This essay was written by Kelley Williams. He serves on the board of directors for Bigger Pie Forum.
Mark Twain advised: "Never argue with an idiot. He will bring you down to his level and beat you with experience," and "Don't interrupt a fool when he's making your point."
We have taken his advice. We have patiently endured smears and personal attacks by Kemper supporters. And bogus claims that Bigger Pie has misused taxpayer funds. It seems we have struck a nerve with our exposure of Mississippi Power's Kemper plant abuses.
Meantime we voluntarily provided information, audits and records to the state auditor and to the Legislative Peer Committee to prove that we have no state funds. After thorough review, the Legislature's Peer Committee and the state auditor both confirmed this month that neither Bigger Pie nor its ITD parent have taxpayer funds – as we have said all along. So we can continue to speak out against bad policies and politically popular but destructive projects like Kemper. We are not subject to political influence or intimidation.
Too bad for the efforts to discredit and silence us. But thanks for the publicity.
A sore nerve
We have exposed Kemper's $4 billion extra cost and the abusive electric rates and tactics to pay for it. It will suck $300 plus million a year out of the Gulf Coast economy if customers pay for it. Mississippi's Public Service Commission will determine who pays. If the company pays, it will eat another $3 plus billion on top of $1 billion already written off. We think the company should pay for the extra cost.
Ouch! That hurts when you touch it.
Kemper's $270 million grant tail
Bigger Pie has no taxpayer dollars. But Mississippi Power does have taxpayer dollars from a federal grant and tax credits. Let's take a look.
The Department of Energy gave the company a $270 million grant to build an experimental plant. The plant cost to date is over $5 billion. The company could have built a simpler better plant for $800 million. So the grant increased the cost by $3.93 billion ($5B less $.8B less $.27B). The grant is the tail wagging the Kemper dog.
Grant has string attached
The grant has a string attached. The plant must "demonstrate advanced power generation systems using IGCC technology." Translation: The plant must try experimental technology to see if it works. It may reduce emissions if it does. However, it will not produce low cost electricity.
Technology not demonstrated. High cost is.
The experiment is the $4 billion gasifier. It is supposed to turn lignite into a syn gas to replace natural gas. It is still unproven. But it has demonstrated it can't compete with simpler proven natural gas fired combined cycle turbine technology. It is unaffordable even if it works.
No one would voluntarily buy the gasifier's expensive electricity. But if the PSC says it's prudent, retail customers in Mississippi Power's monopoly service area will have no choice. They are also liable for $1 billion of the company's debt - thanks to the Legislature's bond bill.
Build first. Think later.
The grant and a $133 million tax credit with a deadline led Mississippi Power to start construction while engineering was only 20 percent complete. Build first. Think later. So it made costly mistakes. The company has written off $1 billion of its mistakes. It wants the PSC to make customers pay for the rest.
Get a grant. Build a plant. Needed or not.
Mississippi Power got the grant in 2008. In 2009 the PSC decided a new plant was needed. The company started work on the gasifier in 2010. However, the PSC did not finally approve its technology and construction until 2012.
Here's the time line. The company took the gasifier grant a year before the PSC determined there was a need for a plant to use it. The company started working on it four years before the PSC approved its technology or its construction.
Once it took the grant, the company was locked in to the gasifier. But it needed PSC approval to build it. The company didn't wait. It went ahead and spent hundreds of millions on the gasifier pending approval. Was there an understanding with the PSC?
The PSC's decisions and rationalizations look like they are driven by the grant and favor the company. Maybe the grant locked in some members of the PSC too. The newest PSC member says it was brilliant to cap cost (due to the grant) at $3 billion. Is it brilliant because $3 billion is less than $5 billion? If so, it would be even more brilliant to cap prudent cost at $800 million for the plant's turbines on natural gas.
Not cheaper in the long run
The PSC evaluated the gasifier against natural gas fired combined cycle plants in widespread use. The gasifier was more complicated and more expensive and risky. It would take much longer to build and start up and run routinely and reliably. And its electricity would cost a lot more.
The PSC picked it anyway over the cheaper simpler safer alternative. The justification was that although more expensive in the short run, it might be cheaper in the long run - if natural gas prices were high enough. So: A bird in the bush is worth two in the hand.
Mississippi Power apparently presented natural gas forecasts that convinced the PSC of this argument. Both the company and the PSC have declined to disclose these forecasts in response to our public records request. So much for regulatory transparency.
Gasifier costs 3X higher
They have also declined to say how much cheaper the gasifier might be in the long run. Even if they disclosed their projections, would you believe them in view of the massive construction cost overruns vs. budget? Would you voluntarily pay more for electricity for seven years for the chance to pay less eight years later? How much less would it have to be to make it a good deal?
There is a widely used industry analysis for questions like this. It's called levelized cost.
It considers the cost and time to build a plant, its fuel and operating and other costs, its operating rate, its reliability and life, interest cost, etc. So you can compare a plant that's cheap to build but expensive to operate with one that is expensive to build but cheap to operate.
We have calculated the levelized costs for Kemper's turbines running on 100 percent natural gas and for Kemper's turbines running on syn gas from the gasifier. (We assumed a cost of $800 million for the turbines and natural gas prices per the Energy Information Administration. We used the company's $3.8 billion cost for the plant on syn gas.)
Here are the results: The levelized cost for Kemper's turbines on natural gas is $.05 per kwh. It's $.16 per kwh for Kemper's turbines on gasifier syn gas.
The gasifier's electricity is over 3X the cost from natural gas over the life of the plant. The gasifier is not cheaper in the long run.
We think the gasifier's actual cost will be higher because it could be harder to start up and operate than to build. And construction has been one disaster after another. Look for startup to be more of the same. It won't be - uh like flipping a light switch.
Tax credits with strings
The $133 million of tax credits required that the plant start up by mid-2014. Although this startup schedule was doubtful from the start, the company booked the credits anyway. It now says it must return them because it can't meet the startup deadline due to construction delays.
Project over manned
The company tried to save the tax credits and make up lost time by beefing up the construction workforce. It now says it over manned the project and that 6,000 workers on the site are too many to work efficiently. It appears that over 4,000 workers are from out of state. So much for Kemper's being good for jobs in Mississippi. The company did not mention the extra cost of the extra workers. A reasonable estimate is at least $1.5 million per day. Who pays for this?
Alabama jobs
Kemper is just a few miles from the Alabama state line. Many of its workers are from Alabama, which is home to union craftsmen with the skills that Kemper needs. The unions are well funded and have long relationships with Alabama Power, a sister company of Mississippi Power in the Southern Company family. These union workers have a stake in Kemper's union jobs.
Mark Twain was right
These union workers also have an advocate. He has run a smear campaign against us for exposing Kemper's many faults and its devastating effect on the lives of Mississippi Power's customers. The campaign has called attention to Bigger Pie. And to Kemper. It has unwittingly helped make our point. Mark Twain was right.
No taxpayer funds
Too bad for the futile appeal to state authorities to shut us down. And that is an argument for organizations like Bigger Pie with financial and political independence. And for things like the First Amendment.
Kelley Williams is the author of this essay. He is the former CEO of First Mississippi/Chemfirst and a Jackson resident. He can be reached at kelley@greenover.com. Discover Bigger Pie Forum at Biggerpieforum.org.
Monday, January 6, 2014
BIgger Pie: Auditor clears us
Bigger Pie Forum purchased distribution rights for its content on
Jackson Jambalaya. This post is sponsored content.
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10 comments:
At first it was impossible to tell if the 'speaker' was representing Bigger Pie or Jackson Jambalaya. Usually when he starts off an article using WE and OUR, it's about this forum. Otherwise, it would usually start something like, "Here's what the folks at Bigger Pie have to say about.....", or at least include quotation marks.
It's early a.m.
State Auditor cleared us.....doesn't have quite the same ring to it these days. Probably should check the donor list.
January 6, 2014 at 6:49 AM = lover of nits
Why no justice for Southern Company's Jake Horton?
You gotta love transparency.
Makes one question how much "Cuz" Chip Pickering gleaned from Southern Company. In his last year in Congrees, he reported an annual income exceeding $1,000,000and in the same breath, claimed that the Kemper Gasification Plant was the crowning achievement of his thirteen-year reign in Congress. More line a crown of thorns. I suspect that Chip's position(co-chairman?) on the House Energy and Commerce Committee allowed him to steer a lot of DoE quid pro quo grants and tax deductions to Kemper.
Chip certainly proved to be a man of numerous positions.
Chip certainly proved to be a man of numerous positions.
That would come under his liaisons with the Belle of Bude up there on DC's C-Ttreet. With his religious connections, I suspect the missionary position
would be his preference.
lol 1046. calls for mind bleach.
Williams' statement would sound a lot more credible if he provided a copy of the auditor's report. But he's not one for showing the same cards he demands from others.
ITD (from which Bigger Pie is funded) is a state-owned nonprofit fund that began with federal and state tax dollars and has had no private money added. That means it contains only tax dollars.
Maybe those tax dollars have been invested over the years and have made more dollars, but all the dollars still belong to the taxpayers.
If Williams invested his own money in a fund, and that fund earned a return, I can guarantee he wouldn't buy the argument that that return money should belong to someone else -- that money made using his money didn't belong to him. Which is exactly what he's arguing for Bigger Pie.
As my Granny used to say: Hell won't be hot enough for some people.
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