AT THE MAJOR CCS PROJECTS: KEMPER

Tamar Hallerman
GHG Monitor
08/03/12

AT KEMPER: MISS. SUPREME COURT DENIES RATE INCREASE TO PAY FOR CONSTRUCTION

The Mississippi Supreme Court this week unanimously denied a request from Mississippi Power to temporarily raise electricity rates to help pay for the construction of its 582 MW Kemper County integrated gasification combined cycle plant. In an 8-0 ruling, the state’s high court rebuffed an attempt by the Southern Company subsidiary to charge interim rates to its nearly 200,000 customers while the same court hears the utility’s appeal case questioning a ruling from the state’s public service commission denying the $2.88 billion project a rate increase until a pending case against the project from the Sierra Club is resolved. The court, though, said it would expedite Mississippi Power’s appeal, which is required under the state’s constitution. Mississippi Power Spokesman Jeff Shepard said that the move could translate to higher rates down the road for its customers due to higher interest costs. “We anxiously await the Court’s decision on our appeal,” he said in a statement. “Our goal, as always, is to do what is in the best interest of our customers while maintaining reliable and safe electric service.”

The Sierra Club, which is challenging the plant’s rate recovery level in court, said it supports this week’s Supreme Court ruling. “This is a great victory for the ratepayers and another nail in the coffin of an awful business decision by Mississippi Power to build the Kemper boondoggle,” said Louie Miller, director of the Mississippi chapter of the Sierra Club, in a statement. “$454 million over budget and rising and less than a third complete with no guarantee from Mississippi Power that it will work on day one—it’s clear that this plant is an unmitigated disaster. It’s high time to pull the plug on Kemper.”

Latest Legal Setback for Kemper

The ruling is the latest legal setback for the project, which has faced quite a few political and regulatory hurdles in the past several months. Last month, the PSC unanimously ruled to deny the utility a requested six-month rate hike for its customers that was expected to pull in $55 million to help pay for project construction, which is expected to be complete in spring 2014. The utility, in the meantime, sought to charge its customers a smaller increase, which is legal under a state statute.

The IGCC project—also known as Plant Ratcliffe—has been under construction in eastern Mississippi for the last two years and is expected to capture 65 percent of its CO2 emissions. It is the furthest-along large-scale carbon capture and storage project for power generation in the Department of Energy’s demonstration project portfolio. Mississippi Power said that it has spent more than $1.1 billion on construction to date and confirmed contracts for an extra $1.5 billion, and that the rate increase is necessary to keep the project moving forward. The Kemper County project has garnered nearly $700 million in government grants, tax incentives and loan guarantees—including $270 million in funding under the Department of Energy’s Clean Coal Power Initiative and $133 million in federal investment tax credits. It plans on selling its captured CO2 for enhanced oil recovery operations in the area.

The Kemper County project is continuing to sink Mississippi Power’s credit rating as cost estimates spiral. Last month it was revealed that at nearly one-third complete, the Kemper project has already hit its $2.88 billion cost cap. The credit rating agencies Fitch Ratings and Moody’s Investors Service said that they were respectively downgrading and mulling a downgrade of the utility’s credit ratings due to those uncertainties surrounding project financing.