Kemper Project

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The Kemper Project is a 582-megawatt (MW) integrated gasification combined cycle (IGCC) coal plant under construction in Mississippi. The plant would include carbon capture and storage (CCS) technology.[1]

The power plant was estimated to be in service by May 2014, at a cost of US$2.4 billion. In May 2017 it was reported the plant would be completed in June, at a cost of US$7.5 billion.[2][3][4] According to a Sierra Club analysis, Kemper is the most expensive power plant ever built for the watts of electricity it will generate.[5]

In June 2017 Southern told investors that vital machinery for the coal-powered section of the plant had started leaking, and would take 18 to 24 months to repair. Shortly after, the Mississippi Public Service Commission unanimously passed a motion stating Southern should remove the risk from ratepayers for the coal plant; prevent rate increases; and operate the plant using only natural gas.[6] In response, Southern said it would use gas at the plant, and warned that it may record a US$3.4 billion loss for the project, and plans to try to recover some or all of the losses from power customers.[7][8]

Location

The photo below shows the construction site in Kemper County, Mississippi.

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Background

According to Energy Online, the proposed Kemper Project project will be fueled with lignite and use Integrated Gasification Combined Cycle (IGCC) technology; it will receive $133 million in tax credits under the National Energy Policy Act of 2005. The Mississippi Public Service Commission needs to approve the project before it can move forward.[9]

In late 2007, Mississippi Power Company filed a permit application with the state DEQ for the new plant.[10] In January 2008, the company announced it was exploring alternatives to building a new plant, including purchasing electricity from other sources, but that it was "most excited about IGCC because it is a Mississippi project through and through."[11]

As of March 2008, the Mississippi state Senate was considering a bill that would help Mississippi Power's efforts to build the new plant. Senate Bill 2793 would allow state power companies to raise its rates to cover construction costs before, rather than after, the plant is in service. The state House and Public Service Commission would also have to approve the bill, without which Mississippi Power may not be able to finance the $2 billion plant.[10]

Public comments on the Draft Air permit were due September 18, 2008.[12]

On October 14, 2008, the final air permit for the Mississippi IGCC coal-fired power plant was issued.

On January 7, 2009 the Mississippi DEQ announced that MS Power would have to start the air permitting process over because the company changed the type of turbines to be used for the plant.

On March 16, 2009, Entegra Power Group LLC and Magnolia Energy LP, requested that the Public Service Commission (PSC) suspend action on the certification of public convenience and necessity pending an analysis of Mississippi's future energy needs. On April 3, 2009, the Sierra Club argued additionally against the certification of public convenience, stating that a NEPA review and air permit must first be completed. Attorney General Jim Hood has also supported the motion. On May 5, 2009, the PSC held a public hearing on the motion. The motion was denied on June 5.[13]

In September, 2009, Southern Mississippi Electric Power Association signed a letter of intent to explore the acquisition of up to 20% of the capacity and output of the plant.[14]

The PSC held the first round of public hearings addressing the need for the plant in October 2009. Hearings on plant costs are scheduled to begin on February 1, 2010.[15]

On April 29, 2010, Mississippi Power indicated it may not pursue construction of the plant after the Mississippi Public Service Commission ruled that the Southern Co. unit failed to prove the plant would benefit customers, issuing an order that placed conditions on the project, including not being able to charge customers up front to build the new plant, and capping the cost of the new power source at $2.4 billion. Mississippi Power spokeswoman Cindy Duvall said the conditions that include a price cap "seem to make it impossible for Mississippi Power to finance or construct the Kemper County IGCC Project even if the right to construct had been - or might in the future - be allowed."[16]

On May 26, 2010, the MS Public Service Commission voted 2-1 to loosen some of their earlier restrictions on the plant. The PSC told Mississippi Power its construction could be no more than $2.88 billion, and could go no higher unless it could show that concrete, steel, and other building costs went up. This was up from the PSC cap in April at construction costs of $2.4 billion. Commissioners also agreed that Mississippi Power could pass on its construction costs to ratepayers, but not until Jan. 1, 2012, when the PSC expects the new power plant to be off the ground.[17]

Commissioners Lynn Posey of the Central District and Leonard Bentz of the Southern District voted for the modifications. Brandon Presley of the Northern District opposed it. Presley said in a statement attached to the order that ratepayers "will have to bear all the risk of this project on top of having to pay for this project upfront. MPC ratepayers will begin paying for this plant before they get any benefits from it." Bentz told WLOX-TV that the order "is an indication to the financial markets that [Mississippi Power] can move forward with it. We put some regulations on them. But we did what we're supposed to do, protect ratepayers at the end of the day."[17] On June 17, 2010, the Sierra Club filed an appeal in chancery court in Harrison County, Mississippi, challenging the need certificate issued by the Mississippi Public Service Commission (PSC) for the project, saying it would allow Mississippi Power to charge rate payers for the costs of the plant before it's built, and that PSC refused to order Mississippi Power to disclose how much customers will pay in rates for the new plant.[18]

On June 22, 2010, the board of the South Mississippi Electric Power Association (SME) said they will vote June 30 on a proposal to buy a stake in the $2.88 billion advanced coal plant. The electric association has negotiated an agreement to purchase a 17.5-percent interest in the 582-megawatt IGCC plant for about $450 million.[19]

On October 7, 2010, the state Supreme Court denied Mississippi Power's motion asking the high court to intervene in the case, and dismissed an appeal by the Sierra Club in response to the power company's motion, sending the suit back to Harrison County Chancery Court.[20]

On December 7, 2010, construction began on Kemper, and is slated for completion in 2014. The plant is expected to cost about $2.4 billion to build, or $4,123/kW. The utility has put a cap on the project at $3.2 billion, or almost $5,500/kW. The plant is designed to burn Mississippi lignite coal.[21]

On January 27, 2011, Mississippi Power Co. said the plant will be named for David M. Ratcliffe, recently retired chairman, president and CEO of Southern Company. Plant Ratcliffe is scheduled to begin commercial operation in 2014.[22]

On Feb. 28, 2011, Harrison County Chancery Judge Jim Persons upheld the decision by state regulators to allow the plant, dismissing arguments from the Sierra Club that the Mississippi Public Service Commission approved the plan without sufficient proof the plant is needed, passing over $2 billion in construction costs on to ratepayers. Judge Person's ruling said while the Public Service Commission's order "lacked specific findings on the balancing of risks," he wouldn't reverse its decision. Sierra Club lawyer Robert Wiygul said the group will appeal.[23]

On March 10, 2011, the Sierra Club filed a suit in U.S. District Court for the District of Columbia, alleging the DOE violated the National Environmental Policy Act and the Administrative Procedure Act in awarding $293 million in federal funds to Mississippi Power for the plant, using lignite coal from a new 12,000-acre strip mine, which the Sierra Club said will cause “extensive and irreversible damage to streams and wetlands” and could result in the release of as much as 5.7 million tons of CO2 every year. According to the complaint: “DOE is using ‘clean energy’ funds to back a project that will inflict all of the environmental harms associated with conventional coal-fired generation of electricity." The Sierra Club asked for an injunction forcing the government to do a more rigorous analysis under the National Environmental Policy Act, one that takes into account global warming and other environmental consequences. Further, they note that the “DOE made no effort to consider renewable energy projects or conservation and energy efficiency projects of any kind.”[24]

In August 2011, Mississippi Power CEO Ed Day said the plant is scheduled to start operations in May 2014. Average customer's rates are projected to go up by 33 percent over a 10-year period, as state law allows the utility to recover costs associated with the plant's construction as the plant is built.[25]

On March 15, 2012, the Mississippi Supreme Court, in a 9-0 vote, said the Mississippi Public Service Commission's (PSC) May 2010 approval for the plant failed to satisfy state law that the plant would benefit the utility's customers. Supreme Court Presiding Justice Jess Dickinson said the absence of specific findings from the PSC clouded its decision, and that without such details, the Supreme Court could not determine if the PSC decision was supported by the evidence. The court told the PSC to clarify how it decided to allow construction, sending the case back to the commission for reconsideration.[26]

On March 16, 2012, Mississippi Power said it would continue building the project. According to state filings, the company had spent more than $1.1 billion on the Kemper plant so far, including $245 million in grant money from the U.S. Department of Energy, and still expects to begin producing power in 2014. A Mississippi Power spokesperson said the utility hoped the PSC would address the ruling quickly to "correct" its order. South Mississippi Electric Power Association, which has agreed to purchase of a 17.5-percent stake in the Kemper plant, has not commented.[27]

On March 30, 2012, after only two days meeting notice and no discussion, Mississippi utility regulators voted 2-1 to issue a temporary certificate so that Mississippi Power could keep building the plant, stating that halting the project would lead to "unnecessary costs" that would cause substantial injury to the utility and its customers. The Sierra Club immediately filed an appeal at the Mississippi Supreme Court to block the certificate, saying "Mississippi Power is not exempt from the law, and the Public Service Commission does not have the authority to bypass state law."[28]

In April 2014 the company said the power station is planned to come online by 2015. It is expected to capture about 2/3 of the carbon dioxide emissions it emits, and sell the captured CO2 for enhanced oil recovery.[29] The estimated cost of the plant is $5 billion.[30]

In October 2014 it was announced the start date had been pushed back to March 2016, and the costs for the plant were over $6.1 billion.[31]

In February 2015 the Mississippi Supreme Court ruled the state Public Service Commission overstepped its authority in approving hundreds of millions of dollars in rate increases to cover the costs of Kemper, and said Mississippi Power must refund the money to its 183,000 ratepayers. Mississippi Power collected $125 million in 2013 and $156 million in 2014 to build the yet-unfinished plant. The court said the regulators violated the law because they did not assess whether the construction costs were being prudently incurred. The ruling prevents the PSC from approving any more rate increases until it conducts prudency hearings on the past cases, a stipulation that could threaten Mississippi Power's ability to finance the construction of the over-budget power plant.[32]

In May 2015 board members with South Mississippi Electric’s 11 cooperatives decided they no longer had an interest in purchasing a 15 percent stake in the Kemper County facility, saying it would raise their rates.[33] Southern, in turn, notified state regulators that it may have to raise electricity rates for Mississippi power customers by 41%, or $37 a month for the typical household, to pay for the project.[34]

In July 2015 the Mississippi Public Service Commission ordered Southern to refund $350 million in Kemper cost overrun charges it had levied against ratepayers. Shortly after, Standard and Poor’s put the company on a ratings watch.[35] However, in August 2015 Southern’s request to raise rates by US$159 million a year was approved on a 2-1 vote by the Mississippi Public Service Commission.[36]

In September 2015 Southern Co. said commissioning of the plant will be delayed from the original March 2016 schedule until sometime after April 19. The delay will result in the cost of the US$6.2 billion project increasing by at least US$15 million, with a further US$234 million in investment tax credits to be repaid to the Internal Revenue Service. The company estimates each month’s delay after March will add US$25-30 million to the cost of the project.[37] In December 2015 the project was up to nearly US$6.5 billion.[38]

In March 2016, Southern Company reported to the U.S. Securities and Exchange Commission that the cost of the Kemper Project had increased to US$6.6 billion - three times the original cost estimate.[39][40]

In March 2017, Southern Co. discovered leaks that will cause it to miss its scheduled mid-March completion of the project.[41]

NYT Investigation

A July 2016 investigation by the New York Times of thousands of pages of public records, internal documents and emails, and secret recordings of Kemper project colleagues concludes "the plant’s owners drastically understated the project’s cost and timetable, and repeatedly tried to conceal problems as they emerged."[42]

According to the Times: "The company and regulators were eager to qualify for hundreds of millions of dollars in federal subsidies for the plant, which was also aggressively promoted by Haley Barbour, who was Southern’s chief lobbyist before becoming the governor of Mississippi. Once in office, Mr. Barbour signed a law in 2008 that allowed much of the cost of building any new power plants to be passed on to ratepayers before they are built."[42]

The Times concludes: "In the end, the Kemper project is a story of how a monopoly utility, with political help from the Mississippi governor and from federal energy officials who pressured state regulators in letters to support the project, shifted the burden of one of the most expensive power plants ever built onto the shoulders of unwitting investors and some of the lowest-income ratepayers in the country."[42]

Coal source

Coal for the plant would be supplied by the Kemper County Mine, a proposed surface mine for Kemper County by Liberty Fuels Co. LLC, a wholly owned subsidiary of North American Coal Corporation. In September 2011, Liberty Fuels applied for a permit to mine lignite coal in east Mississippi that would be burned at the Kemper County coal plant. The application calls for Liberty Fuels to mine two million tons of lignite per year during the first five-year permit. Thereafter, it would mine 4.1 million tons per year through 2052. The mine would cover 31,000 acres over 40 years, eventually becoming the largest coal mine operation in the state.[43] The Mississippi Department of Environmental Quality will hold a public hearing in DeKalb on Oct. 18, 2011 on the application.[44]

Project Details

Sponsor: Mississippi Power (Southern Company subsidiary)
Location: Kemper County, MS
Coordinates: 32.651236, -88.759028 (exact)
Capacity: 582 MW
Type: IGCC
Projected in service: 2019
Status: Cancelled as a coal plant; will burn natural gas[8]

Financing

The Kemper Project received an estimated US$270 million in Department of Energy funds after the Southern Company’s plan for the proposed Stanton Energy Center were dropped. These transferred funds were moved from Florida to Mississippi in December 2008, after Mississippi Governor Haley Barbour's D.C.-based lobbying firm, the BGR Group, pushed for the reallocation. Southern Company has been a BGR client since 1999, having spent a total of $2.6 million with the firm, according to federal lobbying disclosure documents. However, Southern Company alleges that Governor Barbour did not help them receive any additional funding at all.[45] The BGR Group website has deleted all connections with Southern Company from its website.[46]

Mississippi state law was changed to permit charging ratepayers for construction of the facility.[47]

Citizen Groups

Resources

References

  1. ↑ "Kemper County Energy Facilities FAQ," Mississippi Power, accessed January 2016
  2. ↑ Maloney, Peter (May 3, 2017). Mississippi Power Delays Start Date for Kemper Plant, Raises Costs Again. Industry Dive.
  3. ↑ Patel, Sonal (February 23, 2017). Kemper IGCC, Delayed Again, May Not Be Economically Viable. Power.
  4. ↑ Jeff Amy, "Mississippi Power Plant Costs Cross $7.5B; Rate Plan Delayed," AP, June 5, 2017
  5. ↑ Drajem, Mark (April 14, 2014). Coal’s Best Hope Rising With Costliest U.S. Power Plant. Bloomberg Business.
  6. ↑ "Mississippi Power should use only natural gas at Kemper plant, PSC says," Hattiesburg American, June 21, 2017
  7. ↑ Sharon Kelly, "Southern Co. Suspends Kemper "Clean Coal" Project, Warns Investors It May Recognize Losses up to $3.4 Billion," DeSmog Blog, June 28, 2017
  8. ↑ 8.0 8.1 "Current Report on Form 8-K to provide information regarding Mississippi Power’s integrated coal gasification combined cycle project in Kemper County, Mississippi" US SEC 8-K filing by The Southern Power Co, 6/28/2017
  9. ↑ "Mississippi Power Plans Lignite-Burning IGCC Plant", Greenwire, December 15, 2006. (Access to this article requires a trial subscription.)
  10. ↑ 10.0 10.1 "Stopping the Coal Rush", Sierra Club, accessed January 2008. (This is a Sierra Club list of new coal plant proposals.)
  11. ↑ "Energy Needs Prominent in Speech", WTOK.com, January 22, 2008.
  12. ↑ "Stopping the Coal Rush", Sierra Club, accessed November 2008. (This is a Sierra Club list of new coal plant proposals.)
  13. ↑ "Stopping the Coal Rush", Sierra Club, accessed October 2009. (This is a Sierra Club list of new coal plant proposals.)
  14. ↑ "Companies join forces on Kemper County IGCC project," Meridian Star, September4 16, 2009
  15. ↑ Sid Salter, "Proposed Kemper County 'clean' coal plant: Why opponents object," Clarion Ledger, October 11, 2009.
  16. ↑ "MS Power can build Kemper County plant, with a catch" WLOX, April 29, 2010.
  17. ↑ 17.0 17.1 "State regulators loosen restrictions on Mississippi Power's coal-fired plant" CB Online, May 27, 2010.
  18. ↑ "Sierra Club, others sue to stop Miss. Power plant" Bloomberg Business Week, June 17, 2010.
  19. ↑ "SME May Buy Southern’s $450M Coal Stake" EMII.com, June 23, 2010.
  20. ↑ Sheila Byrd, "Miss. justices send coal suit back to lower court" Bloomberg, Oct. 8, 2010.
  21. ↑ "582 MW coal-fired power plant breaks ground" Power-Gen, Dec. 17, 2010.
  22. ↑ "Miss. Power announces name for Kemper coal plant" Bloomberg, Jan. 28, 2011.
  23. ↑ Holbrook Mohr, "Judge Rules Miss. Coal Plant Project Can Continue" ABC News, Feb. 28, 2011.
  24. ↑ "Sierra Club Sues DOE Over Coal Plant" The Blog of Legal Times, March 11, 2011.
  25. ↑ Jeff Ayres, "Work on track for Kemper power plant" Clarion-Ledger, Aug. 30, 2011.
  26. ↑ Jack Elliott, "State high court: Regulators’ details on coal plant not clear," Sun herald, Mar. 15, 2012.
  27. ↑ "UPDATE 1-Southern unit to proceed with costly coal project," Reuters, March 16, 2012.
  28. ↑ Eileen O'Grady, "Mississippi allows Southern Co to keep building $2.8 billion coal plant," Reuters, March 30, 2012.
  29. ↑ Richard Van Noorden, "Two plants to put ‘clean coal’ to test," Nature, April 29, 2014.
  30. ↑ Suzanne Goldenberg, "Can Kemper become the first US power plant to use 'clean coal'?" The Guardian, March 12, 2014.
  31. ↑ Jeff Amy, "Costs rise by another $496 million at Kemper plant," AP, Oct 28, 2014
  32. ↑ Gavin Bade, "Miss. Supreme Court strikes down Southern's Kemper plant rate hikes," Utility Dive, February 13, 2015
  33. ↑ "Partner Backs Out of Mississippi Coal-Gasification Project," IEEFA, May 21, 2015
  34. ↑ "Coal-Fired Power Plant Loses Steam," WSJ, May 22, 2015
  35. ↑ "Southern Company’s Kemper County Folly," IEEFA, July 15, 2015
  36. ↑ "Southern Wins Rate Boost for Kemper Clean Coal Plant," Bloomberg, Aug 13, 2015
  37. ↑ Harry Weber Mark Chediak, "Southern Faces $234 Million Tax Bill Due to Kemper Delays," Bloomberg, September 29, 2015
  38. ↑ Steve Wilson, "Kemper Project costs increase by $62 million; now up to nearly $6.5 billion," Mississippi Watchdog, December 2, 2015
  39. ↑ Amy, Jeff (December 17, 2015). Kemper Plant May Get More Money From Congress. Clarion-Ledger.
  40. ↑ Southern Co.’s Kemper Power Plant Costs Rise Yet Again. Atlanta Business Chronicle (April 4, 2016).
  41. ↑ http://www.bizjournals.com/atlanta/news/2017/03/19/completion-of-southern-co-s-new-kemper-power-plant.html.
  42. ↑ 42.0 42.1 42.2 Ian Urbina,"Piles of Dirty Secrets Behind a Model ‘Clean Coal’ Project," New York Times, July 5, 2016
  43. ↑ "Stopping the Coal Rush" Sierra Club, accessed November 2011.
  44. ↑ "Millions of tons of lignite to power Kemper plant" AP, Sep. 12, 2011.
  45. ↑ McCullough, Amy (2010-04-25). "Barbour’s Kemper connection: Vote on proposed clean coal plant to come down this week", Mississippi Business Journal. Retrieved on 2014-05-26. 
  46. ↑ http://msbusiness.com/blog/2010/05/bgr-website-has-changed-since-mbj-barbourkemper-story/
  47. ↑ "A Model for ‘Clean Coal’ Runs Off the Tracks", The New York Times (July 5, 2016). Retrieved on July 5, 2016. "As governor, Mr. Barbour then signed the Baseload Act, which shifted much of the cost and risk of building power plants from investors to consumers, and allowed utilities such as Mississippi Power to charge ratepayers for projects before they were completed." 

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