The Associated Press April 25, 2012, 10:07AM ET

PSC approves Mississippi Power's Kemper coal plant

The Mississippi Public Service Commission voted Tuesday to give new approval for Mississippi Power Co.'s coal-fired power plant in Kemper County, pushing aside opponents' calls for a fresh look at the plant's finances.

The commission voted 2-1 to approve the $2.4 billion plant. Southern District Commissioner Leonard Bentz and Central District Commissioner Lynn Posey, both Republicans, voted for the plant. Northern District Commissioner Brandon Presley, a Democrat, voted against it. Mississippi Power is a unit of Southern Co.

The PSC had to vote for the plant again after the state Supreme Court ruled last month that regulators didn't fully explain why they raised a cost cap from $2.4 billion to $2.88 billion. The Sierra Club, which opposes the plant, brought the lawsuit that led to that decision.

Commissioners said Tuesday's ruling does not raise the $2.88 billion cost cap, which is meant to provide a 20 percent margin for overruns.

Tuesday's action is unlikely to end the dispute. Louie Miller, who heads the Mississippi Sierra Club, immediately threatened a return to the state Supreme Court. He said opponents will seek an immediate halt to construction at the site, where the unit of Atlanta-based Southern Co. has already spent $1.1 billion and committed another $400 million.

"They did not reopen the record," Miller said. "The Public Service Commission, on a 2-1 vote, has chosen to ignore a unanimous decision of the Supreme Court. What they did today is not legal."

The environmental group opposes the plant largely because it opposes mining and burning coal, saying it produces more carbon dioxide than natural gas. Carbon dioxide contributes to global warming, scientists say.

Mississippi Power spokesman Jeff Shepard said the company is pleased it can move ahead, and said it will deal with future challenges as they arise.

"We're continuing construction," he said. "If something else happens, the process will play out. We'll be here."

While Presley wrote in a three-page dissent that taking new testimony and evidence would be "an appropriate response" to the court decision, the two other commissioners disagreed. In a 133-page order, they wrote that the commission had collected volumes of testimony and evidence before initially ruling in favor of the plan. The power plant would burn lignite mined nearby, convert it to a gas to be burned to generate power and capture carbon dioxide to be pumped underground.

"We find that the record as comprised as of June 3, 2010, is complete, negating the need for the commission to hold additional hearings, request additional evidence or further supplement the record," the order said.

Mississippi Power proposed the huge investment in 2009. Commissioners approved it in 2010, limiting to $2.4 billion what the company could recover from its 193,000 customers. Mississippi Power said it couldn't borrow to build the plant unless it had a margin for error, leading commissioners to raise the cap to $2.88 billion with little explanation of why. The Sierra Club attacked that lack of explanation in its lawsuit, ultimately winning before the Supreme Court in March.

The PSC, though, quickly issued a temporary order giving Mississippi Power legal protection while construction proceeded, before voting in the utility's favor Tuesday.

The majority commissioners wrote that they favor Kemper because they don't want Mississippi Power to become too dependent on natural gas, because the price of that fuel could rise from its current low level. They noted that independent power generators who offered to sell electricity to Mississippi Power could not offer contracts that fixed the price of natural gas over decades.

Miller, though, says natural gas would be the cheaper outcome.

"There is no way they can justify Kemper under current conditions in the energy market," he said. "I think that is the driving force on why they don't want to open this back up."

Customers are not yet paying for the work being done at Kemper, although a state law allows Mississippi Power to recover costs before the projected May 2014 start of commercial operation. The Public Service Commission is still examining the company's proposal to start charging customers and hasn't yet approved any rate increases. Mississippi Power originally projected that it would need to raise rates by a cumulative 33 percent from 2011 to 2014 to finance what it borrows for the plant, and then gradually ease rates as it paid off the debt. It's unclear if the delay has affected those projections.

PSC staffers said during the hearing that Mississippi Power can't collect anything above $2.4 billion from customers before the plant starts operating and can't recover more than $2.88 billion, no matter what.


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