Concerned that the Mississippi Supreme Court's mid-March decision to throw out the regulatory approval the state's Public Service Commission had granted Mississippi Power's $2.4-billion-plus integrated gasification combined-cycle project nearly two years ago, the PSC held a special meeting March 30 at which two of its three members voted to grant the project a "temporary" certificate.
In a written order issued immediately after the PSC meeting, Chairman Leonard Betz and Vice Chairman Lynn Posey said that the action was needed for Mississippi Power to continue constructing the 582-Mw IGCC project, which is about 30% complete and on which the utility has spent about $1.1 billion.
"At this stage, neither the ratepayer nor Mississippi Power benefits from demobilizing and halting the Kemper project," Betz and Posey said in the order. They said the utility estimated that temporarily halting work would cost between $250 million and $500 million, and set back the project's schedule by "a minimum of three months."
Commissioner Brandon Presley issued a strongly worded dissent, asserting that "no one can legitimately argue that continuing permanent construction of generating facility is somehow 'temporary.'" Presley noted that the project being advanced by the issuance of the temporary certificate is "the same project that the state's highest court stripped of certification as unsupported by evidence just days ago." He said he advocates "putting down the shovel" on the project.
Mississippi Power spokesman Jeff Shepard said that the IGCC plant, which is designed to be fueled by locally mined lignite, and to capture 65% of its CO2 emissions for use in enhanced oil recovery, remains on track to be completed by June 2014.
The PSC's controversial decision to issue a temporary certificate came 15 days after the Mississippi Supreme Court unanimously agreed with the Sierra Club that the PSC had failed to to provide sufficient evidence why, after establishing a $2.4 billion cap on the Kemper project's recoverable costs in an April 2010 order, the PSC one month later accepted Mississippi Power's proposal to raise the cost cap to $2.88 billion.
Louie Miller, director of the Mississippi chapter of the Sierra Club, called the PSC's decision to hold Friday's meeting with only two days' notice and to issue the temporary certificate "patently illegitimate and illegal."
Before the hearing, the PSC directed Mississippi Power, the Sierra Club and other intervenors in the Kemper case to file new proposed orders by Monday, April 2.
In its proposed order, Mississippi Power suggested that the PSC reaffirm the conclusion in its May 2010 order that the Kemper project is required to provide incremental generating capacity that the utility will need, that it will provide needed fuel diversity, and that the $2.88 billion cost cap protects ratepayers.
The utility said in its proposed order that fuel diversity is "paramount" and that if, as is likely, its coal-fired Plant Watson units 1 and 2 remain unscrubbed and are taken offline, "over 70% of Mississippi Power's existing fleet will be burning natural gas. Such dependence on one fuel source is not prudent," it said, adding that while gas prices are currently low they have been "extremely volatile" in the past.
The Sierra Club, which has argued the Kemper project is unnecessary and unduly expensive, in its filing objected to the PSC's apparent plan to issue a new order without reopening the record to consider new evidence, and recommended that no certificate for the project be granted.
"For the commission to insist that, like Miss Havisham wandering around in her wedding dress, it will ignore today's reality is contrary to [state law] and a grave disservice to ratepayers," the Sierra Club said in its filing. It added that natural gas prices are "at levels that even Mississippi Power must concede render the Kemper project uneconomic before it is even one-third completed."