A tale of two Public Service Commissions
We really hope that the Arkansas Public Service Commission (APSC) and American Electric Power (AEP)/Southwestern Electric Power Company (SWEPCO) are watching what can happen when state regulators get in bed with the utilities they are supposed to regulate. A case in point that could have come straight out of a John Grisham novel is the tale of the Kemper Plant in Mississippi.
Monopoly utilities learned long ago that since they get a guaranteed return on their investment, the more they spend, the more they make. Why spend a nickel for a pencil if you can pay $1 for it and get 12 percent return on the investment?
Or, in the case of Mississippi Power Company (MPCO), why build a $600-million natural gas plant if you can get approval to build a “clean coal” plant that costs $2.4 billion?
Like SWEPCO and Carroll Electric Cooperative Corp., MPCO and its employees put large sums into campaign contributions. So it wasn’t just the MPCO, but also the legislature that was a captive of the company.
The parent company of MPCO, Southern Company (SOCO), touted this project in Kemper County as “the future of coal.”
“The project was being promoted across the political spectrum from Republican powerhouse Governor Haley Barbour to the Obama Administration,” said Mississippi Sierra Club lobbyist Louie Miller. “Even among many national clean energy and environmental groups, our opposition was questioned and criticized.”
Kemper was a boondoogle from the beginning. Coal gasification was and is an untried technology. As the years went by, the price tag of the Kemper plant grew by billions. SOCO has had to write off $1.6 billion in losses.
SOCO stockholders have taken a huge financial hit, and MPCO has gone from the post-Katrina hero that got the lights back on to a company deeply resented for large, unnecessary electric bill increases.
The CEO of MPCO was fired, along with the MPCO vice president of generation development and KBR, Kemper’s general contractor. The Southern District PSC Commissioner resigned.
“While we were unsuccessful in stopping MPCO’s damn-the-torpedoes-full-steam-ahead effort to construct the plant, this may in and of itself be the downfall of the company yet,” Miller said. “Hence, the $5.6 billion dollar price tag for 582MW making Kemper the most expensive power plant ever built in the United States on a per MW basis, and no end in sight on cost overruns and delays.”
Sierra Club took on the most intransigent, politically connected utility in the country and strangled the concept of clean coal in the cradle.
“Never again will an investor or utility look at clean coal as a good bang for the buck,” Miller said.
While MPCO customers still face high electric bills, Sierra Club reached a settlement with MPCO that provides $15 million in funding energy efficiency projects for low-income households and renewable energy demonstration projects with educational opportunities. The settlement also requires MPCO to close three coal-fired power plants totaling 1,445 megawatts of coal-fired power.
In Eureka Springs, a number of local residents have installed solar generation. Using what is called net metering, they sell excess power back to the power company, and draw power from the system when it is needed.
Such is the power of MPCO that Mississippi – unlike Arkansas – hasn’t allowed net metering.
“The big prize in providing a quantum leap forward for Mississippi to a clean energy future is the hard-fought concession from Mississippi Power that they will not oppose a net metering rule at the PSC or the state legislature,” Miller said. “This rule contains all of the bells and whistles that are key ingredients for providing a robust vehicle for residential and commercial roof-top solar and wind. Up until now, Mississippi was one of five states in the nation where net metering was prohibited.”
Is it possible that SWEPCO’s proposed 345-kV transmission line is the equivalent of MPCO’s Kemper Plant? Similarities can be drawn. If the kind of alternative energy advances seen in the past five years continue, small energy generating facilities will become increasingly competitive, potentially eliminating the need for these long-distance electric transmission lines. Stopping the Shipe Road to Kings River transmission line would be doing AEP shareholders, and its customers, a big favor.