Jackson Jambalaya

Bigger Pie Forum Kelly Williams says Kemper is much like Obamacare in this latest column:


Obamacare and Mississippi Power's Kemper lignite plant have a lot in common. Both are unworkable government solutions to manageable problems. Both have undesirable consequences. Obamacare is destroying the nation's healthcare system and a sixth of the economy. Kemper is saddling a third of Mississippi with high electricity cost. The consequences are becoming more obvious every day.

Both are complex and easy to spin and misrepresent. Both have winners and losers. The early line on Obamacare was there would be more winners than losers. So it was OK to lie about it to get votes for it. But thanks to the disastrous website rollout, the losers are waking up to the con. They are realizing how bad it is. They now outnumber the winners. This is causing some Democrat senators who voted for it to crawfish and try to delay its impact. (Think Mississippi Power's seven year plan to delay Kemper's cost pain to its customers.)

Politics and spin
Kemper's politics are getting tricky too. The early line was it would be a winner for the company and its suppliers and backers - and that the losers (customers) wouldn't realize they were losers until it was too late. But despite the spin, customers are waking up to the 3X higher electricity cost that's coming thanks to the disastrous construction cost overruns.

Obamacare's problem basically is the arrogance and incompetence of central planners. Kemper's problem is the same - on a smaller scale (but still Mississippi's biggest boondoggle ever). Specifically it's the $4+ billion experimental gasifier required by the $270 million DOE grant that Mississippi Power took. It is an unworkable government solution to a political problem - global warming. In theory it will turn cheap lignite into syn gas to use instead of natural gas to make electricity. The experiment may not work. If it does, its electricity will be 3X the cost on natural gas. Customers lose either way. Like Obamacare.

Who pays
The Public Service Commission will decide who pays for the gasifier - the company or its customers. The company says customers should pay $3B and it will pay $1B. Customers say the company should pay off all of it since it's the company's mistake. If the company wins, customers lose and will pay 3X as much for power over the life of the plant - $1000+ more in annual electric bills for residential customers. About half of these have household incomes less than $40,000 per year. There won't be much left over for Christmas and back to school.

The PSC's job is to assure customers a reliable supply of affordable energy. It is not to protect the company from its mistakes. Especially if the company has misled the PSC.

Damaging disclosure
The company recently disclosed that it started construction while engineering was only 20% complete and that this explains the cost overruns and completion delays. This is unbelievable incompetence in project management. Why did the company do it?

Was it in a vain attempt to meet the construction completion deadline to preserve investment tax credits already booked? Like the premature rollout of the half baked Obamacare website to meet the enrollment timeline?

Was the PSC misled?
Did the company justify plant cost to the PSC based on 20% complete engineering? Was it a low ball budget? Was the plant too complicated and too expensive to tell the truth about it and get the PSC to vote for it. Is it still? Like Obamacare?

Did the company give the PSC rosy projections of operating results and electricity cost based on 20% baked engineering? Did it say what the PSC wanted to hear to sell the project? Like the President's, "You can keep your insurance plan if you like it."

Did it also provide inflated natural gas price projections to make syn gas look like a bargain? Like horror stories told about "bad plans" to scare people into Obamacare's insurance exchanges?

PSC clean slate
If the answer to any of these questions is yes, the PSC should not be bound by earlier decisions that favor the company at the expense of customers. It should start with a clean slate and make the best decision now for customers. It should follow the used and useful precedent when it determines prudent cost of the gasifier. This means no decision until after the 5-7 years the company says it will take to get the plant up and running.

So far the company has convinced the PSC that customers should pay while it tries to get the plant to run. But Kemper's customers are wising up and learning that natural gas is a cheaper and better deal for them now. They are looking to the PSC to do its job and assure them a reliable supply of affordable energy now. It's shaping up as another political battle.

Handicapping the politics
The odds still favor the company and its powerful supporters. It has money to spend and direct for lobbyists, political campaigns, opposition research, media ads, legal expenses, etc. It has a network of grateful (perhaps dependent and deferential) elected and appointed officials, contractors, vendors, legal service providers, consultants, etc. It has a well earned reputation for community donations and service and volunteer activities by its officers and employees. But they are a little like the crewe on a mardi gras float throwing beads to the grateful masses - beads the masses paid for thrown from a float they bought by a crewe whose salaries they pay.

Despite these advantages, the political winds are shifting against Kemper. Obamacare's political fortunes are a harbinger of Kemper's political future.

Things to come
Democrats own Obamacare. Not a single Republican voted for it. Many Democrats are now finding ownership to be a liability. It's becoming more and more obvious that it is too complex to work, is a bad idea anyway, and there are more losers than winners. Vulnerable Democrats are edging toward the lifeboats. Don't want to wait too long. There may not be room left. Looks like Secretary Sibelius has been elected to go down with the ship. What about Captain Obama?

Mississippi Republicans own Kemper. It was promoted by a Republican governor and endorsed by his successor. Two Republican PSC commissioners have consistently voted for it against the lone Democrat on the commission. One of the Republican commissioners now retired brags about his ownership. The former Republican governor is on the service club luncheon circuit defending it.

The Republican controlled Mississippi house and senate passed the Baseload Act and the billion dollar bond bill to finance Kemper under the leadership of Republicans. Both were sold as good for customers because they reduced financing costs for the company - which the customer would pay anyway. Both have lots of losers including 186,000 retail customers who are already paying more and who are on the hook personally for Kemper's bonds. They know where to look for someone to blame.

Not too late
The lifeboats may get crowded when Kemper hits the startup iceberg. It's already taking on construction overrun water. But most Mississippi Republicans don't have to go down with Kemper. Many were misled when they were told and believed Kemper was good for Mississippi and the company's customers. Now they know better. They can make amends by seeing to it that the company pays for the gasifier mistake, not customers.

Obamacare and Kemper both have powerful political leaders who sold and pushed the programs. Their legacies are at stake. President Obama's is threatened by the failure of Obamacare and his dishonesty about it. Kemper will take its toll too.

But Kemper doesn't have to be a disaster for everyone. The company should own up to its gasifier mistake. And man up and pay for it. And quit trying to lay it off on its customers. And Mississippi's leaders and regulators and ordinary folks should join forces to make this happen. And learn from the experience.

Kelley Williams is the former CEO of First Mississippi/Chemfirst and a Jackson resident. He can be reached at kelley@greenover.com.