PSC commissioner looking ‘mighty smart’

Published 1:00 pm Tuesday, July 31, 2012

Brandon Presley, the northern district public service commissioner, is looking mighty smart right now.

Presley, 35, former mayor of the small town of Nettleton, has been clanging the alarm about the proposed Kemper lignite plant for years. As costs escalate and huge electricity rate increases loom, Presley’s concerns about the unproven technology are proving to be on target.

It’s a big deal. The plant started out at $1.8 billion when first proposed. Now the price tag is $2.8 billion and rising rapidly. About 186,000 ratepayers on the coast and southeast Mississippi are looking at potential utility rate increases of 50 percent. That’s an economic disaster.

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The other two members of the Public Service Commission are turning Presley’s way and recently refused to allow Mississippi Power to raise rates instantly to fund cost overruns at the lignite plant. Mississippi Power, a subsidiary of the Southern Company, is appealing the PSC’s ruling to the Mississippi Supreme Court.

If successful, the Southern Company, which made $2.2 billion in net income last year, could raise rates $20 a month on residential customers and much more on industrial customers. This will have a dampening effect on economic development in theregion.

The lignite plant seemed like a great idea. Mississippi has an abundant source of low-grade coal called lignite. The problem is the lignite won’t be mined in a traditional fashion. Instead, it will be “gasified,” a greener, more expensive and complicated process. Worse, it’s untested.

In the excitement of being homegrown and cutting edge, Gov. Phil Bryant and former Gov. Haley Barbour signed on and lobbied the PSC to approve the deal. Unfortunately, the Kemper lignite plant is starting to look like the beef plant times 50. A mistake of this magnitude could have serious economic development ramifications on Mississippi.

The Southern Company is asking the Supreme Court to allow it to raise rates during construction to fund cost overruns as they happen. This is unprecedented, thanks to the actions of the state Legislature. After intense lobbying, the Legislature changed the law several years ago to allow such pay-as-you-go cost overruns. In the past, the project had to be completed first.

In his April 3, 2010, dissent of the vote by the other two PSC commissioners, Presley wrote:

“I dissent from the majority’s order in this case because it does not sufficiently protect ratepayers of Mississippi Power Company from the great risks associated with the construction of this project and therefore leaves a potential for financial harm to both the Company and its ratepayers . . .”

The majority’s order identifies the plethora of risks associated with the approval of this project. For these reasons, the Commission should not approve this project until more is known about uncertainties related to each of these categories, including, but not limited to carbon regulation and/or pricing, natural gas prices, technological advances in demand-side management and energy efficiency. My opinion is not to preclude the project forever but to wait until more is known in the areas of uncertainty and at that time, be in a better position to make the correct decision.

Presley’s dissent goes on to question the legitimacy of the cost estimates, the advance in shale fracking, and as natural gas prices decline, the uncertainty of the technology.

As it stands today this technology has run a total of 1,795 hours, which equates to 75 days of run time at the Wilsonville experimental gasification plant. Mississippi lignite has been run at the rate of 5,610 lbs. per hour at Wilsonville whereas this project would be expected to run at 401,145 lbs. per hour. Synthesis gas flow at Wilsonville has been at a rate of 28,914 per hour, whereas this project is proposed to have synthesis gas flow of 1,311,100 lbs. per hour. Both the Mississippi lignite and the synthesis gas have run approximately two percent of the totals projected in this project. The time of the demonstration at Wilsonville relative to the time of use during operation in the project is minimal and not indicative that Transport Integrated Gasification (TRIG) will work at full scale.

Conditional approval of this project without knowing whether or not TRIG will work, at the scale proposed, is equivalent of buying a car and having no idea whether or not the engine will run.

Mississippi ratepayers are being used as the source of venture capital funding for an unproven technology. If it works, the Southern Company gets to license the technology and makes millions on its patents. If it fails, Mississippi ratepayers are left paying possibly 50 percent more on their electric bills.

Ironically, the more money the Southern Company spends, the more it makes, just like a realtor makes a bigger commission on bigger houses. The whole system is perverse. It’s what happens when government runs things.

Bear in mind, the Kemper plant, if it works, will generate 582 megawatts for $2.8 billion, not including the cost of the lignite mine and other required assets. In comparison, the Tennessee Valley Authority has just completed a natural gas power plant for $820 million producing 880 megawatts.

The TVA gas plant will cost one-third as much and produce 50 percent more electricity than the Kemper lignite plant. The gas plant is proven technology with unlimited supply. The lignite plant is experimental and faces all kinds of uncertainty and risk.

Recently, I talked to Presley. He is in disbelief about this whole project. “Its strange to me that after the Commission recently rectified the plant to go forward, Mississippi Power just happened to then find $366 million in cost overruns. Now, the company has found another $56 million in overruns in the last month. So, it now has $422 million in overruns and is only around 30 percent complete.”

“To me the analogies here, minus just the pure corruption, with the beef plant are so clear it’s just pitiful. . .The federal stimulus package cost $810,000 per job. The Kemper project cost the customers of Mississippi Power $144 million per job.”

“I don’t know what the end price tag will be. I don’t know if it will produce power in 2014 … The problem with this thing is that it should never have been let out of the gate in the first place. It’s at least going to end up a 45 percent rate hike.”

Can you imagine the political fallout when one-sixth of Mississippi businessess and homes have a 45 percent hike in their electric bill?

Oh my.