SIERRA CLUB AIMS TO PROVE KEMPER SPENDING IMPRUDENT

Tamar Hallerman
GHG Monitor
9/6/13

The Sierra Club said this week that the most recent status report filed by Mississippi Power to state regulators indicates that the utility will not be able reach its projected in-service date for its troubled Kemper County carbon capture and storage facility. The environmental group also said that the 582 MW integrated gasification combined cycle project is on track to become the country’s costliest electric generating plant on a per-megawatt basis and that the Kemper plant will likely top $5 billion in capital costs. “As Mississippi Power executives ask the Public Service Commission for nearly $3 billion dollars in ratepayer funds, no questions asked, they file another status report showing the Kemper plant is now days away from hitting five billion dollars in costs,” Director of the Mississippi Sierra Club Louie Miller said in a statement. “The Kemper boondoggle is now the most expensive power plant in the country, and Mississippi ratepayers are being charged for its costs before it ever produces a single watt of electricity.”

Miller pointed to the Southern Company subsidiary’s most recent monthly filing to the Mississippi Public Service Commission (PSC), which details the status of construction work on the IGCC facility through July. The status report estimates that with 81 percent of plant costs confirmed, the project’s capital costs are expected to total $4.75 billion, including the cost of the power plant, CO2 pipeline and lignite coal mine. “Mississippi Power plans to meet the May 2014 in-service date; however, the Company could experience schedule delays associated with construction and startup activities for this first-of-a-kind technology,” according to the filing, submitted to the PSC late last week.

Prudency Review Imminent

The Sierra Club’s comments come as the PSC begins accepting preliminary filings related to a spending prudency review, expected to be held in the coming months. Project opponents want the PSC to rule that Mississippi Power has not been prudent in its spending related to Kemper and shift the entire cost of the facility to Southern’s shareholders, which over the last several months have shouldered nearly $1 billion in cost overruns tied to the facility. Under a current settlement agreement, Mississippi Power’s nearly 200,000 ratepayers are required to cover $2.4 billion of Kemper’s capital costs. The utility can also issue an additional $1 billion in bonds to cover construction and financing costs. Any additional overruns, though, must be absorbed by Southern’s shareholders.

Mississippi Power spokesman Jeff Shepard said the utility will not be asking its ratepayers to cover the entirety of the project’s capital costs. “Contrary to continued false claims by Sierra Club, our customers will not pay anything more than the limit established through regulatory and legislative action,” he said. “Our sole focus is to safely bring the Kemper facility online and to continue delivering clean, safe, reliable and affordable energy for our customers.” Shepard said the project’s planned May 2014 completion date still remains “achievable” but that “we could experience schedule delays due to a number of factors.”

Southern is racing to meet the May 2014 deadline in order to take advantage of $133 million worth of federal investment tax credits that expire at the end of that month. The Atlanta-based utility had added an overnight shift of construction workers earlier this spring to help meet that deadline, but an April report from the project’s independent monitor, Burns and Roe Enterprises, Inc., concluded that Kemper likely won’t meet that in-service date due to late deliveries of construction materials, shortages of craft labor and “loss of productivity” due to the extended work hours.

All eyes, though, are now on the PSC to see if its prudency review could drastically delay Kemper’s schedule or alter its balance sheet. Even more closely watched is newly-minted PSC Commissioner Steve Renfroe and whether he will be supportive of the Kemper facility. Mississippi Governor Phil Bryant (R) appointed Renfroe, a former Chevron lobbyist, earlier this week to fill the open seat on the Commission vacated by Republican Leonard Bentz last month. Bentz, along with fellow Republican member Lynn Posey, had been a frequent and vocal supporter of Kemper, often overriding the lone Democrat on the PSC, Brandon Presley. The Associated Press reported that Renfroe is still undecided about Kemper. “The idea of being fair and considering all of the issues and pinpointing the best solution is what I’m committed to,” Renfroe told the AP this week regarding the IGCC facility. Miller said Renfroe needs to “lead a thorough investigation of Kemper costs.” “There should be no presumption in favor of Mississippi Power at the expense of ratepayers,” Miller added.

Kemper is expected to become the nation’s first large-scale power generation plant to install and operate CCS technology, with the help of a $270 million DOE grant. Southern plans on capturing 65 percent of CO2 emissions from the lignite-fired facility and transporting that 3.5 million tonnes of CO2 via Denbury Resource’s existing Green Pipeline to a depleted oil field owned by the oil and gas giant south of Houston for enhanced oil recovery operations.