Regulators settle ’emotionally intense’ Kemper power plant case

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State utility regulators say they have closed their books on the most expensive public utility project in the history of the state.

The Mississippi Public Service Commission unanimously voted Tuesday to approve a proposed settlement for the beleaguered Kemper County energy facility that relieves customers of paying for the project’s multibillion coal gasification technology.

Instead, Mississippi Power customers will be charged for the plant’s natural gas which they have used since 2014. Commissioners said customers will be paying $99 million annually over a period of eight years, and this figure includes recent federal tax cuts.

Commissioner Sam Britton, who represents the commission’s southern district, called the project “complex and controversial” since its birth in 2009.

“It was an emotionally intense subject for many people,” Britton said.

Commission chairman Brandon Presley reminded the crowd at Tuesday’s meeting that he initially voted against the 582-megawatt power project. He considers this latest settlement to be the best outcome possible given the circumstances.

“We’ve endeavored from the very beginning to find a way to take failures at the company and problems that they didn’t see coming down the line to make sure we find a way to protect ratepayers,” Presley said at a news conference following the meeting. “We’ve accomplished that today.”

Mississippi Power Chairman, President and CEO Anthony Wilson said the decision is significant for the company, the state and its customers.

“It’s been a tough journey, but I believe that the stipulated agreement that was voted on here today and entered into by a multitude of parties results in a good outcome for customers,” Wilson said.

But not everyone is happy with the result.

Thomas Blanton, a Hattiesburg oil businessman who was the plaintiff in a state Supreme Court case that ordered Mississippi Power in 2015 to send refunds to its customers, said he is considering filing a lawsuit with the Mississippi Supreme Court over this agreement procedure launched by the commission in July, but is reviewing options with his attorney.

“We recognize seven good issues that we could take across to the Supreme Court,” Blanton said of the stipulation and the process the commission used to get there. “The commission doesn’t have the authority to write law. … There is no provision in the (state) code on amending a certificate. You can’t just make up your own laws.”

The decision comes after years of questions and concerns for the 582-megawatt power project.

The U.S. Department of Energy provided $407 million in financing for the Kemper plant.

When the plant was conceived, planners designed Kemper to convert lignite coal into gas— a process known as gasification — as well as to include a smaller natural-gas portion to generate electric power.

With the coal-fired, or gasifier, operations dead, the Mississippi Public Service Commission called for a settlement for about $99.3 million annually over eight years from its 187,732 customers in East and South Mississippi.

The amount will cover the natural gas portion of the Kemper County energy facility that has helped provide power for 23 counties since 2014.

The commissioners for months had encouraged an agreement between the Mississippi Public Utilities Staff and Mississippi Power that would prevent a rate increase, and possibly cause a rate decrease for Mississippi Power customers. They also insisted that Mississippi Power remove all risk from ratepayers regarding the plant’s lignite coal-related operations, and that the plant’s license be amended so the facility can only run on natural gas.

PSC

Public Service Commissioner Brandon Presley

Commission chairman Brandon Presley has said Mississippi Power customers all together have been paying $126 million annually for the Kemper plant’s natural gas services since 2015. This is just a portion of those customers’ overall utility bills each year, he said.

Yet, there could be more wrangling over the ripple effects of Kemper’s woes.

Per the public service commission’s request, the Tuesday decision would result in a payment plan that assures Mississippi Power customers do not pay anything out-of-pocket for Kemper.

Yet, this only decides a portion of Mississippi Power customers’ rates, which are set by the Public Service Commission every year using an annual performance-based review process. The commission does not make a decision on Mississippi Power customers’ overall rates until they receive a rate proposal from the company, and that is expected to take place later this year.

On Tuesday, however, Presley said Southern Co., Mississippi Power’s parent company, would be absorbing a vast majority of the $6.4 billion in project costs billed to Mississippi Power related to the plant’s coal gasifier technology.

Customers may also feel that impact through reduced services. Since boosting rates was not an option, Mississippi Power Vice President, Treasurer and Chief Financial Officer Moses Feagin said at a Public Service Commission hearing two weeks ago that the company has begun closing local offices and may deploy other cost-saving measures in the future to make up the difference.

Mississippi Power

A dragline excavator seen at Liberty Mine, adjacent to the Kemper County energy facility.

The Kemper plant broke ground and began construction in 2010 near DeKalb.

Its original plans involved never-before-used technology that would convert lignite coal, which is abundant in the region, into a synthesis gas; remove emissions, such as carbon dioxide, from the gas; and then send the “cleaned” syngas to a combined-cycle generating plant to make electricity.

On top of that, the plant’s technology was also expected to reduce carbon emissions, compared to traditional coal technology, by putting carbon dioxide into a nearby pipeline system. From there, oil companies would be able to purchase the gas to inject into fallow oil fields to bring valuable crude oil to the surface.

The plant and nearby lignite coal mine were originally expected to cost nearly $3 billion, and scheduled for full operation by May 2014. It was projected to produce 582 megawatts of electricity — a capacity to power 190,000 homes of Mississippi Power customers.

Yet, Mississippi Power Co. kept hitting snags due to bad weather, labor shortages, incorrect time and material estimates and other delays. Years of missed project deadlines and cost increases ballooned project costs to more than $7.5 billion.