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Lawsuit alleges fraud over ‘goliath’ Kemper Project power plant

By   /   March 3, 2016  /   News  /   No Comments

 

Photo by Mississippi Power

TURBINE POWER: The combined cycle plant is in the foreground, with the heat recovery steam generator smoke stacks looming behind it.

Mississippi’s Kemper Project integrated coal gasification power plant hasn’t generated any power off its primary fuel, but it has generated one thing in bunches: lawsuits.

The latest was filed Wednesday in Harrison County Circuit Court by three plaintiffs — a Biloxi seafood processing firm, Island View Casino and a Gulfport resident — alleging Mississippi Power Co. damaged its estimated 186,000 ratepayers by avoiding accountability for “fraud and mismanagement while fleecing the public in the interest of profits” in building the “goliath” Kemper Project power plant.

The suit also says the plaintiffs are not seeking to change the utility’s rates. The plaintiffs, represented by local attorney Joe Sam Owen and California attorney Michael Avenatti, are seeking economic losses, punitive damages, attorney fees and court costs.

“We are aware of the suit filed and believe it’s without merit and baseless,” said Mississippi Power spokesman Jeff Shepard. “It’s unfortunate that others are attempting to discredit Mississippi Power with no legitimate grounds. The company will defend itself in this lawsuit.”

Related: Kemper Project cost estimate increases by $7.3 million in January

The cost of the plant has ballooned to more than $6.644 billion, from an original estimate of $1.8 billion in 2006. Designed to turn lignite coal into a natural gas-like substance called synthesis gas, it also is years behind schedule.  It has been running on natural gas since August 2014 and is scheduled to be operational generating power on synthesis gas, according to the company, in the third quarter of this year.

There have been several rate increases approved by the PSC to help fund the plant’s construction, including an 18 percent hike in 2013 that was later thrown out by the Mississippi Supreme Court, and an 18 percent “emergency” rate increase to replace the disallowed one that was cut to 15 percent last year, to help pay for the plant’s turbines, which are generating power on natural gas.

This is the third lawsuit filed against Mississippi Power concerning the Kemper Project, and it takes a different legal avenue than the others.

The Sierra Club filed suit in 2010 over the certificate of convenience and necessity, which was the Mississippi Public Service Commission’s go-ahead to the utility to build and operate the Kemper Project. The Mississippi Supreme Court later threw out the first certificate and a new one in 2012 with a $2.88 billion cost cap was approved by the PSC. The Sierra Club and Mississippi Power settled their lawsuit in 2014.

Related: Former manager: Southern Company lied about Kemper schedule

Hattiesburg businessman Thomas Blanton filed suit against Mississippi Power in 2012 over the company’s Kemper-related rate increases under the Baseload Act, signed by Gov. Haley Barbour in 2008. The Baseload Act allowed utilities to recover costs for “prudently incurred pre-construction, construction, operating and related costs.”

The case made it all the way to the Mississippi Supreme Court, which struck down a Mississippi Power rate increase enacted in 2013 to cover the construction of Kemper Project and forced the company to issue refunds to customers. In its opinion, the court ruled the company could not use construction work-in-progress money – $125 million in 2013 and $156 million earned from a 15 percent rate increase in 2013 and a 3 percent increase in 2014 – because the Mississippi Public Service Commission hadn’t ruled on the prudency of the plant’s cost.

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Steve Wilson is a writer and a journalist whose work has appeared on Fox News, the Huffington Post and the Daily Signal. He serves as the Mississippi Bureau Chief for Watchdog.org. Beginning his career as a sports writer, he has worked for the Mobile Press-Register (Ala.), the LaGrange Daily News (Ga.), Highlands Today (Fla.), McComb Enterprise-Journal (Miss.), the Biloxi Sun Herald (Miss.) and the Vicksburg Post (Miss.) His bachelors degree is in journalism with a minor in political science from the University of Alabama. He served four-plus years in the United States Coast Guard after his high school graduation and is a native of Mobile, Ala.