After an attempt to keep updated natural gas price forecasts out of the upcoming Public Service Commission hearings regarding the proposed Kemper County coal plant, Mississippi Power Company filed the data confidentially with the Commission.
In a November motion MPC said that the Commission’s request for additional natural gas price forecasts for the February resource hearings was vague and unnecessary since the company had already submitted price scenarios. No response from the Commission was filed publicly. MPC submitted the data confidentially for proprietary reasons on the Dec. 7 deadline.
The first round of hearings for MPC’s proposed $2.4 billion Kemper County lignite coal plant took place in October, and a second round of resource hearings regarding the plant will begin in February.
The PSC decided in a Nov. 9 vote that MPC had proven a need for additional baseload energy generation by 2014, in the company’s service area of 23 counties in southeastern Mississippi. Baseload generation is the amount of power needed to meet a region’s continuous energy demand. Nationwide, energy from coal and nuclear energy are traditionally used for baseload generation.
MPC’s main argument for the plant has been the volatility and high prices of natural gas, which would be the alternative fuel to coal. MPC argues that the Kemper plant would save its customers in the long run through the low cost of lignite coal, which will have lower and more stable costs for the future. Lignite is also on site at the plant which would eliminate transportation costs.
But the gas market has changed dramatically in the past few years due to new technology enabling natural gas to be drilled from rock called shale. U.S. natural gas reserves and supplies are at record highs, and, despite historic volatility, many experts forecast low prices for the next 25 years.
Utilities such as Progress Energy in North Carolina are replacing coal-fired units with natural gas-fired facilities. Entergy Louisiana just stopped construction on a project converting an existing natural gas plant to a coal-burning plant, at a cost to rate payers of $208 million.
“I can’t tell you why Entergy did what it did,” said Thomas Anderson, MPC vice president of Generation Development in an interview. We do “what is in the best interest of our customers,” he said.
Utilities need an energy generation mix, and different utilities have different load factors, Anderson said. “I would not expect every utility to come up with the same answer,” he said.
MPC is not “anti natural gas,” Anderson said. MPC actively purchases natural gas daily on the market but doesn’t want a “disproportionate amount of natural gas in (its) mix.”
The federal Energy Information Administration released its updated natural gas forecast yesterday (Dec. 14) which doesn’t have the average daily market price of natural gas reaching $8 per million Btu until 2030. While prices reached more than $9 per million Btu in 2000, the nation is currently experiencing the lowest prices in seven years with prices below $4 per million Btu.
Phase II of the hearings will focus on the economics of the proposed plant as well as other solutions to the energy need, such as generation from independent power producers (IPPs) or other technologies. IPPs intervening in the hearings are KGen Power, Entegra, Magnolia Energy LP and Calpine.
The Baseload Act, passed by the state Legislature in 2008, would allow the PSC to permit MPC to raise customers’ rates to pay for the plant’s financing costs. This Construction Work in Progress “pre-pay” system has been used in other states for utilities building pricey nuclear or coal-burning facilities. As with any utility baseload plant, the remaining cost of the plant would eventually be recouped through customer rates as well.