Does Southern deserve a billion for Kemper?

By WYATT EMMERICH,

The final hearings for the failed Kemper power plant are under way this week at the Mississippi Public Service Commission (PSC).

The billion-dollar question is: Does this failed project deserve a billion dollars from the ratepayers of Mississippi?

The answer from the PSC should be a resounding “NO!” but don’t expect this. When you are caretaking “Other People’s Money” vigilance becomes lax.

Let’s be clear about this: Mississippi dodged the Death Star by avoiding the full eight-billion-dollar cost of Kemper. Our state would never have recovered. That’s because, thank the Lord, the PSC never ruled Kemper “prudent.” The minute the PSC had deemed Kemper prudent, the ratepayers would have been on the hook for the full eight billion.

That would have been $43,000 per household for the one-third of our state serviced by Mississippi Power Company (MPC). The whole state would have suffered.

Constant media attention kept MPC and its Atlanta-based parent, Southern Company, at bay. A band of about a dozen individuals deserve credit for this including Northsiders Kelley Williams and Charles Grayson with the Bigger Pie Forum, Hattiesburg oilman Tom Blanton, Jackson city councilman Ashby Foote, Mississippi Sierra Club president Louie Miller, Kemper whistle blower Brett Wingo, Clarke Reed from Greenville, journalist Steve Wilson, energy expert Chip Estes and yours truly.

It was a fight. The Alabama union bosses were dragged out. Full page ads were run defaming our integrity. People were followed. Threats were made.

Throughout the whole process PSC commissioner Brandon Presley was steadfast in his opposition to Kemper. His role in stopping prudency was critical. Our state owes him a debt of gratitude.

As for the other two fellows previously on the PSC, I hope their campaign contributions and new cushy jobs were worth raising the electricity rates of tens of thousands of Mississippians.

It all started with the abominable Baseload Act allowing utility companies to start charging customers for new power plants before they were put into service. You can thank Gov. Haley Barbour for that one. Southern Company is one of his biggest clients.

This act will be devastating to Georgia and South Carolina, where $20 billion in failed nuclear plants were prematurely deemed prudent, saddling those ratepayers with exorbitant rates for decades to come. Mississippi dodged this bullet.

I don’t blame the Southern Company. Their executives are smart and shrewd. They almost got away with a plan to greatly increase the wealth of their shareholders, which is their job by law.

Because of our screwed-up electricity regulated monopoly system, Southern gets a guaranteed return on any new power plant it builds. The more expensive the plant, the bigger the return. What a recipe for disaster.

Standing in the way, supposedly, is the Public Service Commission. Its sole job and duty is to protect the ratepayers from the power company monopoly. Unfortunately, a few well-placed contributions can unhinge this protection. History tells us this is the rule, not the exception.

Now that the $8 billion bullet to the heart was dodged, should we allow Southern and MPC to shoot us in the arm with a billion-dollar bullet? Bear in mind, this still comes out to $5,500 per ratepayer.

MPC and Southern claim the PSC “ordered” them to build Kemper. They are threatening to sue the PSC if they don’t get the billion. The PSC should stand their ground and not back down. Let them sue.

The PSC doesn’t “order” power companies to build plants. They get approval to begin construction and only get reimbursed if the company can prove that the new power plant is “prudent” and “used and useful” at “fair and reasonable” rates.

 

It is true that Kemper is now running on natural gas, but that was not the power plant that was approved by the PSC. The PSC approved a lignite coal gasification plant that was supposed to operate at near-zero cost by using nearby lignite and selling CO2 as a byproduct to oil companies. That failed miserably.

The PSC never approved a natural gas plant in Kemper and never would have. First of all, Kemper is out of the way. A new transmission line had to be built. Huge amounts of land had to be purchased. A new natural gas plant would have cost $500 million, not a billion. During the time that Kemper was under construction, Entergy and TVA bought three used natural gas plants for an average of $250 million. All had more capacity than Kemper.

Second of all, a new plant was not needed. Electricity consumption is flat. MPC claimed Kemper was needed because it had to shut down the Watson and Greene County coal plants and the old Sweat gas plant. But MPC never shut down any of them.

For the cost of Kemper, you could have put state-of-the-art solar panels on the roof of every MPC customer’s house and cut every electric bill in half.

Deceit was rampant throughout the process. MPC and Southern forecast natural gas prices five times the federal forecasts. The feds were right. Company officials never explained how they came up with their grossly inflated numbers.

The application of fracking techniques has created a surplus of natural gas, causing prices to drop like a rock. Construction had barely begun on Kemper when it was clear fracking was dramatically altering the energy landscape. MPC and Southern plunged on.

Delays and cost overruns were never timely reported, keeping the PSC in the dark during crucial steps in the approval process. The Kemper construction manager alerted Southern CEO Tom Fanning to these shenanigans and was soon fired.

During all of this, Kemper construction subcontractors held a campaign fund-raiser for one of the pro-Kemper PSC commissioners who wasn’t even running for re-election. The audacity!

Let them sue. They will lose and Mississippi ratepayers will save a billion dollars. Kemper was a boondoggle from the get go – a completely unproven concept, scaled up 100 times from a tiny pilot project. Scaling up anything more than a factor of seven is engineering malpractice.

We have two new PSC commissioners thanks to the media attention. It is a great example of the democratic process at work. These new commissioners, along with Brandon Presley, need to do their jobs – protect the ratepayers. It is no more complicated than that.

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