Wyatt Emmerich: An expensive and dubious experiment

February 20, 2013 10:11:13 AM



Both the Mississippi House and the Senate have approved a bill that saddles one-third of Mississippi's homes and businesses with a billion dollars in debt relating to the Kemper power plant. If Gov. Phil Bryant signs the bill, it will become law. 


If you live in the southeast one-third of our state, chances are your own household is about to be on the hook for an extra $3,500 in debt - payable through mandatory increases in your utility bill. 


This is like watching a train wreck in slow motion. If Kemper continues, it will set back economic development in Mississippi for decades. Why come to a state with high utility costs? 


It's not too late to stop this. The Public Service Commission can still rule that the entire plan was "imprudent." The plant could then be converted into a natural gas plant and the giant utility parent company, Southern Company, could be forced to eat the loss. 


Such decisive action is unlikely, mainly because the powerful politicians who backed this misguided project would have to admit their mistakes. 


"Imprudent" it is. First of all, the Kemper plant relies on an untested technology. We don't even know if it will work. There has never been a commercial scale lignite plant that has successfully sequestered and stored CO2. 


Second, we don't know if the CO2 can be stored in the ground without environmental damage or loss of the gas. Finally, the market for CO2 is not established. 


Basically, the whole project is a massive high-risk venture capital project forcing Mississippi homeowners to finance the project through their utility bills. And guess who benefits if the project works? The Southern Company. It gets the patent on the process - if it works. Mississippians get the bill if it doesn't. 


In response to the cost overruns and looming rate hikes, the Mississippi Public Service Commission (PSC) has negotiated a 10 percent cut for Mississippians on any patent revenue. In a private deal, the firm that puts up the money would get 80 - 90 percent of the profits, not the other way around. 


The PSC - with backing of the Legislature and the state Supreme Court - needs to stop the bleeding and convert this to a simple gas-fired plant. If Southern Company wants to pursue its cockamamie plan to sequester CO2 from lignite, then great. Let them do it on their own dime. 


Instead, the Legislature has rubber-stamped the PSC's plan to issue a billion in bonds whose principal and interest will be paid by Mississippi homes and businesses. This is nothing more than an attempt by our political leaders to save face and delay the wrath of the voters by borrowing more of someone else's money.  


The Kemper power plant was supposed to cost $1.8 billion. Now the tab is approaching twice that much. This is a disaster caused by a perfect storm of big business, big government and big lobbying firms. 


Ironically, the Kemper plant, which runs on low-grade coal, is being constructed right as fracking is discovering huge new cheap sources of natural gas. 


The Kemper plant, if it works, will generate 582 megawatts. In comparison, the Tennessee Valley Authority (TVA) is building a natural gas power plant for $820 million capable of 880 megawatts. 


Let's think about this: The TVA gas plant will cost one-fourth as much and will produce 50 percent more electricity than the Kemper lignite plant. The gas plant is proven technology with unlimited supply. The lignite plant is experimental and faces all kinds of uncertainty and risk. 


So why would a power company do this? Because the commission is bigger on a $3.8 billion plant than an $820 million plant. The power company is allowed to make a percentage profit on the rate. The higher the rate, the higher the percentage profit. The higher the equipment cost, the higher the reimbursement profit rate. It's simple math. 


Power company executives, in fact, by law have a fiduciary responsibility to maximize the return to their shareholders. They could be sued if they did not do their best to maximize rates, which in turn maximize profits. 


If ratepayers were free to choose among energy providers, this wouldn't be a problem. But in a regulated environment, ratepayers are totally dependent on the three public service commissioners and the Legislature. The lobbying has been significant. When the project is in the billions, you can afford to spend millions on politicians. 


Sadly, there is no watchdog here except the Sierra Club. In conservative Mississippi, most people feel that if the Sierra Club is against it, it must be a good thing. The Sierra Club opposes the plant because it uses low-grade coal (lignite.) The real reason to oppose Kemper is its mind-boggling inefficiency. 


If this had been 20 years ago, our larger statewide newspapers might have done an exposé. But that was then and this is now. Our larger newspapers have lost half their subscribers and most of their investigative reporters. Instead of buying a subscription, people get their news for free on the Internet. Funny, there is no free lunch. You get what you pay for. The money saved on subscriptions will be peanuts compared to the utility rate hikes to cover this boondoggle. 


Throughout all of this there has been one lone voice of sanity, Democrat Brandon Presley, the sole member of the three-member Public Service Commission to vote against this project and raise obvious questions. This is a good argument for a two-party system, for much of the blame rests squarely with Mississippi's Republican leadership.