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Commissioner on Kemper plant: ‘It’s time to resolve this’

The Kemper energy facility produced syngas and made other major milestones, but Mississippi Power suspended operations on Wednesday after the Public Service Commission asked the company to operate it only with natural gas.
The Kemper energy facility produced syngas and made other major milestones, but Mississippi Power suspended operations on Wednesday after the Public Service Commission asked the company to operate it only with natural gas.

Now that Mississippi Power has announced it is stopping work to get the Kemper County plant operational on lignite coal, the clock starts ticking Thursday on a quick process to resolve the issues surrounding the energy facility.

“It’s time to resolve this,” said Sam Britton, Southern commissioner with the Public Service Commission, when he stopped by the Sun Herald on Friday. “And the intention is to resolve it in 90 days.”

In what is being called by some a historic vote, Britton and fellow commissioners Cecil Brown and Brandon Presley on June 21 basically pulled the plug on Kemper as a new technology, clean coal gasification operation. The project that’s three years behind schedule still isn’t fully operational with lignite coal, and at $7.5 billion, has far exceeded its original estimate of about $2 billion.

The commissioners came out of executive session at the June 21 meeting and said the plant should operate only on natural gas. They also said Mississippi Power and its parent Southern Co., rather than the ratepayers, should pay another $3 billion in losses for the plant — in addition to the $3 billion in costs Mississippi Power has already absorbed.

When the commissioners meet Thursday, Britton said he expects to approve an order that gives Mississippi Power 45 days to meet with Chevron, the Mississippi Public Utility staff and other parties and come up with a stipulation or agreement to solve the financial and other issues of Kemper. Once that is filed and becomes public record, he said the commission will set a hearing in 45 days, or around Aug. 20.

Britton said he and the commissioners are focused on three things the stipulation agreement should provide:

▪  Kemper should operate only on natural gas.

▪  Mississippi Power customers should be removed from bearing any of the costs associated with the gasifier and related lignite coal portion of the Kemper facility.

▪  The agreement should result in no rate increase to Mississippi Power customers and the commission encourages a rate reduction, especially for residential customers.

This proposal is a long way from the recent cost increases of $30 million or more a month.

While 45 days is an aggressive timetable — and a huge dollar amount is involved — Britton said he believes the issues can be resolved, and that all parties will be given a chance to have their say.

It won’t necessarily put an end to the Kemper saga, though. Once the commissioners vote, the ruling can be appealed and go to the state Supreme Court and possibly be overturned.

Mississippi Power already has taken action to suspend lignite coal operations, and Britton said that is a significant step.

The company also has filed WARN Act notifications that 250 people working at Kemper may be laid off.

In a filing to the Securities and Exchange Commission on Friday, Mississippi Power said carrying construction costs are more than $16 million per month and consulting and legal fees run an additional $3 million each month.

The company also kept the door open at Kemper, saying if start-up activities resume on the lignite coal portion, Mississippi Power estimates costs of $25 million to $35 million a month.

Mississippi Power did accomplish new advances at Kemper, Britton said, something many people thought would never happen. But the technology came at a high cost.

The company again cautioned its stockholders, saying that if Mississippi Power does not ultimately obtain rate recovery of the outstanding costs, the company may record a $3.4 billion loss in the second quarter.

Britton said he believes Southern Co. will step up and support Mississippi Power in resolving the issues. From June 28-30, Southern Co. made $1 billion in equity contributions to Mississippi Power to prepay $300 million of the outstanding principal amount under its $1.2 billion unsecured term loan, according to its SEC filing, to repay $591 million of the outstanding principal amount of promissory notes to Southern Co. and repay $10 million of the outstanding principal amount of bank loans.

While the resolution of Kemper may bring financial pain to the companies, it could help economic development in South Mississippi by letting companies considering a move to the area know what electric costs they can expect to pay.

“It will bring certainty,” Britton said.

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