MISS. POWER CEO STANDS BEHIND KEMPER DESPITE COST, SCHEDULE SLIP

Tamar Hallerman
GHG Monitor
10/18/13

Despite a series of slips in cost and schedule, the President and CEO of Mississippi Power said his company’s 582 MW Kemper County gasification project, currently undergoing peak construction in eastern Mississippi, is still worth the now-$4.75 billion investment. In an interview this week with GHG Monitor, Ed Holland said the utility’s foray into large-scale carbon capture and storage technology will prove to be valuable in the long run. “Our main message is that there has to be a future for coal in this country, and we think that Kemper is the coal plant of the future,” he said.

Holland’s optimism comes as Mississippi Power’s parent organization, Southern Company, has sought to downplay Kemper’s role as a pioneering ‘clean coal’ facility amid growing attention as the Environmental Protection Agency seeks to sharply limit the carbon emissions of future coal plants by mandating CCS technology. Despite remaining the darling of the CCS community, the project has received increased scrutiny from green groups, credit ratings agencies and consumer advocates alike as concerns about cost and environmental impact grow.

But Holland said despite the growing attention and recent setbacks, optimism remains high for what’s set to be the country’s first utility-scale power generation facility with CCS. “We’re excited about the technology. We’re getting very close to the finish line where the plant will be up-and-running, and we think that it will provide low-cost, reliable energy for our customers for years to come,” Holland said. However, he took more of a wait-and-see approach when discussing whether the Southern Company subsidiary would consider CCS technology for future projects. “Certainly, with the cost overruns, we would need to examine [future decisions] very closely,” he said, adding that a larger factor would likely be the demand for baseload capacity, which he said is not expected in Mississippi Power’s service area “for some time” once Kemper comes online.

Challenges Continue

Mississippi Power has faced numerous challenges as it has moved to finish construction work at Kemper. The utility has seen ballooning capital costs at the facility—costs have increased nearly $2 billion above an initial estimate of $2.88 billion—after facing an abnormally wet summer and lower-than-planned construction labor productivity. Because of those factors, Mississippi Power confirmed earlier this month that it would not be able meet its originally-planned May 2014 in-service date. Instead, the utility said the plant likely won’t come online until “later in 2014,” but would not yet speculate on a date. “We were under a very compressed and aggressive schedule to begin with,” Holland said. “We think we could have made it absent the complications with the weather. We’re aggressively trying to catch up now.”

The utility also continues to fight long-standing legal and regulatory challenges from the local chapter of the Sierra Club; company officials will defend the prudency of their spending on Kemper during a review in front of utility regulators next year. The Sierra Club and other opponents have been pushing the Mississippi Public Service Commission to rule that Mississippi Power has been imprudent in its spending, and shift the entire cost of the facility to Southern’s shareholders, who have already absorbed nearly $1 billion in cost overruns over the last several months.

Holland defended Mississippi Power’s spending related to the project. “Certainly we think that every expenditure that we’ve made in the construction of the plant has been prudent,” he said. “We have built a quality plant, a plant that will provide low-cost-reliable energy to our customers for years to come. We have written off every dime above that which the Public Service Commission and the legislature said that the customers ought to be responsible for.” He added that Southern and Mississippi Power have made a “huge statement” by agreeing to write off nearly $990 million in order to complete the project. “You never can predict from a regulatory, judicial or legislative perspective what the outcome will be, but we feel very good about where we are in our position in those prudency hearings,” he said.