The Kemper Clean Coal Calamity Continues …

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Ashby M. Foote III,       President, Bigger Pie Forum | 13 February 2013

If the title of a new law contains the words affordable, reduction or protection, your first reaction should be to grab your wallet.  Such is the case with the “Mississippi Public Utility Rate Mitigation and Reduction Act,” (HB 1134 and SB 2755) now being debated in the Mississippi legislature.  On a scale of 1 to 5, this billion dollar bond bill deserves 5 Pinocchios.  Why?  The Act will result in higher — not reduced — electric bills for the 180,000+ retail customers in Mississippi Power’s (MP) service area by giving the power company another $1 billion to spend on its Kemper project.

How so?

Consider this parable: Joe citizen is minding his own business when he is approached by a slick vinyl siding salesman carrying a box of donuts.  By the fifth donut Joe is fixing to decide which color of siding he needs to buy — the pale yellow that costs $59 per month over 20 years or the lime green that is only $53 per month over 20 years.  Lucky for Joe, just before he signs the contract, cousin Billy Frank shows up, whacks him upside the head and reminds him that Joe’s home already has vinyl siding and it comes with a 40 year guarantee.

If we are lucky, Billy Frank will show up at the state Capitol real soon.  The slick promoters of HB 1134 and SB 2755, laden with donuts and other lobbying lagniappe, have presented the state legislators with a false choice, a false premise and a terrible deal for electricity users in southeast Mississippi.

The false choice: HB 1134 and SB 2755 are presented as a way to reduce rates.  Far from it, the bills create a Special Purpose Entity (SPE) that would allow the issue of up to $1 billion in bonds.  The proceeds of these bonds would be available to MP to cover expenses already accrued on the Kemper project.  But the duty of paying the interest and principal on those bonds is the sole responsibility of MP’s 180,000+ retail customers.  The SPE monthly charges of $50 to $60 over the next 20 years will be a separate listing on customer bills.  Net result – Customers’ bills will go up even if the electricity rates don’t.

The false premise: Promoters of the bills suggest that $3.8 billion of spending on the Kemper County clean coal plant has already been approved.  It has not.  There are still numerous prudence reviews to be completed before plant costs can be considered approved and passed on to ratepayers.

It is the job of the Public Service Commission (PSC) to oversee utilities like MP.  The PSC has capped the costs of the Kemper project at $2.88 billion but now they watch from the sideline as MP and its parent Southern Company lobby the Legislature for an additional billion dollars in financial relief.

The terrible deal: The real story of HB 1134 and SB 2755 is that they are at their heart a bailout of MP and Southern Company for poor business decisions made over the past four years.

There is a better solution that the parable’s Billy Frank would agree with.  The Kemper project includes an 800-megawatt combined cycle plant that burns syngas from coal or natural gas.  If this combined cycle burned 100% natural gas it would not only keep customer electric bills from going up – it would actually result in electric bills going down.  Such a plan would require some big write offs by Mississippi Power and Southern Company but if someone is going to get Krispy Kremed why shouldn’t it be the folks with the big donut budget.

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