Southern Company Says Kemper Not Viable as Coal Plant, Blames the PSC

Posted by on February 25, 2017

In an apparent first salvo in a public relations campaign to shift blame for the Kemper power plant boondoggle away from himself and corporate management and onto state regulators, Southern Company chief executive officer Tom Fanning admitted this week that Kemper plant is not economically viable as a coal-burning power plant.

The startling reversal came during an earnings call Thursday at a time when Southern faces intense scrutiny from federal and state regulators and the Securities and Exchange Commission – – and as its Mississippi Power Company subsidiary, the plant’s owner, faces a Moody’s downgrade over Kemper’s skyrocketing costs and failure to operate despite being three years past its promised operating date.  Southern took a 27 percent hit to its fourth quarter net income thanks to Kemper schedule delays.

During the call, Fanning acknowledged that Kemper can only be feasible if it runs on natural gas as financial analysts questioned him about a just-released “economic viability” study by Southern that found that low gas prices for the long-term mean the plant can’t profitably gasify lignite in the gasifiers Southern spent most of $7.1 billion to build.

Fanning called a “reduction in the longterm gas price forecast” an “overwhelming change, the big change. Obviously, there are others. It is a point in time. When we had this plant certificated, we all thought that gas prices were going to be double digits and there was some spread that were way higher than where we are now.”

Fanning’s comments came as the company announced it will soon file a rate case with the Mississippi Public Service Commission seeking to recover its costs for the plant.

Although Fanning has often reassured Mississippians that they are protected by a  $2.88 billion cost cap agreement limiting their liability for the plant’s runaway budget,  he has failed to mention that once the plant is declared operational, the cap won’t protect them from additional costs of some $4 billion. That includes $200 million a year in operation and maintenance costs, a disturbingly high figure that keeps going up for the novel “clean coal” plant.

To investors, Southern often touts its friendly relationships with state regulators in the four states in which its regulated utilities operate, but the fall 2015 Mississippi PSC election quickly became a referendum on Kemper, replacing two commissioners who reliably rubberstamped MPC’s agenda with two new faces, Sam Britton and Cecil Brown, both of whom have pledged not to leave ratepayers holding the bag.

A source close to the Public Service Commission told CIC recently that the PSC staff has run the numbers and that even under the cap, electrical rates could increase by 40 percent or more – a catastrophic burden for MPC’s 186,000 disproportionately lower-income customers in 23 counties in southern Mississippi.

To continue reading:  http://www.climateinvestigations.org/southern_company_kemper_not_viable_as_coal_plant_and_it_s_the_psc_s_fault

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