Kemper Plant ‘99 percent’ complete

Published 11:34 am Tuesday, October 11, 2016

By Kendra Ablaza

Mississippi Today

In rural Kemper County, about 20 miles north of Meridian, stands a tangled network of chrome and multi-colored pipeline intertwined into structures as tall as high-rise buildings.

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The next-generation coal plant built to produce electricity is under construction, but workers could not be seen from outside the massive structure, nor heard over the loud humming of the plant.

Nearby is a large dome-shaped structure that houses up to 100,000 tons of lignite, a type of coal that is softer and less energy dense than other coals found in the Appalachian Mountains but plentiful in Mississippi.

Lignite is touted by the plant’s operators for being an abundant, affordable natural resource not subject to price volatility and transportation costs associated with other fuel sources.

But after delays and cost overruns have kept the Kemper County power project more than two years behind schedule and ballooned the price tag by billions, trust in Mississippi Power Co.’s new technology is wavering in some.

In October, the unit of Atlanta-based Southern Co. said the plant will be fully operational by Nov. 30. That announcement came just two weeks after company officials told Mississippi Today that it would be powered up by Oct. 31, a claim that raised eyebrows from observers of the project, who have seen a slew a deadlines come and go over the years.

Even when the proverbial switch is flipped on, the saga of the Kemper project will not be over.

Once the plant is fully operational, the Mississippi Public Service Commission, which regulates public utilities, will begin holding a series of meetings known as prudency hearings to determine whether the utility company or its ratepayers will be responsible for the plant’s added costs over the years.

The hearings will also determine whether the plant can operate reliably and provide electricity at a reasonable cost.

The ultimate goal of those meetings is for Mississippi officials to confront a substantial question that has been on the minds of many Mississippians for years: Was building the Kemper County power plant the right decision?

At a recent public-service commission town hall meeting in Meridian, ratepayers raised concerns about the successful completion of the project and associated costs, and wondered aloud what would happen next.

The Public Service Commission said it would use its authority to protect ratepayers but cannot publicly offer their opinions about the merits of the project.

“(The plant’s legality) is not before the commission,” Cecil Brown, a Democrat who represents the Central District, said at the town hall. “Our job is to make sure if the company files a rate case with us … (ratepayers) have access to power on a reliable and efficient basis and at a reasonable cost.”

A question of prudency

Former Gov. Haley Barbour, whose lobbying firm represented Mississippi Power’s parent company, Southern Co., aggressively promoted the project that broke ground and began construction in 2010.

Under state law, the Public Service Commission is allowed to review whether expenses related to pre-construction, construction, operating and related costs associated with a generating facility were “prudently incurred” and can make these determinations as often as each calendar quarter.

The plant, which is running on natural gas, was supposed to go into full operation by May 2014. Mississippi Power Co. missed previously self-imposed deadlines due to bad weather, labor shortages, incorrect time and material estimates and other delays.

On Sept. 16, Mississippi Power spokesman Jeff Shepard told Mississippi Today the project was 99 percent complete. The plant’s latest milestones include both of its gasifiers, or devices that promote a chemical reaction that turns a solid into a gas, producing synthesis gas from lignite.

“The next step in the project is producing first electricity,” Shepard said via email. “ … We expect to reach that milestone by the end of this month (September). And the remainder of the facility is still scheduled to be placed in service by Oct. 31.”

Weeks later, the utility announced another month’s delay to that deadline plus an additional $33 million to the price tag.

Robert Wise, a utility attorney in Jackson who has been following the plant’s struggles for years, said he’s not surprised by further delays given its history.

“It’s always been the same: more delays, more expenses and more possible jeopardy to the ratepayer,” Wise said.

The attorney said the project can’t reach an end date until there has been sufficient testing, and, per a former project manager-turned-whistleblower Brett Wingo, that could be a prolonged period.

“I have no idea (how long it could take) and I wonder if Mississippi Power has any idea,” Wise said.

Since its inception, the project has drawn national attention for promising to be the first of its kind and size to operate commercially in the U.S. The utility has plans to sell the plant’s technology to other countries.

Once complete, the plant would not only produce electricity for Mississippi Power customers but also reduce carbon emissions compared to traditional coal technology, by putting carbon dioxide into a nearby pipeline system. From there, oil companies can purchase the gas to inject into fallow oil fields to bring valuable crude to the surface.

Kemper is also on track to be the most expensive power plants ever built. The project’s total cost is now about $6.9 billion, more than double the original estimate. The plant and nearby lignite coal mine were originally expected to cost $2.9 billion.

Mississippi Power’s position is that the Mississippi Public Service Commission in the late 2000s determined there is a need for a new power facility in Mississippi based on population growth, the age of existing facilities and a need for price stability when it comes to fuel costs. The utility also argues the plant’s technology will ensure customers have a reliable source of power in the event of a disaster.

According to the U.S. Department of Energy, last updated in May 2016, Mississippi consumes more energy than it produces. Also, with our long, hot summers, Mississippi’s per capita energy consumption in the top third of all states.

The plant is designed to produce 582 megawatts, or power 190,000 homes, once it starts generating electricity from lignite.

Shepard said the commission approved the Kemper project because of its potential for long-term fuel diversity and price to operate the plant while it is running on lignite.

He also said building a new baseload facility, one that has a steady fuel source (unlike wind and solar facilities, where supply fluctuates) always requires an investment.

“This facility, when operating on lignite, will protect customers over 40 to 50 years from price spikes in the commodities that we use as fuel sources: coal or natural gas,” Shepard said. “Adding a third fuel mix in there is beneficial to our customers.”

The Kemper Rollercoaster

In addition to the hearings, the public can ask the commission questions about the Kemper project’s costs and usefulness via a “discovery docket,” or electronic file on the commission’s website. According to the commission, only Mississippi Power customers may submit information requests and may receive responses related to the project through the docket.

This docket, which launched in early October, will stay open for roughly six months. The commission’s responses to those questions will be considered during the hearings.

Meanwhile, the commission also plans to post previously sealed records.

As for what the public pays, there is a $2.88 billion cap on what Mississippi Power ratepayers can pay for the plant. Any increase beyond that depend on the commission’s approval.

Rate increases have also impacted the power company’s 186,000 customers in 23 counties from the Gulf Coast to Meridian, seeming at times like a roller coaster for electricity costs.

According to Mississippi Power, the first rate increase related to the Kemper facility went into effect in April 2013. Those increased customers’ base rates by 15 percent.

In January 2014, an additional 3 percent increase was added, bringing the total rate increases related to Kemper to 18 percent.

In the summer of 2015, the commission ordered Mississippi Power to rescind the rate increases for one month.

The rate increases were wiped out for one month, then returned to 18 percent through the rest of 2015.

A Mississippi Supreme Court ruling returned the rate increase to 15 percent on a permanent basis, beginning in January 2016.

The Supreme Court also ordered refunds to the utility’s customers when it ruled that portions of rate increases imposed between April 2013 and July 2015 to pay for costs associated with the Kemper County plant were illegal.

The plant’s delays and added costs have sparked lawsuits against Mississippi Power, as well as a U.S. Securities and Exchange Commission investigation into the plant’s cost and schedule.

One of them included a six-year battle with the Sierra Club. In 2014, the Mississippi Power and the environmental advocacy group reached a multi-million-dollar settlement.

Per the settlement, Mississippi Power converted to natural gas or retired several coal-fired plants. It also set up a $15 million fund to help low income rate payers of Mississippi Power make their homes more energy efficient.

The Securities and Exchange Commission also launched an investigation in May into the rising costs of the Kemper project, examining the estimated costs of the project and the expected date that service may begin.

The Southern Co. branch said in its filing that it believes the inquiry is focused primarily on “periods subsequent to 2010 and on accounting matters, disclosure controls and procedures, and internal controls over financial reporting associated with” Kemper, the Associated Press reported.

“While we cannot predict the ultimate outcome, as we have said in our disclosures on this matter, we do not expect the investigation to have a material impact on the financial statements of either Southern Company or Mississippi Power,” Shepard said in a statement at the time.

In the meantime, Sam Britton, the lone Republican serving on the Mississippi Public Service Commission representing the Southern District, said it is Mississippi Power’s responsibility to get the plant up and operating, and follow all regulations for doing so before the commission can look into the matter.

“They have a tremendous burden on them to fulfill all these requirements,” Britton said. “… Whenever they come to us with that, we will look at that and then that is when a decision will be made.”