Obama’s ideal clean coal plant plagued by cost-overruns, higher energy rates for consumers

Kemper County plant

A power plant in Mississippi that has been touted as an example of new clean coal technology has turned into a financial boondoggle for the Southern Company and ratepayers in the area, according to the Wall Street Journal, and that it could dissuade other power companies from taking similar projects (emphasis added):

Mississippi Power Co.’s Kemper County plant here, meant to showcase technology for generating clean electricity from low-quality coal, ranks as one of the most-expensive U.S. fossil-fuel projects ever—at $4.7 billion and rising. Mississippi Power’s 186,000 customers, who live in one of the poorest regions of the country, are reeling at double-digit rate increases. And even Mississippi Power’s parent, Atlanta-based Southern Co., has said Kemper shouldn’t be used as a nationwide model.

Meanwhile, the plant hasn’t generated a single kilowatt for customers, and it’s anyone’s guess how well the complex operation will work. The company this month said it would forfeit $133 million in federal tax credits because it won’t finish the project by its May deadline.

One of just three clean-coal plants moving ahead in the U.S., Kemper has been such a calamity for Southern that the power industry and Wall Street analysts say other utilities aren’t likely to take on similar projects, even though the federal government plans to offer financial incentives.

Southern recently took $990 million in charges for cost overruns approaching $2 billion. The company’s stock has been battered in the past year, and the company’s market value has dropped $6.4 billion since April, to $35.8 billion. Mississippi Power’s credit rating has dropped to three notches above junk.

The thing is that the Southern Company, through its Mississippi Power subsidiary, has taken a huge gamble on carbon capture technology (CCS), which is costly and has produced questionable results where it has been tested.

But this Mississippi clean coal plant, which is supposed to serve as an example of the technology, is actually proving what then-candidate Barack Obama said in 2008 about his energy plans. Remember, he said that environmental proposals would “bankrupt” a company that wanted to build a coal plant and that “electricity rates would necessarily skyrocket.”

Consumers serviced by Mississippi Power, which is a regulated monopoly, are already seeing a 15% rate increase. The power company wants a 22% hike. But it may get much worse by the time the plant is up and running next year.

“An average-sized residential customer will see an estimated increase of $912 in the initial year of operation ($76/month), or 61%,” wrote Brubaker and Associates last year in a private estimate of the plant’s costs to consumers. “An average-sized commercial customer will see an estimated annual increase of $4,513 ($376/month), or 60%.”

“An average-sized industrial customer will see an estimated annual increase of $282,760 ($23,563/month), or 54%,” they added in the estimate.

The Environmental Protection Agency (EPA) has hoped that recent anti-consumer carbon emission rules on new natural and coal-fired plants would create a market for CCS technology, even though they admit that the rules won’t do much to limit carbon emissions. But if the Kemper project is supposed to be the example, don’t expect many other power companies to try to follow.

You shouldn’t have much sympathy for the Southern Company or its subsidiary, Mississippi Power. They support President Obama’s anti-consumer energy plan, despite the fact that it’s bankrupting them.

If only someone had warned them.

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