Mississippi Power will build $2.4B Kemper plant
Update — June 3 — On June 3 the Mississippi Public Service Commission formally gave Mississippi Power Company the green light to build its $2.4 billion Kemper County clean coal plant, granting it a certificate of public convenience and necessity.
The company agreed to conditions outlined in the Commission’s May 26 order that placed financial restrictions on the plant.
Original story — On May 27, one day after the Mississippi Public Service Commission issued a new order conditionally approving the $2.4 billion Kemper County clean coal plant, Mississippi Power Company announced it would accept the conditions and build the plant.
The Commission passed an order easing the financial restrictions outlined in its April 29 order, namely raising the cost cap to $2.88 billion and agreeing to allow the company to use CWIP — or charge customers for plant financing costs before the facility provides electricity.
“After a comprehensive review of (the) order, we have determined the stringent conditions that the commission imposed will still allow us to move forward to finance and construct the plant,” said Tommy Anderson, MPC vice president of generation development, in a statement. “While this was not what was requested, we view this order as one we can accept, and it will allow us to be able to unlock the tremendous value the Kemper County IGCC Project brings to our customers.”
The company had originally asked for a price cap of $3.2 billion and requested that they be able to raise customer rates starting this year. However, CWIP, or Construction Work in Progress, won’t be permitted in rate base until 2012.
The plant is scheduled to be operational by 2014.
MPC had also requested that the Commission limit itself to quarterly prudency reviews, which would prevent the Commission from reviewing the project as a whole for cost disallowances after its completion. The Commission said quarterly reviews “would be contrary to the public interest. To determine prudence, the Commission must have sufficient perspective concerning the reasons for particular costs.” The Commission said the prudency review schedule would be determined at a later time.
MPC asked for a rehearing on May 10 after the Commission’s original, more stringent order, saying the financial conditions imposed on the plant seemed to make it impossible to build. MPC also said it would be financially irresponsible to build the plant without the CWIP allowance, because it would make the project more expensive for ratepayers. MPC needs CWIP to maintain a good credit rating so that it can have access to capital and obtain lower interest rates.
The new order still says the Commission will hold MPC accountable to its cost estimates for certain operational features, like heat rate and by-product revenues, notwithstanding variance due to natural disasters or regulation changes.
The Kemper Integrated Gasification Combined Cycle (IGCC) project will be the most expensive addition to a public utility in Mississippi history.
The plant would put Mississippi on the map as having the first U.S. power plant to capture carbon on a commercial scale.
In addition to using new technology that would burn gas made from Mississippi lignite coal for electricity production, the plant would capture 65 percent of carbon dioxide emissions.
Nationwide, the energy industry is preparing for impending government regulations that will tax companies according their carbon footprints. MPC plans to sell the captured carbon to companies who will use it for Enhanced Oil Recovery. In EOR, carbon is pumped into an oil well to extract more oil after a well has already been depleted using conventional drilling methods.
MPC is a subsidiary of Southern Company and provides retail electric service to less than 200,000 people in 23 southeastern Mississippi counties. The company also sells wholesale power to various electric power associations and co-ops in the state.
The impact that Kemper will have on customer electric bills is still unknown. Rate impact information was filed confidentially with the Commission.
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