Abby L. Harvey
GHG Monitor
9/4/2015
Mississippi Power this week reported an additional $25 million in cost overages at the Kemper County Energy Facility in its monthly status report to the U.S. Securities and Exchange Commission. The report, which tallies costs through July 2015, attributes the extra$25 million in the total project budget to “additional resources in support of startup and commissioning activities, as well as operational readiness.” The latest overrun puts the project’s estimated price tag at $6.25 billion, well above the initial cost estimate of $2.4 billion.
The plant, once completed, will use Mississippi lignite, a low-rank brown coal, to produce electricity. It will employ a custom integrated gasification combined cycle (IGCC) system and carbon capture and storage technology to produce electricity from the coal with carbon emissions roughly equal to that of natural gas. The project’s captured CO2 will be used in enhanced oil recovery.
Regardless of the latest cost overrun, the project reportedly remains on schedule to begin operation in the first half of 2016, two years later than initially expected. “We are continuing our start-up and check-out activities and, as expected with any project, we are identifying and remediating issues along the way. In some cases, we are having equipment repaired by the original equipment manufacturer, while in other cases our engineering and construction team is implementing solutions on site. These equipment repairs are all part of the start-up process,” Jeff Shepard, Mississippi Power spokesman, said this week.
Challenge to Rate Increase Dismissed
The company got some good news this week in the form of the denial of a challenge to a requested rate increase. The Mississippi Public Service Commission (PSC) recently allowed Mississippi Power an 18 percent emergency rate increase. The emergency rate increase, which the commission could make permanent in December, would replace a rate hike overturned by the state Supreme Court in February that was intended to help fund the company’s Kemper project.
Due to the financial hardship associated with the Kemper project, and the fact that the Kemper facility, though not yet at full operation, has been supplying the surrounding community with electricity generated with natural gas, the PSC found the emergency rate increase justifiable. However, local businessman Thomas Blanton filed a motion to dismiss Mississippi Power’s initial request for permanent rate recovery. Blanton argued the request was premature as the state Supreme Court had ordered that the PSC could “fix no rate increases until the Commission is in compliance with this Court’s opinion.”
In the order denying Blanton’s motion to dismiss, the PSC said it has fully complied with the court’s instruction: “The Court specifically held, in its majority opinion, that ‘[t]he decision of this Court does not foreclose [Mississippi Power Company] from seeking recovery of its financing costs through a rate increase, as long as the laws of our state are adhered to by the Commission.’ This has been done.”
“The PSC confirmed that the company has the right to request permanent rate recovery for the assets already in service at the Kemper facility because they are, and have been, used and useful for more than a year without the company earning any permanent cost recovery,” Shepard said. “We believe the PSC’s decision to deny Mr. Blanton’s motion is supported by the evidence in the record and Mississippi law.”
Blanton has also filed a petition with the state Supreme Court requesting the emergency rate increase be overturned. In the Aug. 21 petition, Blanton again argued that the PSC is in violation of the February state Supreme Court decision. “The only basis for granting the interim rate increase is that according to Mississippi Power Company, it has a desperate need for money. The company claims it is going broke and blames its perilous financial circumstances on the Supreme Court’s decision, never taking full responsibility for its massive miscalculation regarding Kemper IGCC,” Blanton wrote.
He also noted that the Public Service Commission has yet to determine the prudence of the project, though a hearing is scheduled for Nov. 10. “This Court should direct the Public Service Commission to rescind the August 13, 2015 interim rate increase and disallow any rate increase by Mississippi Power Company until there has been a prudence finding,” Blanton argued.
