The plant has not generated a single kilowatt for customers. The company this month said it would forfeit $133 million in federal tax credits because it won't finish the project by its May deadline. Labor and material costs for the Kemper plant exceeded expectations. The company in June 2010 won state approval to go ahead with the project and by that December had broken ground on a 3,000-acre tract.
Southern recently took $990 million in charges for cost overruns approaching $2 billion. The company's stock has been battered in the past year, and the company's market value has dropped $6.4 billion since April, to $35.8 billion. Mississippi Power's credit rating has dropped to three notches above junk.
The 582-megawatt Kemper plant is designed to convert a low grade of coal, lignite, into clean-burning syngas, which is similar to natural gas. As part of that process, the plant will strip out and capture 65% of the carbon dioxide, a greenhouse gas, that would have been released into the atmosphere by burning coal. Turning coal to gas before burning it, or gasification, has proved necessary for capturing CO2 because efforts to cull it from plants that burn coal haven't been practical.
Keeping CO2 out of the atmosphere is a goal of the Obama administration's since greenhouse gases have been implicated in climate change. The government last month set limits on CO2 emissions from new power plants and cited Kemper as evidence that power plants could meet the new standards.
Through various subsidies, the federal government had committed nearly $700 million for the Mississippi Power plant, though part of that was the $133 million that the utility will forfeit because of delays.
The Mississippi Public Service Commission approved Kemper, fearing that the price of the natural gas that powers many plants in the state would increase. Mississippi Power told the commission in 2009 that natural gas could hit $20 per million British thermal units and would drop no lower than $7.38 between 2014 and 2054. Its forecast was made even after energy companies had discovered a way to pull gas from previously inaccessible shale-rock formations. The resulting glut means that natural-gas prices haven't topped $6 per million BTUs since January 2009. Today, they are around $3.75.
|Kemper Plant Construction|
Kemper's cost, previously projected at around $2.9 billion are now estimated to be $4.7 billion. The utility says it underestimated labor costs and the amount of steel pipe, concrete and other materials it would need for so big a plant.
Because the state Legislature allowed Southern to charge customers for the plant's costs before it began generating power, customer rates began to rise, jumping 15% this year. A 3% increase is scheduled for next year, though the company is seeking 7%.
Regulators and Southern agreed in January to cap costs that customers would cover at $2.88 billion, far below the $4.7 billion projected cost. But Southern recently won approval from the Legislature to sell up to $1 billion in bonds to help cover about half the difference; customers will repay the bonds through a surcharge on bills.
Some locals have another reason to remain enthusiastic: They don't have to pay for the plant. Many Kemper County residents get power from the federal Tennessee Valley Authority, which charges some of the lowest electricity rates in the country. (WSJ, 10/13/2013, photos/graphics courtesy WSJ)