Wednesday, March 15, 2017

Bigger Pie's Charles Grayson: Death by a thousand cuts at Kemper

December 6, 2016, posted “Kemper Gasifier: Slow Agony, Sure Death”. The article called for a tough stance by PSC and Mississippi Public Utilities Staff (MPUS) during the remaining Kemper regulatory process: accounting declaration of in-service (operational), interim rate filings beginning June 3, 2017, Used and Useful determinations and, finally, determination of Prudently spend capital. We predicted Mississippi Power and Southern Cos would opt for a negotiated settlement of Kemper cost recovery if the free pass from Mississippi Regulators ended.

Southern’s February 22, 2017 Form 10-K (Annual Report) submitted to the SEC and comments by CEO of Southern to Wall St analysts, make clear PSC and MPUS have taken a more demanding stance on in-service designation than Southern expected. Southern recognizes the possibility, even desirability of a negotiated settlement on Kemper.

It gets worse for Southern. On February 21, 2017, Mississippi Power Co file an updated analysis of Kemper lifetime economics burning lignite syngas vs Kemper turbines burning natural gas. No surprise, Kemper burning lignite was less economical than the Kemper turbines as a stand-alone natural gas generating plant.

In the quotes below, Fanning is saying the Mississippi Public Utilities Staff is going to be more demanding than expected to declare Kemper in-service or operational. This can delay remaining cost recovery and rate making procedures for an unknowable duration and escalate MPC risks. Southern is acknowledging that a regulatory process in which all performance bars for Kemper may be high, represents an unacceptable risk. They have alerted Wall Street that Kemper may be resolved by negotiations outside the normal regulatory process. This can be advantageous for rate payers as it gives PSC degrees of freedom not available within the formal process. Will PSC take full advantage on behalf of rate payers? PSC should grant no rate relief for lignite processing costs until full Base Load operation on syngas alone is demonstrated for a full year.

The full text of our December, 2016 article, “Kemper Gasifier: Slow Agony, Sure Death” is reposted following recent quotations from Southern.

Quotes from the Southern Company 10-K filing of February 22, 2017 with the Securities and Exchange Commissions.

Page II-389: “The Company also recognizes significant areas of potential challenge during future regulatory proceedings (and any subsequent, related legal challenges) exist. As described further herein, these challenges include, but are not limited to, prudence issues associated with capital costs, financing costs (AFUDC), and future operating costs, net of chemical revenues, potential operating parameters; income tax issues; costs deferred as regulatory assets; and the 15% portion of the project previously contracted to SMEPA.”

“The Company also expects that timely resolution of the 2017 Rate Case will likely require a negotiated settlement agreement. In the event an agreement acceptable to both the Company and the MPUS (and other parties) can be negotiated and ultimately approved by the Mississippi PSC, it is reasonably possible that full regulatory recovery of all Kemper IGCC costs will not occur.”

Quotes from Tom Fanning, CEO of The Southern Company, in a conference call with financial analysts February 22, 2017.

“What it will be – when we file for tax and accounting in-service is essentially prescribed by accounting and tax rules. So when we hit that level, we think that four or five days of continuous integrated operation will make that determination.”

“I think the general thrust of the staff is that they want to see more sustained operation as yet undefined beyond what’s required in order to call this thing in-service for tax and accounting purposes. We’re having those discussions now.”


Cancer can often be “cured” (remission) if treated before metastasizing to other organs. Remission after advanced metastasis is nearly impossible, slow agony and sure death.

The Kemper clean lignite project is a cancer in Mississippi’s economy. It must be treated quickly if S.E. Mississippi’s economy is to avoid an agonizing death spiral. Shutter the mine and lignite gasification. Southern Company would write off $3.3-3.5 billion more. Neither regulation nor the U.S. Constitution ensures utilities a profit on an investment benefiting no one. Other options only manage varying degrees of damage to Mississippi’s economy.

Charles Grayson is a writer for Bigger Pie Forum.  

Bigger Pie Forum purchased distribution rights for its content on Jackson Jambalaya.


Anonymous said...

Thank you Haley Barbour. The greatest bullshit artist in the history of Mississippi politics.

Anonymous said...

No one allows me to pass on my mistakes to someone else. I've taken a bath on a few bad investments. Took my medicine and moved on. Southern Company should be required to do the same. You buy stock in a company, they make a bad decision, your stock loses value. Tough luck Southern Company, you should of done your homework. To force MS ratepayers to pay for your total screwup is wrong.

Anonymous said...

I don't care about Kemper County. I only spend money in Madison.

Anonymous said...

11:26 am. But all of Southeast MS including Meridian down to the Coast

Anonymous said...

11:26 am: Be assured that if all of Southeast MS is hit with the bill for this Unused and Useless lignite gasification plant that is too expensive to even maintain and operate, then all of Mississippi's economy and tax base as a whole will suffer as $4.2 Billion is transferred from Mississippi ratepayers to owner of Mississippi Power, Southern Company, in Atlanta. Hopefully the current Mississippi Public Service Commissioners will not allow that.

Anonymous said...

Southern company should have to pay the cost overage and let their stock valuation go down and dividends stop. They can also lower executive pay. Then maybe the shareholders will throw the bums out.

Anonymous said...

Who can forget when hooked-in-the-gill water carrier Chicken Little Crawford (July 2015) decided to shoot this messenger:

For years, communities, businesses, and consumers in southeast Mississippi have counted on Mississippi Power Company for far more than electricity. The company has been a valued partner in economic development projects, disaster recovery (especially after Katrina), fights to save military bases, and more. Further, company leaders frequently provide effective leadership for statewide initiatives.

For Hattiesburg oilman Thomas Blanton and others to gloat because they got an activist supreme court to strike down a rate mitigation plan for the company’s new Kemper power plant, and portray of this longtime, good corporate citizen as criminal, is over the top.

Indeed, communities, businesses and consumers may want to take a sober look at what happened.
Hopefully, the commission and the company will negotiate, as they did before, a rate plan to mitigate the impact on customers. The alternative may be a 40% rate increase in the near future.

A financially weak utility, requiring higher rates than those negotiated previously, benefits nobody. Customers should look to Blanton and the court if that happens.

Anonymous said...

Put your chest-high waders on before you jump into this massive discharge of Haley Barbour sewage from October 2013:

"The law changed while I was governor to allow the companies to start collecting earlier because it keeps the rates lower," Barbour said. "… It keeps the debt load down because you don't have as high of payments. At the end of the day, you will pay the same but you will pay less per month, which for most households is a bigger issue."

Translation: When I was Governor I pushed the Legislature to pass SB 2793 (2008) so that our monopolistic power companies could use Mississippi ratepayers like slave shareholders in an investment bank that never returns any money to its special class of ratepayer investors.

Barbour countered that although natural gas prices are relatively cheap in the U.S. at $3.60 per 1 million BTUs, he predicts they will eventually go up and pointed to the $11.87 per $1 million BTUs natural gas is selling for in Europe.

"You cannot believe the price of natural gas is going to stay the same," Barbour said. "As supplies increase and oil prices stay at $100 a barrel or more, it is inevitable we will see natural gas used as a motor fuel, because it is so much cheaper for the equivalent and it's going to grab more and more of the market share for motor fuels, particular for heavy trucks."

Then, for fun, the reporter makes the obligatory mention of the blind trust gag because who is going to challenge Haley Barbour. Right? Of course nobody tells you that Reeves Barbour held down the lobbying chore$$$$$ during Haley's time away. And we all know that Reeves was more than qualified to do the job.

Mississippi Power Co., a subsidiary of Southern Co., has long been represented by BGR, the Washington lobbying firm Barbour co-founded more than a decade before he became governor, according to an Associated Press article published last month.

Barbour acknowledged the financial link between Southern Co. and BGR during a luncheon speech, the AP article states.

"He noted after the speech that he was not working for BGR while he was governor; his assets were in a blind trust," according to the article.

Anonymous said...

The real question should be, "who got fat off of this?" (besides Haley, we know his snout is always first in the trough).

And yes, we will all pay for it.

Anonymous said...

I don't think the Meridian Star has ever heard a Haley Barbour idea that they don't like:

Bill just 'makes sense'

Kemper County plant decision a no-brainer

Governor Haley Barbour applauds PSC’s decision on plant

Some major spin here as Crawford throws some FUD over natural gas:

Crawford: Kemper plant a prudent investment

Which is the exact same talking points that Haley and all the others were throwing all along. Right Bill?

Anonymous said...

Southern Company Says Kemper Not Viable as Coal Plant, Blames the PSC

Anonymous said...

Does Worker Comp Commission provide cowboy boots for its three members? If not, they will soon.

Anonymous said...

Gov. Phil Bryant announces Energy Works: Mississippi's Energy Roadmap (updated)

Southern Co. CEO Thomas Fanning reiterated support for the coal-fired plant that its Mississippi Power Co. subsidiary is building in Kemper County, despite the cost rising to $2.8 billion.

"There's a big capital cost, I get that, but the energy coming out of this technology will be super-cheap," Fanning said.

He said Kemper's technology, which would capture carbon dioxide and other byproducts and sell them to other users is "a home run, not only for the state of Mississippi but for America and the world."

Fanning warned against relying too much on natural gas, though Southern Co. is currently burning gas for 47 percent of its power. He said coal and nuclear should be kept viable, indicating that's why his company is building Kemper as well as new nuclear reactors in Georgia.

Bryant also repeated his support for the Kemper plant. When asked if the Public Service Commission should reverse itself and grant Mississippi Power a rate increase now, Bryant said he'd leave that up to the PSC.

Anonymous said...

Gov. Phil Bryant signs bills ratifying Mississippi Power rate increases for Kemper project (updated)

JACKSON, Mississippi -- Gov. Phil Bryant signed two bills into law Tuesday, codifying a settlement between the Public Service Commission and Mississippi Power Co. over the company's Kemper County power plant. Mississippi Power, a unit of Atlanta-based Southern Co., filed for a 7-year-rate plan as contemplated under one of the laws less than two hours after Bryant approved the measures. The other law that Bryant approved allows Mississippi Power to sell up to $1 billion in bonds to pay Kemper costs over $2.4 billion.

Tuesday was the last day for Bryant to act before the bills became law without his signature. He repeated his support for the plant in an interview with The Associated Press. Bryant has previously said the plant, with its plan to gasify soft coal mined nearby, is an important element of an energy policy for the state

"I think we've gotten a strong show of support from the Legislature, but the most important point to me is carrying through with our responsibility to the people who work there," Bryant said. "Hopefully, this will keep the cost of energy low in the future."

Anonymous said...

Sometimes things work out and sometimes they don't, but usually you don't have to spend three or four or seven billion dollars before you figure out it's not going to work out.

Anonymous said...

More Kemper WIN!

JACKSON, Miss. (AP) - After a tubing leak in part of its Kemper County power plant, Mississippi Power Co. now says it's unsure when the $7 billion plant will be finished.

With the plant three years behind schedule, the Atlanta-based Southern Co. says it won't meet the latest deadline of mid-March. Mississippi Power will update the schedule and cost of the plant next month.

Related SEC Southern Company/Mississippi Power 10K filing with filing date of March 16, 2017:

Anonymous said...

SO and MPC can't say when they will have the plant open, but their deadline to both open and start a rate case at the MPSC is June 3. Commissioner Britton is quoted as saying that June 3 is a "firm deadline" for a rate case; the deadline is just 2 1/2 months away. Think they'll make it? The plant remains unused and useless because in comparison with Natural Gas the plant can't be economically operated. Opening the plant as a lignite gasification plant will not benefit the "public convenience and necessity".

Anonymous said...

Beef plant 2.

Anonymous said...

I wonder how Haley's valet and shoeshine boy, Leonard "I own Kemper" Bentz, is feeling about his pet economic development project these days?

Anonymous said...

7:55: Beef Plant 2? I wish! More like Beef Plant times a thousand!

Anonymous said...

"This is an unbelievable accomplishment, and it''s a game changer for our country," he said.

Barbour recalled when the idea was first presented to him. The notion of turning wood chips and agricultural waste into fuel sounded like the alchemists of old claiming they could turn straw into gold.

"It''s almost like making gold out of straw," Barbour said of the technology, which reduces nature''s process of breaking down biomass over the course of decades into a matter of seconds.

"It does sound like science fiction, even though I have explained (the process) a number of times," admitted Fred Cannon, CEO of Kior.

Kemper only function so far is employing parasites and vaporizing ratepayer and taxpayer money.

BUUUUUT... ALL the lobbyists got paid, UPFRONT!

Anonymous said...

Do the people who led us to this foreseeable (there was a fracking revolution, right?) dead end have regrets sufficient to prevent them passing on the burden of Kemper to the innocent rate payers? Do they have regrets at all? Will the MPSC end up with regrets?

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