Saturday, March 18, 2017

Bill Crawford: Fuel Diversification is Real Kemper Issue for PSC

What will natural gas prices look like over the next 40 years?


Well, over the past 20 years, prices recorded at the dominant Henry Hub distribution center in Erath, LA, ranged from a low of $1.05 per million Btu to a high of $18.48. Over the past 10 years prices ranged from $1.46 to $13.31.

The current price is $2.60. Forecasts show prices rising over the next two decades, but they vary in pace and amount. The U.S. Energy Administration projects natural gas prices through 2040 using multiple scenarios that encompass demand, supply, exports, and various consumption projections. Its latest forecasts indicate prices may remain below $4.50 or jump as high as $9.20.

The only knowable thing about natural gas prices is they are volatile.

When Mississippi Power Company proposed its Kemper lignite plant to the Public Service Commission (PSC) over a decade ago, traditional coal-fired plants were under attack by environmentalists and EPA and natural gas prices were high, averaging $7.81 at Henry Hub from 2005 through 2008. The company and the commission deemed it prudent for Mississippi Power to pursue an alternative fuel source for its next baseload power plant. The alternatives were nuclear and clean coal. Given Mississippi's vast, cheap lignite deposits, the clean coal alternative was chosen.

All know what happened next. Shale oil discoveries dramatically ramped up gas supplies, driving down prices. And the costs to build the lignite plant skyrocketed.

Over the next several months, PSC commissioners will be tempted, and politically pressured, to gaze into a crystal ball and guess what natural gas prices will be over the next 40 years. That's because the lignite plant will soon come fully online and the commission has linked the "viability" of the plant to natural gas prices.

Yes, the technology works. Syngas produced from lignite coal has powered electricity generation which has been delivered to Mississippi Power customers for weeks now. Carbon dioxide has been sequestered, sulfuric acid produced, and both delivered to downstream users.

The final hurdle for the plant to come fully online is for both syngas turbines to operate simultaneously for a specified period of time.

When it does, the company will ask commissioners to approve rates to allow recovery of costs for building and operating the multi-function facility. Building costs for the power plant were capped at $2.8 billion. Another $1.4 billion was authorized for the CO2 pipeline, the coal mining operation, and limited other items. Allowable operating costs have yet to be determined.

How much cost to allow Mississippi Power to recover from ratepayers will be the great challenge for our elected commissioners. Politicians tend to focus on the moment. Utility companies must focus on multiple decades. That's why major power generators have diversified baseload fuel supplies. History has shown reliance on a single fuel source over time to be imprudent.

So, the real analysis facing commissioners is not what natural gas prices may do, but how much rate payers should invest to provide Mississippi Power necessary and prudent fuel diversification.

Crawford is a syndicated columnist from Meridian (crawfolk@gmail.com)

19 comments:

Anonymous said...

One of the very few well written, well reasoned articles about Kemper. Not the populist Bigger Pie natural gas investor based article; not the I hate the politicians, lets bash them all approaches; and not the Southern Company is our great utility defense. PSC has a responsibility to do the job of determining prudence which includes having to look at costs over decades, not until the next election. Good job, Crawford

Anonymous said...

Gimme a break. Crawford is in the tank for Kemper. Only water carrier bigger is Haley Barbour.

Anonymous said...

2:05 Please read 1:37 comment

Anonymous said...

2:05 -- that's you in 1:37's comment, in case you don't recognize yourself.

"not the I hate the politicians, lets bash them all"

Thanks for chiming in - you represent your group well.

Anonymous said...

abolish the PSC and the market will sort it out

Anonymous said...

Kemper Clean Coal is all sunshine and rainbow farts until the price of gas goes above 10.00/MBTU. At which point we will find out what the availability of the magic lignite coal gasifier scrubing collection process really is. Anyone want to bet that it will have more suck than a black hole?


Meantime Bill Crawford previously bloviated on Mississippi Republican politics and waxed nostalgic for the days of Haley and sons' principled lobbying and governing.


BILL CRAWFORD: Responsible governance has had its day in Mississippi
Posted on April 24, 2016 by Daily Journal in Opinion
BILL CRAWFORD

BILL CRAWFORD

Bless their hearts. They did the best they could.

After taking care of themselves, political promises, and lobbyists, there just wasn’t much Republican legislators, with their new super-majority in the House and Senate, could do to take care of Mississippi’s real needs.

At least it certainly looks that way.

House Republicans kept their money train fueled by special interests and lobbyists on track.


...

Another unaddressed real need is the growing fiscal crisis. Just after Republican legislators adopted its huge tax cuts, Gov. Phil Bryant ordered additional mid-year budget cuts and another raid on the state rainy day fund. Couple these with legislators depending once again on one-time money to balance the budget and you see the state’s sound fiscal foundation starting to crack. Aggravating the problem, insiders say spending bills just passed will exceed next year’s revenue by $150 to $200 million. And that’s before the new tax cuts kick in.

Yes, it seems clear, the politics of self-interest and special interests now dominate the Republican dominated Legislature. Responsible governance, espoused by the early fathers of the modern Republican Party in Mississippi and championed by former Gov. Haley Barbour, has had its day.


KIOR, BEEF PLANT, KEMPER, that kind of fiscal nonsense all got in high gear just as soon as Haley's term ran out. Right?!

Anonymous said...

Why should ratepayers pay for fuel diversification? They should get the cheapest fuel prices possible. If fuel prices go up, let the people who are buying power THEN pay for it. This notion that some people have to pay now so that some people don't have to pay later is pure speculation. Let it happen as it happens.

Anonymous said...

Damn 6:12, with that kind of forward thinking we should put you in charge. That way, utilities won't have to build any back-up plants to supply electricity Might be a problem when one goes down for needed repairs, or some natural disaster - at that point the utility will have to start construction of a new generating plant. Might leave you out of electricity for a few years until it gets built, but for all those years until the back-up is needed, you want have to be paying for the extra capacity.

Anonymous said...

Southern Company made a huge gamble by building this experiment and putting on the back of its smallest utility. PSC also needs to look at how this plant affects rates and stifles economic development. Mississippi has a over supply of electricity as is. Nobody ever mentions Plant Sweatt (owned by MPC and idled the majority of the time) located just south of Meridian; or the plant in Enterprise that was built and dismantled due to low energy costs. The thing should never have been built, but now it's here and the PSC must limit the damage to the ratepayers.

Anonymous said...

3:20 & 3:46 snowflakes. Read 1:37. Self-serving bullshit. Bill Crawford is BarbourSouthernCoMPCKemper shill. Has been fm GETGO. Get over yourselves. Crawford using same nat gas price fuel diversification BS that Bogg Hogg uses. PLUS Henry Hub hasn't been "dominant" for long time. That's Crawford journo thinking he's some sort of exxxppperrrtttt. He ain't. Kemper has been scam since the 2793 drawing board. Lynn Posey complete idiot too. Go find your safe space now.

Anonymous said...

Crawford=Boar Hind Tit

Anonymous said...

Is Kingfish paying Crawford to come up with this bullshit or is Crawford paying Kingfish to publish his bullshit?

Anonymous said...

Here is the latest on Kemper just out. Read it and weep Bill. The rats are leaving the SS Kemper:

https://www.desmogblog.com/2017/03/17/brain-drain-engineers-and-managers-flee-southern-company-troubled-kemper-clean-coal-plant

So at what point are Bill Crawford and Barbour not willing to burn more money on the pagan altar of fuel diversification? $7.1 Billion enough? The truth is that it was the job of SO/MPC to understand that fracking had brought a paradigm shift to the natural gas market by 2010 and that natural gas prices, as the EIA has forecast, will not recover during the 40 year life of the plant if it ever reaches the Commercial Operating Date (COD). Further SO is just on the verge of blowing through the the June 3 "firm" date to both open and file a rate case on the coal gasification plant so they can ask the MPSC for $4.1 Billion. Then what will Bill Crawford have to say?

Anonymous said...

For $7 billion they could have acquired or built dozens of natural gas facilities or hundreds of wind and solar farms which would have generated more electricity than could ever be used for the entire state. It would have been highly profitable to have gone that route but they made a bad choice.

Anonymous said...

Wind or solar farms can not be used as a baseload plant. This is the same kind of argument BPF has tried to sell, comparing Kemper with other secondary plants. A baseload plant is one that will be a primary source, capable of operating and providing the required electricity 24/7/365. A natural gas plant would not meet the purpose of diversification. What could have been done that would meet the need was a nuclear plant - but getting one approved in today's climate, especially in the Obama administration years - was not going to happen.

Anonymous said...

Actually Southen Compqny is nearly complete on 2 nuclear reactors in Georgia. Built with plenty of incentives from the Obama administration. First reactors built since Three Mile Island.

Anonymous said...

8:51: A base load plant is required to be reliable 52/365. Kemper can't get there without the spending of hundreds of millions more over another period of many months. So just how many more dollars and skulls do you want to burn on the pagan altar of diversification to make that happen? And what do you propose doing on June 4 when the plant still isn't at COD and, if it ever opens, at any case is too expensive to operate and maintain as a coal gasification plant (employing 200 people to run it instead of 20)? The MPSC will walk away at that point and leave SO to continue to run the plant on NG and take its loss instead of their constituents. The good news is that SO makes tens of Billions a year and can and will take the hit.

Anonymous said...

Rate payers are NOT investors. They are consumers. The investors , who assume the risks and benefit from the profits, are supposed to take the losses and gains.

If Kemper were a good investment, they wouldn't have needed taxpayer money. Their stock holders would be happy and their stock would go up in anticipation of future success.

This notion of using tax dollars to pay for business start ups would be tolerable if taxpayers received a dividend when profits were made. We don't. We just get burdened with the costs.

Anonymous said...

SO needs to be ready to write off the $4.1 Billion instead of asking innocent ratepayers to pay for for their failed experiment.

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