Mississippi Power can’t flip switch on Kemper Project until 2015

By Steve Wilson | Mississippi Watchdog

The Kemper Project clean coal power plant won’t start up on time and Mississippi Power’s parent firm, the Southern Company, will be on the hook for added construction costs.

The opening of the oft-delayed experimental power plant in Mississippi was delayed until 2015, the Southern Company said in a filing with the Securities and Exchange Commission released Tuesday.

The company will take a $380 million charge before taxes against its income in the first quarter of 2014. With the additional costs, the plant, mine and associated drag line is expected to cost more than $5.53 billion, making it one of the most expensive power plants per kilowatt in the country.

The facility’s original cost when construction was approved in 2010 was $2.4 billion and it’s already a year behind schedule.

The Southern Company blames an additional $61 million in charges for the 582-megawatt integrated coal gasification power plant on weather, labor costs, productivity, shortages of equipment and materials and start-up activities.

The plant was originally scheduled to become fully operational in the fourth quarter of this year. The delay in the start-up date will cost the company an additional $135 million. The company will run the turbines off natural gas starting this summer.

Last week, prudency hearings in front of the Mississippi Public Service Commission, the state’s governing body for utilities, were delayed from May until August at the earliest. The Mississippi Public Utilities Staff, an organization separate from the elected three-commissioner PSC, filed a motion to postpone the hearings due to the appeals before the Supreme Court by the Sierra Club and Thomas A. Blanton. The motion was accepted by the PSC.

“How do you start charging for a plant before it was deemed prudent?” said Louie Miller, state director of the Mississippi Sierra Club. “I think the tide is turning here on Kemper. None of this passes the smell test. The PSC is supposed to be a watchdog, not a lapdog. For the staff to take this step speaks volumes.”

To charge customers for the plant, Mississippi Power has to prove before the PSC in the prudency hearings it has spent money wisely.

The Mississippi Supreme Court asked the PSC some tough questions about the approval process for the plant, ongoing since construction for the plant was approved in 2010. All nine justices voted in favor of the questions.

“The court is feeling its oats and really stepping up,” Miller said. “The chickens are coming home to roost because the PSC made it up as they went along. The court is basically asking ‘How did you get to where you are now?’”

Mississippi Power, by virtue of an agreement reached last year with the PSC, can only recover $3.8 billion of its costs from its nearly 187,000 customers through rate increases and the sale of bonds. The Legislature passed a $1 billion bond issue for the company last year. Ratepayers have already been saddled with an 18-percent rate increase for the plant.

Kemper is designed to convert lignite coal into syngas, which is a natural gas-like substance, to fire the turbines and produce electricity. The plant is designed to capture at least 65 percent of the carbon dioxide from the gas stream. It would be only the second IGCC power plant in the nation, besides Duke Energy’s trouble-plagued Edwardsport facility in Indiana.

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