Mississippi Power finally had its way with the state’s Public Service Commission
On June 3, regulators granted Mississippi Power Company a certificate of public convenience and necessity to build its $2.4-billion clean coal plant in Kemper County, on which the company broke ground last week.
The approval came after extensive hearings in February, a conditional approval passed by the Commission in April, a demand for rehearing by Mississippi Power, and a later May order which eased restrictions on the plant and gave the company the option to request additional funds up to $2.88 billion. The final order also gave the company permission to charge customers for financing costs prior to construction. (See May 31 story: “MS Power to build $2.4B Kemper plant.”)
The Kemper plant is set to be operational by 2014, and will produce more than 500 megawatts of new electricity through gasifying lignite coal, which will be mined on site.
Gov. Haley Barbour and U.S. Energy Secretary Steven Chu urged the Mississippi Public Service Commission to approve the Kemper project, which will use new TRIG technology and be the first commercial-scale plant in the nation to capture 65 percent of its carbon dioxide emissions.
The company has said it plans to sell the carbon to sources that will use it for Enhanced Oil Recovery.
Betting Against Natural Gas
The Public Service Commission ruled in 2009 that the Mississippi Power Service area in southeastern Mississippi would need additional electric generation by 2014.
Solutions presented were the Kemper plant; building a much cheaper natural gas-fired power plant or purchasing gas-fired generation from existing independent power producers. Natural gas-fired generation has not traditionally been used by electric utilities for baseload demand, the minimum power utility customers are expected to require.
Because coal can be mined on site, Kemper’s fuel costs can be stabilized long-term. Mississippi Power argued that locked-in coal costs would result in much cheaper electricity for customers than reliance on volatile, high-cost natural gas.
Natural gas advocates, however, argued record supplies of gas had been found in recent years due to new shale fracturing technology, which should keep gas costs low and stable in the future.
According to Commission information obtained via public records request, if natural gas prices – which are currently $4 per million Btu – don’t reach $12 to $14 per million Btu by 2020, Mississippi Power customers will have lost out on Kemper. (See Sept. 26 story: “Forbes: Shale gas means flat prices until 2020.”)
The U.S. Energy Information Administration currently predicts that natural gas prices will be $6.64 by 2020.
Forbes recently predicted gas prices should be near $5 by 2020.
Risk to Customers
As with all public utility infrastructure, utility customers will pay for the cost of the plant over time.
However, Kemper is unique in that the Mississippi Legislature’s Baseload Act, passed in 2008, shifts much of the risk of Kemper to Mississippi Power’s 190,000 southeastern Mississippi customers and away from shareholders.
The Baseload Act gives the Commission the right to allow Mississippi Power to charge customers for plant costs regardless of whether construction is ever completed or whether Kemper ever produces electricity.
The project will more than double Mississippi Power’s assets.
Customer Rate Shock Kept Confidential
Mississippi’s three Public Service Commissioners voted on the Kemper plant without their constituents knowing how the project would affect their monthly electricity bills. (See Sept. 20 story: “Public record or corporate secrets.”)
Mississippi Power Company, led by attorney and Mississippi Ethics Commission chair Ben Stone, filed the plant’s cost impact to customers confidentially with the Public Service Commission. The Mississippi Public Utilities Staff (a state advisory agency independent of the Commission) allowed the filing to remain hidden according to their interpretation a Commission rule, which did not expressly forbid the concealment of rate impacts, despite the fact that they do not fall under the state’s category of proprietary or trade secret information.
The company said publicly rates would escalate by about a third, regardless of what type of alternative was chosen.
In Sept., the Mississippi Poultry Association said poultry plants in the Mississippi Power service area had been told by the company that their electric rates would be rising by 33 percent due to the expense of the Kemper plant. The MPA said the high rates could keep poultry jobs away from the state. (See Sept. 20 story: “Poultry association: Kemper could cost jobs in Mississippi.”)
On Dec. 7 the Commission unanimously passed a new rule that specifically prohibits concealing customer rate impacts. (See Dec. 13 story: “New law forbids hidden rate deals.”)
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