By JACK WEATHERLY
Mississippi Power Co. and its parent, the Southern Co., issued a statement Wednesday saying that the coal-gasification operations at the Kemper County power plant will be suspended and natural-gas operations would continue.
The statement came as a Mississippi Public Service Commission hearing approaches on Thursday, July 6, to determine the future of the project that is years behind its original completion schedule and billions of dollars over its initial expected cost.
PSC Chairman Brandon Presley made the July 6 hearing sound like an ultimatum. “We are telling the parties to get a plan and get a settlement ready that does not increase rates one penny,” Presley was quoted as saying.
Presley said in an interview on Thursday that “it appears that the company heard the commission, loud and clear. I’m very confident now that we’re going to get a settlement in 45 days” from the issuance of the order.
A successful settlement, Presley said, would entail: 1.) the plant relicensed as a natural gas facility; 2.) that there there be no rate increases from where they stand today; and 3.) that customers not be responsible for any costs related to coal gasification.
At stake is $3.4 billion in the plant’s coal gasificati0n cost, which the PSC has not included in the utility’s retail and wholesale rates, Mississippi Power said in a filing Wednesday with the federal Securities and Exchange Commission.
Those costs include $2.5 billion for gasifiers and gas clean-up facilities as well as for lignite mine and carbon dioxide pipeline facilities, and other items.
It notes that if the PSC does not allow the $3.4 billion, the company and its parent would have to take a charge to income for the second quarter of 2017.
The commission voted on June 21 to hold the hearing to take up an order that will give Mississippi Power 45 days from that date to comply. It would allow only the use of natural gas to operate the plant. Mississippi Power serves nearly 190,000 customers in 23 counties.
The companies said on Wednesday that the plant will continue to produce electricity using natural gas, as it has since August 2014, the companies said.
“In light of the uncertainty as to the future of the gasifier portion of the Kemper [Integrated Coal Gasification Combined Cycle project], Mississippi Power believes it is proper and prudent to engage in an orderly suspension to preserve workforce safety and health, while still retaining the necessary workforce and abiliity to run the combined cycle units,” Mississippi Power said in a filing with Securities and Exchange Commission on Wednesday.
The utility also said that its decision was “a prudent step to manage costs in light of the current circumstances.”
The facility, whose current cost has risen to $7.5 billion, compared with the original projection of $2.9 billion, that was based on the assumption that gasifying lignite, a soft coal in a formation that could fuel decades of operation and allow control of that cost, compared with natural gas.
The expectation was the synthetic gas would be cheaper in the long run than natural gas, and equally clean due to the removal of most of the carbon dioxide, which would be sold to explorers to aid in extraction of oil.
That assumption has not proved to be true, as the nation is awash in natural gas, pushing down long-term prices thanks to the technological breakthrough called hydraulic fracturing, or fracking.