Lignite looking more like the wrong horse to have bet on
by For the MBJ
Published: June 19,2011
While the world has been championing natural gas as the savior of the energy crisis, Mississippi Power has insisted that gas prices will be high and volatile — reminiscent of 2009 — for years to come.
The 2011 Energy Outlook from the U.S. Energy Information Administration (EIA) projects that natural gas prices will stay around $5 per million Btu through the year 2022.
Why? Advancements in technology have made it possible to get natural gas from a rock called shale.
TIME Magazine recently featured a chunk of shale on its cover with the headline: “This rock could power the world.”
These predictions are bad news for Mississippi Power Company customers who will pay for the $2.4-billion Kemper County clean coal plant.
Public records obtained by the Mississippi Business Journal show that in order for customers to see a cost benefit from the plant, gas prices will have to reach the $12 – $14 per million Btu range by 2020. That’s more than twice what they are predicted to be.
Where was this information in the spring of 2010, when the state Public Service Commission gave Mississippi Power the green light to build this expensive clean coal plant?
The answer is that it was available. A year ago the EIA was predicting that gas prices would be around $6 or $7 by 2020.
The Kemper Plant in a nutshell
A study said that the Mississippi Power service area in southeastern Mississippi would need more electric generation by 2014.
Mississippi Power asked the state Public Service Commission if it could build a $2.4-billion clean coal plant in Kemper County to meet that need. The company has to ask the state for permission to build the plant, because, as always, captive power company customers have to foot the bill for utility improvements — which are essentially public works projects, not economic development projects.
The company based its request on the fact that natural gas prices had been historically high and volatile. But, ignoring information from the EIA and numerous other entities, it predicted gas prices would continue to be high in the future.
Thus, the utility argued, the alternatives — buying natural gas-generated electricity from independent power producers or building a natural gas plant themselves — would not be in the best interest of Mississippi Power’s customers. Electricity from a lignite coal plant would be cheaper, they said.
What was the rush?
Why couldn’t Mississippi Power have waited to build the plant? Say five years, even, and let customers benefit from cheap gas prices and put off paying for a multi-billion-dollar plant?
The power company stressed that its grant from the U.S. Department of Energy had a time limit. But the grant was only for $270 million, which is not that large of a chunk when you’re looking at a $2.4-billion price tag.
Rate increases that customers will bear as a result of the plant are still unknown, by the way. The Mississippi Public Utilities Staff allowed Mississippi Power to conceal them from the public.
We at least know how plant costs will affect chicken farmers in Southeast Mississippi. According to information released by the Mississippi Poultry Association, Mississippi Power informed its poultry farmer customers in September that their electric rates would be rising by more than 30 percent due to the Kemper plant.
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