Weak hand for Southern Company
Mississippi Power and its parent, Southern Company, are trying to get the Mississippi Public Service Commission (PSC) to give them a billion dollars or so for their failed Kemper lignite gasification plant. That’s a lot better than the $7.5 billion they had hoped to lay on ratepayers, but it’s still a billion more than they deserve.
A new state-of-the-art natural gas plant would have cost around $750 million, which is what the PSC is agreeing to allow into the rate base. Bear in mind that rival Entergy purchased three used natural gas power plants for an average price of $250 million while Kemper was under construction. MPC is not happy with the PSC’s offer of $750 million and is wrangling for an extra $250 million to pay for extra doodads related to the failed gasification effort. At the very least, the PSC needs to stick to its guns and not allow a penny more than $750 million.
The reality is this: No new plant was needed at all. MPC’s 2016 annual report shows a pre-Kemper generating capacity of 3.5 gigawatts compared to the summer peak usage of 2.4 gigawatts. Regulations require 10 percent reserve capacity. Even without Kemper, MPC already has a 45 percent reserve capacity. That means the PSC could refuse to certify a single penny of Kemper. Not a strong hand for MPC or Southern.
Southern Company would be wise to take the $750 million before this blows up in their face and they get nothing, which is what the company deserves for this boondoggle.