Mississippi regulators make it official: Kemper will run on natural gas

Dive Brief:

The Mississippi Public Service Commission on Thursday issued an order marking the end of Mississippi Power’s ill-fated 582 MW Kemper integrated gasification combined-cycle (GCC) plant.
The order gives Mississippi Power 45 days to present the PSC with a settlement agreement that provides for the ownership and operation of only a gas-fired fired generator, without the coal gasification and carbon capture technology originally envisioned when the plant was proposed in 2006.
Separately, the Atlanta Journal-Constitution reports that Southern Co., Mississippi Power’s corporate parent, has injected $1 billion into the utility, which is faced with absorbing billions of dollars in losses stemming from the failure of the Kemper project.

Dive Insight:

Southern Co., Mississippi Power’s corporate parent, pulled the plug on Kemper late last month, but the PSC’s ruling makes it official.

The IGCC project is will not run as originally designed. The gasifiers that Southern had wanted to use to turn local lignite into syngas will not be used. Presumably, that will make it tougher for Southern to license the gasifier technology it helped develop at Kemper and at an earlier site in Wilsonville, Ala.

The failure of the Kemper project is a blow to clean coal proponents and is likely to impact Southern’s shareholders. Southern investors have already lost $3.1 billion on the project, and the company says it may be facing another $3.4 billion loss.

The seven year old, $7.5 billion project is years behind schedule and about $4 billion over budget.

In the settlement agreement that Mississippi Power that has been ordered to file, the PSC will be looking for to protect ratepayers from bearings more of the Kemper costs.

In the original project approval included a construction cost estimate of $2.4 billion with a cap beyond which the costs would have to be borne by shareholders, not ratepayers. That cap set the total construction cost recoverable from ratepayers at no more than $2.88 million.

In the settlement, the PSC is looking for no rate increases for rate payers “at a minimum” and “serious discussions” about a rate reduction. The settlement should also remove any risk of rate payers bearing any costs associated with the gasifiers or related assets.

Mississippi Power must file a settlement within 45 days and a hearing will be set 45 days from the filing of the settlement.