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Despite deal, there are still Kemper-related issues to resolve for Mississippi Power

IN CHARGE: Southern District Public Service Commissioner Sam Britton, left, Northern District PSC Commissioner Brandon Presley (center) and Central District Commissioner Cecil Brown discuss the deal Tuesday that ended a nine-year battle over the Kemper Project power plant.  Photo by Steve Wilson

Mississippi regulators took a victory lap Tuesday after unanimously approving a deal that ends the nearly decade-long battle over Mississippi Power’s Kemper Project clean coal power plant.

The commissioners admit, however, that not everyone is pleased with the deal that will rewrite the plant's authorization to have it burn natural gas as it has since August 2014 and gave the company $729 million from ratepayers on capital costs for the combined cycle turbines, transmission lines and other equipment.

"This commission is closing the books on this project and bringing certainty to the ratepayers of south Mississippi who are customers of Mississippi Power Company," Northern District Commissioner and PSC chairman Brandon Presley said. "As I said on the bench, we've been working to make a silk purse out of a sow's ear and take the failures of the company and problems they didn't see coming down the line to make sure we protect ratepayers and the public interests of Mississippi.

"We've accomplished because of the hard work of the commission as a whole."

Thomas Blanton told Mississippi Matters that he'll carefully read the settlement agreement and then make a decision on whether to file a lawsuit. The Hattiesburg oilman filed a lawsuit that resulted in a 2015 state Supreme Court decision that forced the utility to pay back an 18 percent rate hike ($350 million) approved by the previous PSC to ratepayers.

"I expected them (the commission) to do this," Blanton said. "They made it look like they're trying to do their job and they're trying their best to find a middle path, which I understand that. But the ratepayers deserve better. They've (Mississippi Power) got more generating capacity than they need already, so why are you doing a capacity study after funding another plant? That should've been done first."

While the deal largely wraps up the fight over Kemper, there are still several issues in play.

As part of the deal, the company will have six months to file a report to the commission on its excess generation capacity. Adding Kemper's 661 megawatts to Mississippi Power's 3,089-megawatt generation portfolio that includes five coal and natural gas power plants gives the utility 21 percent more capacity and could lead the commission ordering the closure of some of its surplus facilities in order to save customers money.

The report will be due to the PSC by September 6. The company will also have to modify Kemper's turbines — which were designed to primarily run on a mixture of syngas and natural gas — to optimize them to run solely on natural gas.

Also, there is $18 million worth of land that won't be needed for Kemper now that it will be run as a natural gas plant. The settlement ordered the proceeds be credited to ratepayers.

Nearly all of the intervenors — Chevron, Chemours, Walmart and others — agreed to the deal, which amounts to an overly expensive natural gas plant. The irony is that Mississippi Power told regulators in 2009 that an integrated coal gasification plant would be more cost-effective because of future high natural gas prices, which never materialized.

One estimate in testimony put the price of an equivalent capacity natural gas plant at $566 million while another put the cost at $664.8 million.

Southern District Commissioner Sam Britton said the cost of Kemper as a natural gas-only plant was on the high end of cost estimates for an equivalent natural gas plant.

Under the terms of the deal, the Mississippi Power will be unable to pass on costs on the now-shuttered gasification plant to customers. The utility ceased three years of work in June in trying to get the gasifiers into a steady-state mode of operation after numerous technical and safety issues.

The $7.5 billion plant was originally designed to be fueled by lignite coal converted into synthesis gas and emit less carbon dioxide than a conventional coal plant. The plant was originally supposed to be operational by May 2014 and the company has already written off more than $6.4 billion in costs related to the gasifier

Thanks to the passage of the tax reform package championed by President Donald Trump, Mississippi Power would also reduce what it collects from customers annually to pay for Kemper from $126 million as it originally requested to $99.3 million and will end collection of various regulatory costs such as legal fees after eight years, saving its 187,000 customers in 23 coastal counties tens of millions of dollars.

The company will also receive a smaller rate of return than it ordinarily would on the plant's capital costs.

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