Kemper operating costs are the final blow

In a state like Mississippi, which limits and regulates power companies, your electric bill is effectively a tax over which you have little control. As a result, it is incumbent upon the Mississippi Public Service Commission (PSC) to act responsibly to protect consumers. We call on the PSC commissioners to do their jobs and shoot down any more rate increases relating to the ill-fated Kemper power plant.

Kemper was touted as a first-of-its-kind clean coal plant that would turn low-grade lignite into cleaner synthetic gas, which is no “greener” than natural gas but far greener than a traditional coal plant. It was proposed as a $1.5 billion plant by Atlanta-based Southern Company, which owns 100 percent of Mississippi Power Company (MPC.)

Unfortunately, the $1.5 billion plant has turned into a $7 billion plant and it’s still not finished. This week we learned that annual operating costs are now estimated to be four times higher than original projections. That means it will cost far more to burn lignite than to burn natural gas, which is plentiful and cheap partly because of the new fracking technologies in the oil fields.

The significance of this cannot be overstated. A natural gas plant would have cost a tenth the cost of Kemper. Southern and MPC justified Kemper because, once built, it would operate on inexpensive lignite, which on an on-going basis would be cheaper than having to buy natural gas. The new operating projections blow this argument out of the water. Not only is Kemper now 10 times more expensive to build but it will also be far more expensive to operate than a common natural gas plant.

This can only mean one thing: It’s time to pull the plug on Kemper and its plan to convert lignite coal into synthetic gas. Fortunately, Kemper can run on natural gas and is currently operating that way.

Ratepayers have already paid for this with a rate increase to fund the one billion dollars spent for Kemper’s natural gas turbines. Ratepayers should not pay one dime more.

The Kemper fiasco is a lesson to Mississippians about the frailties of the regulated monopoly system. In Texas, lawmakers have deregulated electricity, allowing customers to purchase the cheapest electricity from the lowest-cost providers on the grid. Mississippians should have such options.

Southern and MPC executives argued that Kemper would diversify Mississippi’s energy base. That was a fraudulent argument. If that’s what they really wanted, they could have expanded their grid, connected with buying cooperatives, and purchased inexpensive energy from hundreds of diversified power plants all over the country. Instead, they wanted to build their own captive plant for a huge amount of money and then be mandatorily reimbursed for both interest and equity returns. In Mississippi’s perverted monopoly system, the more the power company spends, the more money they make. The Mississippi PSC simply cannot let this go down.

Just this month the PSC approved a new $3.7 million solar farm that will provide enough power for 250 homes. Using that math, 750 solar farms could have been constructed for a third the cost of Kemper and supplied all 188,000 MPC customers with green solar power requiring zero fuel costs and minimal operating costs.

Kemper was Southern Company’s mistake. They failed grossly on their capital projections and now on their operating projections. Southern’s natural gas projections were off by a factor of five. Kemper is the ultimate definition of a boondoggle. It is time for the PSC to state clearly and publicly that Mississippi consumers will not be forced to bear this economic burden.