commission approved lifting a $200,000 spending cap imposed by the state’s 2008 Baseload Act on hiring consultants for the panel, boosting the spending authorization to $2.5 million, though one source close to the PSC said the commission is unlikely to spend that.
The commission has retained two large national law firms – Baker Donelson and Michael Best & Friedrich – that have well-established utility practices.
The firms are working with the Public Utilities Staff, or PUS, a separate unit of lawyers, accountants and other experts established in 1990 to provide unbiased expertise to the PSC and firewall the PSC from corruption after several pay-off scandals. The PUS has already begun negotiations with Mississippi Power, hoping to reach a settlement over Kemper on the terms outlined today, according to the PSC source.
Calls to Mississippi Power’s press office were not returned. But an MPC press release characterized the PSC’s decision as providing “guidelines” for negotiation, “including the possibility of the project only operating as a natural gas-fueled combined cycle plant,” phrasing that is considerably less definite than the PSC’s own press release, which carried the bold-face headline, “Public Service Commission to Mississippi Power Company: Kemper Facility should operate using only natural gas.”
MPC noted that a formal detailed proposed order will be presented at the PSC’s July 6th meeting, and said it looked “forward to reviewing that order.”
Meanwhile, Kemper has already pushed up rates by fifteen percent, despite the failure of the small 585 megawatt facility’s proprietary gasification technology, which is supposed to turn lignite, the dirtiest but most plentiful coal in the world, into a synthetic gas for combustion in a turbine to produce electricity.
The plant was also designed to strip out carbon dioxide and pump it into a nearby oil field to force out more oil, as well as use off-gases to produce sulfuric acid for industrial sale. But without gasification, none of these expensive added technologies is working.
Called Transport Integrated Gasification, or TRIG, Kemper’s technology was developed by former Haliburton subsidiary Kellogg Brown & Root from a petrochemical industry process. But the process had never been used to gasify coal to produce power at commercial scale.
The decision leaves Southern Company in a doubly-awkward position. CEO Tom Fanning has consistently portrayed the project as moving toward inevitable success as a lignite burner, even after a company studyfound that low gas prices made it it unfeasible to operate given construction costs and operating and maintenance costs now estimated at $200 million per year. Southern originally put that number at $50 million annually.
Southern has also touted its chummy relations with state regulators in the four states in which its utility subsidiaries operate in the southeast – Alabama, Mississippi, Georgia and Florida.
But with this new regime at the Mississippi PSC threatening to up-end Kemper, and a potential similar revolt brewing in Georgia over Southern’s still-unfinished Vogtle nuclear plant following the catastrophic Westinghouse bankruptcy, those local regulatory partnerships are looking less friendly.