By JACK WEATHERLY
Years of construction delays and huge cost overruns at Mississippi Power Co.’s Kemper County clean-coal gasification plant have reached the breaking point, as far as state regulators are concerned.
The Mississippi Public Service Commission voted unanimously Wednesday to issue an order on July 6 giving the utility 45 days to comply with the order that would allow only the use of natural gas to operate plant – and not add to ratepayers’ burden.
That would mean that the $7.5 billion facility that has been under construction for seven years would function as plant that would have cost a fraction of the plant designed to produce synthetic gas from lignite in a nearby deposit.
The plant, which originally projected to cost $2.9 billion, was approved based on the assumption that lignite-gasified power would be cheaper in the long run than natural gas. That has not proved to be true.
Tom Fanning, chief executive and chairman of parent Southern Co., referred last August to the plant as a “dual fuel” operation, though he was adamant that gasification would be the primary fuel. The process is designed to remove most of the carbon dioxide from the synthetic gas produced. And the C02 is to be used in removal of crude oil from the ground.
The project is more than three years behind schedule.
Mississippi Power serves about 187,000 customers in 23 counties.
“We are telling the parties to get a plan and get a settlement in 45 days that does not increase rates one penny,” PSC Chairman Brandon Presley said, according to The Wall Street Journal. Presley voted against the construction of the plant, which was approved 2-1. The two other current commissioners were not in office at the time.
Mississippi Power posted a statement on its website that says:
“The Mississippi Public Service Commission today held a special meeting to discuss the Kemper County energy facility and Mississippi Power’s request to keep Kemper related customer rates stable. The PSC has kept the rates for Kemper in place.
“The Commission also established a process to address project costs and encouraged discussions among all parties to reach agreement.
“The PSC provided several guidelines to consider for the negotiations, including the possibility of the project only operating as a natural gas-fueled combined cycle plant. We expect the process for any negotiations and this new docket will be formally addressed as part of a proposed order the Commission will consider at their July 6 meeting. We look forward to reviewing the order.”
The Wall Street Journal reported Wednesday that “if Mississippi Power cannot find a way to pass on some of the remaining costs, it will face a difficult financial situation.” The paper noted that Mississippi Power’s assets exceed its liabilities by $1.2 billion.
Moody’s Investors Service, a leading credit rating firm, downgraded $800 million of Mississippi Power Co.’s debt securities in March because of continuing problems with the coal-gasification plant. The downgrade means that future credit for the power company stands to be more expensive.
The plant isn’t finished, even though Mississippi Power announced in January that it produced electricity from syngas. Engineering challenges have led to the delays and cost overruns.
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