Mississippi Power executives were more concerned with “financial (and) accounting considerations (such as tax benefits) and less on the day-to-day management” of the company’s controversial Kemper energy project, an expert told the Mississippi Public Commission in testimony last week.
Don Grace, an accountant and subcontractor working for the Public Utilities Staff, told the MPC that Mississippi Power invested in only “minimal design” to determine its original cost estimates and operating schedule. The resulting cost overruns and construction delays will likely delay Kemper’s startup date in the second quarter of 2016, resulting in possible rate hikes and the loss of more federal tax breaks, Grace said.
The $6.267 billion “clean-coal” power plant is already two years behind schedule and billions over budget.
Mississippi Power spokesman Jeff Shepard told Mississippi Watchdog the company insists the plant would be in service in the first half of 2016, likely after April 19.
At the center of the controversy is the Kemper Project’s gasifier, a sophisticated plant which converts lignite coal into a natural gas-like substance called synthesis gas to burn in Kemper’s electricity-generating turbines.
Without that gasifier, the plant’s carbon capture system — which is supposed to scrub 65 percent of the carbon dioxide from the synthesis gas stream — will not work. If the gasifier and its carbon capture system don’t come online by April 19, the utility will have to pay back more than $234 million in IRS investment tax credits.
The combined cycle plant, which is composed of the electricity-generating turbines, has been operational since August 2014 on natural gas. Grace said in his testimony since the combined cycle was optimized for synthesis gas, made from lignite, rather than natural gas, the fuel costs compared with three other combined cycle plants running on natural gas was 10 percent higher. Grace said if the gasifier never goes into service, the PSC might need to revisit rate increases to cover spending on the combined cycle plant since several components were designed to function with the gasifier and would no longer be useful without it.
The PSC in August approved Mississippi Power’s request for a $159 million emergency rate increase — an 18 percent increase that was the same amount as the one overturned by the Mississippi Supreme Court — to cover costs on the combined cycle. The company said it would run out of money in November if an emergency rate increase wasn’t granted after its previous 18 percent increase was thrown out by the Mississippi Supreme Court.
The PSC will hold a hearing Nov. 10 for permanent rates on the combined cycle and other working plant assets and will issue a ruling by Dec. 8.
Thomas Blanton, the Democratic candidate for the Southern District PSC seat, filed a lawsuit that resulted in the Mississippi Supreme Court ordering the company to refund $350 million in rate increases to help fund Kemper construction.
The court ruled the company could not collect rate increases before the PSC decides, in a prudency hearing, whether the spending on construction was justified. If the commission rules the utility’s spending was justified, it could then pass costs on to customers via rate increases.