With southeast Mississippians paying 66 percent more for electricity and Southern Company writing off a billion dollars in losses, it’s reasonable to conclude the Kemper lignite plant is not working out well. The only question now is who should pay for it – the 350,000 Mississippi electricity customers or the 500,000 Southern Company shareholders.
If Kemper had been a success, the Southern Company shareholders would have reaped the benefit with patent rights to a new technology. Now that Kemper is failing, the same shareholders who would have benefited from its success should pay for its failure. That is the free enterprise system.
The original cost estimate for Kemper was $1.2 billion. Today, it is $4.7 billion and climbing fast with an uncertain startup date. The outside Kemper auditors have criticized the project for failing to implement basic cost control procedures – not surprising when a company that has never built a chemical plant tries to build a type of plant that has never been built in the history of the world. The magnitude of the hubris is remarkable.
Southern Company – a $17 billion utility holding company out of Atlanta – has a statutory responsibility as a Mississippi monopoly to provide its captive customers electricity at a reasonable rate. It has failed to do this, as its electricity now costs 66 percent more than Entergy customers pay in the rest of the state. Mississippi’s Public Service Commission (PSC) has been derelict in its duty by allowing this to happen. Kemper is the dessert ending a 12-course gourmet meal paid for by Mississippi taxpayers for the benefit of Southern shareholders. It’s Southern’s turn to pick up the check.
In the private sector, you buy new equipment to lower costs. Only in the perverted regulatory environment can you spend $5 billion on equipment and then raise prices. The system is broken.
Leonard Bentz, chairman of the PSC, tells us Mississippi’s losses are limited to $2.4 billion. We beg to differ. He consistently excludes – as the Mississippi Supreme Court has pointed out – a half billion for the mine and pipeline. And he excludes another billion that the state Legislature approved with the tacit permission of Bentz and his ally Lynn Posey at the PSC. The true figure is $3.88 billion. In fact, if history repeats itself, sooner or later Southern will seek reimbursement for every penny of the total $4.7 billion (and growing). Divided by the number of retail customers, that’s about $25,000 apiece. For that kind of money, every household could have installed solar roof panels and cut their energy bill in half.
Kemper made no sense from the get-go and Mississippians should not pay for a penny of it. While Kemper was being planned, Southern missed at least two opportunities to buy used natural gas plants either of which could have provided 50 percent more power for one-twentieth the cost. Even worse, there wasn’t a need for a new plant to begin with. State electricity consumption is flat. Southeast Mississippi electricity demand has never come close to exceeding supply. And if it did, Southern could buy electricity from dozens of existing plants throughout the South for 50 percent less than what Southern’s own plants charge.
How did this come to be? Best ask the Republican leadership which has championed the plant and pushed it through. We suspect a good audit of Southern’s PAC donations and lobbying expenditures might offer a clue, if such information was not secret. As the Republican Party assumes total power in Mississippi for the first time in 140 years, we are reminded of the old rock lyrics: “Meet the new boss, same as the old boss.”
Kemper will be built but who pays for it is still an open issue. Southern has now written off a billion dollars in Kemper losses. What does it take for our Republican leaders to see the writing on the wall? Do they really want to go down with this ship? Since when has defending the power company as it blatantly screws the common man been good politics in Mississippi?
The lack of candor on Southern’s part gives the Republicans a perfect opportunity to cry foul and distance themselves from this debacle. Whether the party has the wisdom to seize this opportunity remains to be seen. But then, maybe it has nothing to do with wisdom and everything to do with money.
The PSC should deem the entire project imprudent in its upcoming hearings. At the very least, delay a declaration of prudency until Kemper meets its operating promises beyond any shadow of a doubt. This could mean a long prudency delay. Southern has asked for seven years to work out the kinks.
If the PSC refuses to do its duty and protect consumers, the Mississippi Supreme Court should reaffirm its recent denial of the Kemper construction permit. Either of these two actions would save our state from an economic albatross that would hamper growth for decades to come.
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