Written by ANITA LEE The Sun Herald
GULFPORT — Mississippi Power’s lignite plant in Kemper County will be 70 percent finished, at a cost so far of $2 billion, by the time a Chancery Court judge decides in about a month whether construction should continue.
The Sierra Club is asking Chancery Court Judge Jim Persons to revoke the certificate the Mississippi Public Service Commission granted for the plant, saying the cost is too high. Mississippi Power argues the plant represents the most reliable and economical solution for ratepayers’ future power needs.
Ratepayers are expected to cover construction costs, but the PSC denied Mississippi Power authority to begin raising rates until the Sierra Club’s appeal is decided. A total rate increase of 33 percent would be phased in over time.
Plant costs have increased from an initial $2.4 billion to $2.88 billion.
The project could experience more cost overruns, or the technology to transform lignite, a form of coal, into power could fail, Sierra Club attorney Robert Wiygul said.
“There’s no margin for error,” Wiygul told the judge in a hearing Friday. “There’s no way of ameliorating the risk.”
The Sierra Club believes Mississippi Power should bear the cost if the judge revokes permission for the plant.
Mississippi Power disagrees. “The exposure of the ratepayer to this high initial cost is essentially fixed, regardless of the decision of this court or the Mississippi Supreme Court, in Mississippi Power’s view,” company attorney Ben Stone said.
The PSC would decide how the cost should be apportioned.
Judge Persons said ratepayers could suffer regardless because Mississippi Power’s financial condition would be compromised if construction stopped. Wiygul said the Sierra Club wants to see the plant converted for natural gas, but Stone said the cost at this point would be “exorbitant.”
In a previous appeal, the state Supreme Court ordered the PSC to outline its reasons for initially approving the plant in 2010.
The PSC issued a detailed order in April outlining its reasoning for plant approval, but refused at the Sierra Club’s urging to consider more recent information about low natural gas rates.
Wiygul said the information shows Mississippi Power overestimated the future cost of natural gas in projections the PSC accepted in 2010. Assistant Attorney General Justin Matheny, representing the PSC, said the agency accumulated a great deal of information regarding gas prices and that safeguards were put into place to monitor plant construction costs.
“The fuel diversity and looking at things long term is what protects the ratepayers from paying too much for electricity in the future,” Matheny said.
Stone said gas prices are highly volatile, while lignite is a relatively cheap and financially stable form of fuel. Ratepayers will be better off over the 40-year life of the plant, he said, if Mississippi Power can rely on lignite to generate power when gas prices are higher.
He said Mississippi Power has proceeded with construction because the company needs a new fuel source by 2014, when the plant should be completed.
Wiygul argued the PSC’s decision to approve the plant was “arbitrary and capricious,” as evidenced by the Supreme Court opinion that said the PSC failed to sufficiently explain its reasoning.
The lignite plant is not expected to begin paying off for ratepayers until 2024, but Wiygul said that time frame could be extended if gas prices remain relatively low.
“The customers are pawns in the Sierra Club’s strategy to kill coal,” Stone said. “They don’t care who pays what.”