AT THE MAJOR CCS PROJECTS: KEMPER

Tamar Hallerman
GHG Monitor
09/21/12

AT KEMPER: LOCAL COURT HEARS ARGUMENTS OVER PLANT CERTIFICATE

A Mississippi court heard oral arguments late last week regarding the financial future of a carbon capture and storage facility under construction in the eastern portion of the state. Lawyers for Mississippi Power, the Southern Company-owned utility constructing the 582 MW Kemper County integrated gasification combined cycle plant with CCS, and the state chapter of the Sierra Club, which has fought vehemently against the facility, argued for four hours Sept. 14 in chancery court about whether the Mississippi Public Service Commission’s reissuing of $2.88 billion in rate recovery for the project in April without hearing new evidence was legal.

An attorney for the Sierra Club argued that the economics for the plant are no longer valid given the cheap price of natural gas. He said that the PSC’s revalidation of rate recovery earlier this spring was illegal and that the court should revoke the project’s certificate. “As we’ve said from day one, this plant is dirty, expensive and unnecessary and we continue to maintain that the public service commission is bound by state law to find the cheapest and most reliable form of baseload power generation, and that Kemper is neither by a country mile,” Mississippi Sierra Club Director Louie Miller told GHG Monitor earlier this week. He added that Mississippi Power should pick up the tab for Kemper if it wants to build a coal plant. 

Meanwhile, a lawyer for Mississippi Power argued that the Kemper County facility has become caught up in the Sierra Club’s efforts to kill coal-fired power generation and that the source is the cheapest and most reliable source of electricity for its nearly 200,000 ratepayers. The utility added that it would be “cost prohibitive” to halt construction and shift to natural gas generation for the facility, as the Sierra Club has suggested, and that its certificate is valid. “Mississippi Power is confident in the case presented [Sept. 14],” Mississippi Power spokesman Jeff Shepard said in an e-mailed statement. “The Commission’s decision [for reissuing rate recovery] was strongly supported by the evidence presented, which included tremendous details, facts and figures. … We believe the Commission is well aware of every aspect of this project and did not think that additional testimony or further hearings were necessary.”

Mississippi Power Continues with Construction

In the meantime, Mississippi Power is moving ahead with construction of the $2.88 billion facility, but cannot raise rates on its customers to help pay for the plant—allowed under the state’s Construction Work in Progress program—until this legal challenge from the Sierra Club is resolved. The utility said it eventually plans on raising rates by roughly 33 percent to pay for the project, which will capture 65 percent of emissions and pipe the CO2 to nearby depleted oil fields for enhanced oil recovery operations. The judge hearing the case did not indicate how he would rule, but a verdict is expected within the next several weeks, according to local media reports.

Mississippi Power also said late last week that construction at the Kemper site has hit its halfway mark with the installation of a section of its gasifer, which will help convert the lignite coal mined next to the facility into syngas. “Installation of the gasifier marks a pivotal point in the construction phase of our project and the advancement of 21st century coal technology,” Mississippi Power Vice President of Generation Development Tommy Anderson said in a statement. The utility said that by the time a ruling is made by the chancery court within the next month, the plant’s construction will likely be 70 percent complete and that the company would have spent roughly $2 billion on construction, making it critical for the utility to be able to start collecting some extra money from its ratepayers. The plant is expected to come online in May 2014.

Miller questioned the progress of the facility and said that Mississippi Power is providing misinformation about how far along the project is. “They were saying this plant would be 70 percent complete by the end of the month, which is complete, unadulterated misinformation, a blatant lie is what it is,” Miller said. He said reports from the project’s independent construction monitor, URS Corp., indicate that the utility is closer to 32 percent complete on construction. “There’s a long way to go when you’re 32 percent complete. There’s plenty of room for this thing to spiral completely out of control, and that’s what we’re saying. Look at what’s happening with Duke its Edwardsport, Ind., IGCC plant. They’re more than $1.2 billion over budget, and I certainly expect [Kemper] to go to that length, if not further,” Miller said. The most recent official cost estimates for Kemper have indicated that the facility is nearly $500 million over budget and that it is nearing its $2.88 billion cost cap.