Waist deep in the Big Muddy

And the big fool said to push on.  Pete Seeger’s 1967 song was a metaphor for Lyndon Johnson and the Viet Nam War.  It is now shorthand for a blind escalating commitment to a lost cause.

A good example of a blind escalating commitment to a lost cause: the Kemper County Lignite Plant under construction by Mississippi Power.  On April 2 its Southern Company parent announced another construction (and startup) write off of $177 million in its 8K SEC filing. This brings the total cost for the experimental plant to $5.5 billion and counting.

The announcement includes a very long list of don’t-blame-me-if-it-doesn’t-work disclaimers and warnings about risks and possible quicksands and gar holes ahead.  The reason for these disclaimers is it’s OK to snow the locals.  But it’s dangerous to snow the SEC if things don’t work as advertised and there are casualties.

Kemper’s casualties

Kemper’s Mississippi casualties are likely to include investments, jobs, the economy and the poor – if customers under Mississippi Power’s monopoly are forced to pay for it.  Electricity from Kemper’s syn gas from lignite will cost over twice as mush as electricity from natural gas from a plant that costs one tenth as much.  And this is the best case if things work as advertised.

The extra cost of Kemper’s electricity will suck over $16 billion out of the economy during the 40 year plant life.  It will mean fewer investments and at least 100,000 fewer jobs.

It will mean hardship for 155,000 residential customers in Mississippi Power’s monopoly service area.  These families have a median income under $40,000 per year.  Their electric bills have already gone up 18% to prepay for Kemper.  They may go up three times as much if Kemper is placed into service.

The cost of a blind commitment to a lost cause

Viet Nam cost the lives of 58,000 American military.  It cost the country its trust in its political leaders.  It cost Lyndon Johnson the presidency.

Defense Secretary Robert McNamara ran the war.  He was a former Ford Motor whiz kid and certifiably always the smartest guy in the room.  But he got it wrong and couldn’t admit it – until years later.  He spent the rest of his life trying to atone for his decisions.

There was no obvious or easy way out of the Viet Nam quagmire.  It just kept escalating.  It got harder and harder to justify the cost.  (Like Kemper’s write offs.)

An obvious way out

There are many parallels with Kemper.  But there is one big difference. There is an obvious way out of the Kemper quagmire: pull the plug on the experimental plant.  And run its turbines on natural gas.

It will be hard for Mississippi Power and its Southern Company parent to pull the plug.  It will mean a write off of $5+ billion total now or more later.  It may mean a new CEO for the Southern Company which calls the shots.  It will mean embarrassment for some and disappointment for other disillusioned supporters who were misled by blind faith in Mississippi’s trusted political leaders.

The non-experimental part of Kemper includes turbines that turn generators to make electricity.  The turbines will run on natural gas or a combination of natural gas and syn gas from lignite.  Mississippi Power made over a million dollars in January 2014 selling electricity to the North East from the turbines running on natural gas (per an informed Mississippi Power source).

These turbines cost about $800 million and will generate 800 mega watts of electricity running on natural gas.  They will supply 40% more electricity on natural gas at 40% of the cost per kwh  vs the experimental plant running on syn gas.  They are the obvious way out of the Kemper quagmire.

Hard decisions

The Public Service Commission can get the customers out of the Big Muddy now.  The company’s leaders can extricate it now or later – or drown.

The PSC can save the customers if it deems the turbines on natural gas prudent and orders them into service immediately.  The turbines have already been proved commercial by the out of state sales of  electricity from them in January.  The seven year plan and the billion$bailout bill should be scrapped.

These will be hard decisions.  It’s hard to admit you were wrong.  But better late than never.  And it is not too late to save the customers if the PSC acts now in their best interest.

These  decisions will pay off for Mississippi for years to a come.  Our political and business establishments should encourage them.

We should all applaud those with the courage to make them.

The payoff

Customers’ electricity cost will go down immediately.  Their lives will be better.  There will be more money in their pockets to spend and invest to create jobs in Mississippi and to make the economy grow.

(Note. Pete Seeger’s song ends with the platoon neck deep in the Big Muddy and the big fool saying push on.  The big fool steps in a hole and drowns.  The sergeant takes over and backs the troops out of the Big Muddy – with the captain dead and gone.)

Kelley Williams | Chair, Bigger Pie Forum |  April 7, 2014.