Wednesday, August 19, 2009
The Mississippi Public Service Commission will begin the first round of hearings Oct. 5 to determine the feasibility of an expensive, new coal-burning plant in Kemper County. Mississippi Power filed a certificate of public convenience with the commission, asking for permission to begin preparing nearly 50,000 square acres of land for the purpose of digging up the low-grade coal-ish lignite to burn in a sister power plant that is, theoretically, designed to capture 65 percent of the resulting carbon dioxide.
The plant is an ambitious venture, considering there's nothing like it existing outside a laboratory. It's likely to be expensive. Mississippi Power says it will cost about $2 billion to put together, but that's only after it gets almost $1 million from the federal government in gifts and tax incentives.
The question the commission is facing is why exactly do we need it? Mississippi Power says the state will need new power sources to fund growing industry in the state, which represents almost 75 percent of the state's rising future energy needs. But they're not looking to charge the industries for the new plantthey're looking to pass that cost on to about 186,000 customers.
When the $3 billion Grand Gulf nuclear plant came online in the 1970s, it jacked up the monthly bills of Entergy's 300,000 customers by more than 50 percent. Mississippi Power has only 186,000 customers to finance their little expenditure. It is logical to assume that bills will dance upward for Mississippi Power folks. This is no problem for the people of Kemper County, who are served by rival power company Tennessee Valley Authority, but it'll be big news to Mississippi Power customers further south, who won't benefit from the plant's estimated 200 jobs.
One question commissioners will be weighing against the plant is whether or not it is easier to rack up use of smaller, newer power generators owned by independent power companies.
Small power companies like KGen own modern natural gas plants all over the state, which represent about 8,000 combined megawatts of electricity. A plant off Beasley Road in North Jackson operates only about 10 percent of the year because bigger power companies like Entergy prefer to produce power at their own aging facilities instead of buying from KGen. But the KGen plant, all by itself, can produce 520 megawatts of electricity, almost as much as the 582-Megawatt Kemper plant, and it was built by stockholders, not ratepayers.
The power of the future is already here. Ratepayers must demand that energy companies use this power to capacity before approaching us to pay for their new construction.
There are a couple of things I'd like to comment on. If my memory serves me correctly, the rate impact of the Grand Gulf plant was phased in over a 10 year period beginning in around 1988, so there was not a 50% percent increase in customers' bills. Please check me out on that, and I apologize if I'm wrong. I do know that Entergy's customers are now enjoying some of the lowest rates in the southeast. Another thing, KGen was not constructed by a "small company" but by a mega-utility -- Duke Power out of North Carolina. Several "merchant plants" were built in Mississippi by out of state companies in the early 2000's hoping to take advantage of very high margins in the "peak power market". These plants are designed to provide peak power, not baseload power that will be generated by Mississippi Power Company's new plant.The peak power markets never fully developed for the merchant plants. Also, during testimony at the MS Public Service Commission each merchant plant representative offering testimony during pre-construction hearings was specifically asked if he/she considered the regulated electric utilities as having an obligation to purchase power from them. Each person answered "no". These folks made bad business decisions and now they are trying to force the regulated utitilies to purchase power from them. Some of the merchant plants have been dismantled and some have been purchased by either TVA or the regulated utilities. The remaining merchant plants have formed a coalition with the Sierra Club and others to try and keep new baseload power plants from being built...as well as demanding that the regulated utilities purchase power from them. That's quite a change from their initial game plan.
Here's a rare Adam Lynch response, Freebird, verbatim. Adam writes: I saw your input and couldn’t stop myself from responding. Indeed it’s a thrill to see anybody responding to a story about the utility industry. (It just doesn’t to seem to have the pizzazz of a Pickering story, for some reason—possibly for the lack of sex). So let me read back some quotes from you: In complaint No. 1 you calls into question the issue of subsequent rate increases connected to Grand Gulf’s construction : “There are a couple of things I'd like to comment on. If my memory serves me correctly, the rate impact of the Grand Gulf plant was phased in over a 10 year period beginning in around 1988, so there was not a 50 percent increase in customers' bills. Please check me out on that, and I apologize if I'm wrong. I do know that Entergy's customers are now enjoying some of the lowest rates in the southeast.” Entergy did raise their customer’s rates more than 60 percent for the purpose of financing the $3 billion Grand Gulf nuclear power plant. Yes, they did phase those rates in over a multi-year period, but that is not to say customers didn’t feel the whack when it hit them. Entergy Mississippi’s records of Middle South Energy rate moderation, (see attached pdf) from 1985 to 2008 shows a wild fluctuation in customers’ rates, from a 17.4 percent increase in 1985 (see “total” column) to as high as 49 percent in 1995. Scan the “total” column all the way down and you’ll notice the percentages hovering dangerously around 40 and 45 percent for about 12 of those years. Miller likely got his 60 percent claim from the MSE-3 Rider column. (MSE stands for Middle South Energy). That column represents the total rate increase demanded by the new plant, which is registered by Entergy’s own documentation to be 60.8 percent. Keep in mind that this only represents Mississippi’s portion of the total cost of Grand Gulf. The cost of Grand Gulf was split between more than one state, with Mississippi rate-payers accounting for about a third of the whole plant. Three billion dollars is a lot of money that could have been invested in something as wild as coastal wind farms or as level-headed as investing in powering down consumer use by subsidizing the modernization of customer’s household heating and cooling systems, or even sending out free fluorescent light bulbs to all your customers. But investment in teaching your customers how to use less electricity is no way for an energy company to make money, right? Complaint No. 2 calls into question the identity of the KGen plant as one of the little guys: “Another thing, KGen was not constructed by a “small company” but by a mega-utility -- Duke Power out of North Carolina.” True enough: Originally, KGen was owned by Duke, but Duke bailed out of the sadly unprofitable independent power production (IPP) world. KGen still uses Duke folks to operate some of their plants, but it’s a KGen animal now, and KGen certainly doesn’t qualify as a big fish in Mississippi waters. Complaint No. 3 seeks to point out that the independent power provider generators weren’t designed to replace the big critters occasionally proposed by the likes of Entergy and Mississippi Power: “Several ‘merchant plants’ were built in Mississippi by out of state companies in the early 2000's hoping to take advantage of very high margins in the "peak power market.” These plants are designed to provide peak power, not baseload power that will be generated by Mississippi Power Company's new plant. The peak power markets never fully developed for the merchant plants.” You got a good argument there. Peak power and baseload power are two different things, but apparently there is some room for maneuvering on that front. William Mohl, (see attached pdf) speaking on behalf of Entergy Mississippi, submitted testimony to the Mississippi Public Service Commission in 2005 makes big claims that about a “load-following” natural gas burning facility in Attala County that Entergy recently bought from IPP Central Mississippi Generating Company. According to Mohl, that plant can “also can function in a baseload role” with btu generation comparable to Entergy Mississippi’s existing fleet of gas-fired generators. If you read this correctly, you can see that Entergy praises the ability of the formerly independently-owned plant—at least after Entergy buys it. Complaint No. 4 is an argument that independent power suppliers knew what they were getting into when they entered the market: “Also, during testimony at the MS Public Service Commission each merchant plant representative offering testimony during pre construction hearings was specifically asked if he/she considered the regulated electric utilities as having an obligation to purchase power from them. Each person answered "no". These folks made bad business decisions and now they are trying to force the regulated utilities to purchase power from them. Some of the merchant plants have been dismantled and some have been purchased by either TVA or the regulated utilities. The remaining merchant plants have formed a coalition with the Sierra Club and others to try and keep new baseload power plants from being built ... as well as demanding that the regulated utilities purchase power from them. That's quite a change from their initial game plan.” Do you continue riding your horse forward if the horizon turns out to contain a tar pit? The overall message of the story was that it may indeed be time for a change of game plan if Mississippi ratepayers stand to gain low electricity bills from the change. This is no more about the whining of the independent energy providers than it is an implication that the Jackson Free Press is fostering a nefarious desire for a deregulated utility market. (Our regulated, semi-monopoly market works great for us, with diligent PSC oversight, by the way.) Again, this whole argument is about keeping rates down, and if a regulating authority determines that rates can truly stay low if the dominant power suppliers buy more juice from IPPs than, for Pete’s sakes, they should do it. — Adam Lynch
Oops, my comments were not "complaints", they were just comments. Thanks very much for your response (and you are correct -- utility stuff is not all that sexy -- and people do love to pile on when someone experiences a personal failure!). My understanding is that these merchant plant operators have the same opportunity as anyone else to respond to "requests for proposals" that are sent out by the regulated utilities and TVA. If they are able to be the low cost provider and provide the electricity when requested then they have a good chance of getting the deal.Their intent has not been to provide power on a 24 hour per day / 365 days per year basis. Their intent has been to make a lot of money in the high margin market of peak power production (mostly during the summer months). Once again, if you take a chance and it doesn't work out for you, you have no right (in my opinion) to argue that anyone should be forced to buy your product. Heck, restaurants go belly-up all the time. Maybe if we were required to eat there they could stay in business.