By Bill Minor
JACKSON – “Corporate socialism” is how Northern District Public Service Commissioner Brandon Presley describes Mississippi Power Company’s $2.8 billion lignite-fueled electric power plant now under construction in Kemper County.
You’d be hard-pressed to challenge his characterization, given that MPC’s lignite venture is the first power plant ever built with consumers, rather than the company, paying the bill for its construction. MPC’s 168,000 ratepayers would pick up that tab even before they used one kilowatt from it.
“This is a heck of a good deal for stockholders of the company (Southern Company),” said Presley, “but a raw deal for ratepayers.” Southern Company, which had $2.2 billion net profit in 2011, is the nation’s fourth largest electric utility.
Kemper is unique for another reason: It’s the first time lignite – a peat-like form of soft coal found broadly in east-central Mississippi – is used as a fueling ingredient to generate electricity. Lignite, in thickness ranging from one to six inches under a thin soil cover, has long been known to exist in Northeast Mississippi but has never been mined commercially because of its low combustible quality.
Mississippi Power’s scheme for generating electricity with lignite is a huge experiment – a technology known as “gasification.” So, Mississippi, the nation’s poorest state (and Kemper County one of the poorest) is made a guinea pig for a high risk corporate venture. Owned by KBR (Kellogg, Brown amp& Root) of Houston and the Atlanta-based Southern Company, the process is designed to extract “syn” (synthetic natural gas) from the peat-like lignite to fire generators. Limited tests of the process were run at a test site in Wilsonville, Ala., but Presley contends “it has not been proven to be cost effective.”
Authorized in April 2010, on a 2-1 vote of the state’s Public Service Commission, the plant was estimated initially to cost $1.8 billion, which was later revised upward to $2.8 billion. Of note, when the PSC was first considering the lignite fueled generating plant, Gov. Phil Bryant, then lieutenant governor, testified for approval of the project.
In the months since the power company began construction overruns have escalated to $450 million over budget, prompting the company recently to ask for an interim 40 percent rate increase. When the PSC denied it, an appeal was taken to the state Supreme Court. High court judges ruled 8-0 against the company.
Notably, Mississippi Power’s chief counsel is Ben Stone of Gulfport, who also serves as attorney for the embattled State Port Authority at Gulfport, and is now chairman of the state Ethics Commission. A member of the ethics body for 20 years, Stone, a former Democratic state senator, was reappointed to another four-year term in 2010 by then-Lt. Gov. Bryant.
The PSC fixed a cap of $2.8 billion that the power company could spend for the Kemper project. Now, with the plant only about 35 percent complete and exceeding its budget, MPC revealed it was making a shake-up in the top contractors on the facility. Previously it’s been run by a joint venture: W.G. Yates amp& Sons Construction of Philadelphia (who were closely connected to the former Barbour administration, and now the Bryant administration) and KBR. Performance Contractors of Baton Rouge, already doing work related to the project, will be in overall charge of construction, said the company. Yates would still have a part in the project.
Presley, 35, the only Democrat on the three-member Public Service Commission, has waged a lonely battle against the huge electric generating gamble. But last week he picked up support from his two colleagues to probe whether utility companies are getting the lowest rates to borrow money. That’s important because what power companies pay in interest is part of their rate base on which the commission calculates what they may charge customers.
“Interest rates to borrow money are now lower than they’ve been in 60 years and we need to pass that on to the ratepayers,” Presley declared.
Columnist Bill Minor has covered Mississippi politics since 1947. Contact him through Ed Inman at email@example.com.