Kemper Project's early history influenced by pursuit of taxpayer and ratepayer cash

December 13, 2017

 

The settlement reached between regulators and Mississippi Power over the costs on the Kemper Project clean coal power plant could be the final chapter in the battle over the controversial $7.5 billion plant pending approval of the Mississippi Public Service Commission.

 

It's easy to forget how we got to this point. Kemper is a story of a great technological gamble by one of the nation's biggest utilities, the Southern Company, that was to be financed on the backs of ratepayers and big-shot lobbyists who made it rain with federal tax dollars in the hopes of keeping coal as a key fuel for the nation's electrical generation capability.

 

During the George W. Bush administration, the U.S. Department of Energy started the Clean Coal Power Initiative, a $2 billion, 10-year program to develop and demonstrate "clean coal technology" that would reduce pollutants such as sulfur, nitrogen and mercury and even carbon dioxide.

 

Four projects were selected in October 2004 to receive federal grants: Excelsior Energy's Mesaba Energy Project in Minnesota, the Peabody Mustang Clean Coal Project in New Mexico, the NRG Energy Limestone coal plant in Texas and a joint project of the Orlando Utilities Commission and the Southern Company. 

 

The New Mexico and Minnesota projects were never built, while the grant for the Limestone plant was a modification to an existing coal generating plant to reduce its mercury emissions.

 

The Florida plant, announced in October 2004, was to be built at the Orlando Utilities Commission's Stanton Energy Center and would be a 285 megawatt capacity demonstration project using Kellogg Brown and Root's proprietary TRIG (Transport Integrated Gasification) process that could use lower-grade coal, such as lignite, as its fuel.

 

The plant was designed to turn coal into a natural gas-like substance called synthesis gas while removing pollutants and using the syngas to fuel electricity-generating turbines.

 

In December 2006, the Southern Company announced it'd build a TRIG coal gasification power plant near Meridian and the risk shifted to 187,000 ratepayers in the service area for the Southern Company's smallest subsidiary, Mississippi Power.

 

Mississippi Power was set to receive $133 million in IRS investment tax breaks from building the plant, which was designed to capture 65 percent of the plant's carbon dioxide emissions and cost $2.4 billion. The company couldn't make the original start date of May 2014 required by the tax breaks and had to return them. 

 

Another set of IRS tax breaks, this one for $279 million, had to be returned after the plant missed an April 2016 deadline.

 

Total costs for the plant later ballooned from $2.4 billion to $7.5 billion.

 

The Orlando Utilities Commission decided not to pursue the federally-funded coal plant project near Orlando and pulled out of the project in November 2007.

 

Then-Gov. Haley Barbour played a major role in the shift of $270 million in U.S. Department of Energy funds under the Clean Coal Power Initiative thanks to his connections in Washington. On February 6, 2008, BGR lobbyist Eric Burgeson requested a meeting with Barbour, then-Secretary of Energy Samuel Bodman, then-Southern Company CEO David Ratcliffe and other officials about moving the DOE financing from the defunct Florida plant to Kemper.

 

It was little surprise that the DOE announced in May 2008 that it'd shift the clean coal grants to Kemper. Barbour had once been the chairman of the Republican National Committee and helped start a high-powered lobbying firm, BGR Group, with Ed Rodgers and Lanny Griffith in 1991.

 

The Southern Company was one of BGR's highest paying lobbying clients starting in 1999 and continuing to the present. The utility paid BGR more than $4.3 million to lobby on its behalf in Congress according to analysis of federal lobbying records. 

 

Barbour left the firm from 1993 to 1997, when he returned after his stint as chairman of the RNC. He left it again in 2003 when he decided to run for governor, with his shares in a company that once owned BGR held in a blind trust.

 

Another key plank in the Southern Company's plan came via the Mississippi Legislature. The state passed Senate Bill 2793 in the 2008 legislative session — commonly known as the Baseload Act — allowing utilities in the state to start charging customers for power plants before they generated a single kilowatt of electricity. Barbour signed the bill into law. 

 

Mississippi Power needed approval from the Mississippi Public Service Commission to proceed with building Kemper and the PSC unanimously approved the utility's request for more generation capacity in 2009. In 2010, Mississippi Power convinced the PSC to authorize an integrated coal gasification plant over a conventional natural gas-fueled plant, using natural gas projections that showed that a lignite plant would be the cheapest option.

 

That wouldn't be the end of natural gas and Kemper.

 

In August 2014, with delays and cost overruns mounting, Mississippi Power decided to fuel Kemper's electricity-generating turbines — optimized for use with syngas — on natural gas. In June of this year, the company announced that the gasifiers and associated equipment would be sidelined after numerous attempts to get them fully operational and the plant would be run as a natural gas plant that will end up costing ratepayers at least $1 billion if the PSC approves the deal between the utility and the separate Public Utilities Staff.

 

The company has already written off more than $6 billion in Kemper costs. 

 

 

 

 

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MississippiMatters is a news blog of cooperative writers, videographers and podcasters published by  The Well Writers Guild, a 501c3 devoted to mentoring Mississippi writers and to addressing uncovered or under-covered topics.  MississippiMatters focuses on offering creative "takes" on our state's culture, ideas, events and more.