Southern's Clean Coal Experiment Ends With Mississippi Order

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  • Regulators order utility to reach deal to run plant on gas
  • Kemper project was designed to gasify coal, capture emissions

Southern Co.'s Kemper County power plant near Meridian, Mississippi, on Feb. 25, 2014.

Photographer: Gary Tramontina/Bloomberg

A seven-year, $7.5 billion effort to build a first-of-its-kind “clean coal” power plant in Mississippi is officially over.

Mississippi regulators ordered utility owner Southern Co. on Thursday to come up with a deal that’ll have the Kemper plant -- once hailed by the Obama administration as the future of coal -- running as a natural gas-fired generator instead. That ratified Southern’s June 28 proposal to pull the plug on using coal there.

The ruling seals the fate of the Kemper plant, and memorializes the state utility commission’s call last month for the company to give up on “unproven” technologies at the plant. It also assures that customers won’t pay for the failure. Almost three years after the plant began generating power with gas, Southern has been unable to put crucial coal-gasifiers into service.

The death of Kemper’s “clean coal” component represents a major setback for the very technologies that President Donald Trump has promoted as a way to help save mining jobs. It also marks the end of a high-profile project that was plagued by construction slowdowns, equipment failures and sliding gas prices. Kemper is already years behind schedule and more than $4 billion over budget.

The Mississippi Public Service Commission told Southern it wants to finalize a settlement within 90 days guaranteeing that customers won’t pay for the coal portion of the plant. Southern last month warned investors that it may take a $3.4 billion second-quarter charge if the company isn’t authorized to recover the costs of the project from customers.

"Today’s proceeding is in line with the framework the commission laid out two weeks ago,” Jack Bonnikson, a Mississippi Power spokesman, said by email Thursday. “We look forward to reviewing the order.”

Kemper was supposed to turn coal into gas to produce electricity -- all while removing carbon dioxide emissions linked to global warming. At least that was idea as the U.S. government poured $382 million of grants into the project and then-Energy Secretary Steven Chu stressed its “national importance.” Now, Kemper’s only claim to fame is becoming quite possibly the most expensive gas plant ever built.

Gas Supplies

When Kemper was conceived, America’s gas resources were thought to be shrinking, and Southern pitched the plant as a valuable hedge against volatile commodity prices. The shale boom has since unleashed so much gas that it’s glutted markets and sent prices plummeting to the lowest level since the 1990s.

By February, Southern was estimating that running the Kemper plant on gas was more economically viable than using coal under two of three gas-price scenarios.

The company has 45 days to propose a settlement to the commission with a further 45 days for public comment, according to Thursday’s order.

— With assistance by Jim Polson

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