Tamar Hallerman
GHG Monitor
06/15/12
AT KEMPER: MISSISSIPPI POWER TO ASK FOR RATE INCREASE
Mississippi Power is expected to ask the Mississippi Public Service Commission next week for a rate increase to help pay for its Kemper County carbon capture and storage project. The utility, a subsidiary of Atlanta-based Southern Company, is expected to request a rate increase of 6 percent to help offset construction costs from its 582 MW Plant Ratcliffe at a June 22 PSC meeting. If approved, the increase is expected to help the company garner $50 million from its nearly 200,000 ratepayers, though the request is roughly half of the increase initially desired by the utility. Late last fall, Mississippi Power filed a request for an 11.66 percent rate increase under the PSC’s Construction Work in Progress (CWIP) mechanism, which allows utilities to charge ratepayers for plants under construction. However, that figure has since been updated, company spokesman Jeff Shepard told GHG Monitor.
Critics of the integrated gasification combined cycle (IGCC) project called for the PSC’s three commissioners to reject the rate increase proposal, which falls under Kemper County’s previously approved $2.88 billion rate recovery cap. “This is the proverbial tip of the rate increase iceberg. This is the beginning of many rate increases,” said Louie Miller, director of the Mississippi chapter of the Sierra Club, in a conference call with reporters this week. The Sierra Club has estimated that the project will ultimately lead to a 45 percent rate increase for area consumers, but Mississippi Power said that amount will likely be closer to a 33 percent increase. “We have said and continue to say that this plant is dirty, expensive—emphasis today on expensive—and unnecessary, and the Public Service Commission needs to…step up and protect the ratepayers from getting stuck with this outrageous boondoggle,” Miller said.
Whether the Sierra Club will be able to convince at least two of Mississippi’s three PSC commissioners to oppose the request remains to be seen. Throughout the project’s lifetime, nearly every vote taken by the Commission has fallen along partisan lines—Republicans Leonard Bentz and Lynn Posey have remained strong supporters of Plant Ratcliffe, while lone Democrat Brandon Presley has been a vocal opponent. Most recently, Bentz and Posey voted this spring to maintain the project’s $2.88 billion rate recovery cap after a legal challenge from the Sierra Club was unanimously backed by the state Supreme Court. Overall, Miller acknowledged that winning over the support of Commissioners Bentz or Posey will likely be a challenge. “We’re hopeful that the light bulb will go off in one of the two Commissioners [heads] and that they will come to the conclusion that they stayed with Mississippi Power as long as they could, that they were mislead and that there are better ways to look at this. We haven’t seen any signs of that happening, obviously,” he said.
Project More than $360 Million Over Budget
The PSC meeting will come two weeks after Mississippi Power publically revised the project cost estimate to $2.76 billion, roughly 15 percent above its initial $2.4 billion projection. The utility said it reported the revised estimate to URS Corp., the firm hired by the Mississippi PSC to independently monitor the plant’s construction, last month. That change puts the utility within $110 million of the $2.88 billion rate recovery cap previously approved by the commission. In a company release issued June 8, Mississippi Power said that despite the increase, construction is moving forward on schedule and that the plant is roughly 31 percent complete.
The utility said it does not expect the new cost estimate to increase costs for its ratepayers. “Mississippi Power will deliver additional economic value for the project from increased byproduct sales, such as CO2, and savings from lower financing costs. Because of these benefits to customers, the new estimate will not increase the rate impact of Kemper,” the company said. Shepard, the company spokesman, said the utility is “committed” to keeping costs contained. “Mississippi Power is committed to bringing the plant on line, within the cost cap, to provide clean, safe and reliable energy for our customers,” he said.
Miller said that cost estimate increase is indicative of why the PSC should block more public funding from going towards the project. “This certainly is something that the Sierra Club has warned the Public Service Commission about in regard to [Plant Ratcliffe], and this is the exact scenario that we were very concerned about happening. Certainly we’re on a crash course here to blow the budget considering the project is only 31 percent complete. This does not bode well for the ratepayers of Mississippi Power,” Miller said. He likened the Kemper County project to Duke Energy Indiana’s Edwardsport IGCC plant, which is expected to come online this fall but is roughly $1.3 billion over budget.
The IGCC project has been under construction in the eastern portion of the state for the last two years and is expected to come online in spring 2014. It is the furthest-along large-scale CCS 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 CWIP funds are necessary to keep the project moving forward. Plant Ratcliffe 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. It plans on selling its captured CO2 for enhanced oil recovery operations in the area.
