Kemper plant proves to be poor investment

Published 10:47 am Thursday, May 21, 2015

The entity that buys power for many Mississippi electric cooperatives, including Southwest MS EPA and Magnolia EPA that serve Lincoln County, pulled out of a deal to buy 15 percent of the $6.2 billion Kemper County power plant, The Associated Press reported Wednesday.

It’s a significant blow to Mississippi Power’s financing plan for the boondoggle known as Plant Ratcliffe.

South Mississippi Electric Power Association buys and generates power for 11 electrical cooperatives in southern and western Mississippi. Those 11 cooperatives serve more than 400,000 accounts combined. Southwest MS EPA serves about 25,000 meters, and Magnolia serves about 30,000.

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SMEPA said in 2012 that it expected to pay about $500 million for its 15 percent share of the Kemper plant.

The association currently purchases about 28 percent of its electricity from Mississippi Power, but SMEPA has overhauled its own plants and recently purchased a natural gas facility in an effort to generate more of its own power. Some customers of SMEPA-served cooperatives already saw rates increase in part to pay for construction of the Kemper plant, according to The AP.

Mississippi Power’s own customers’ rates increased 18 percent to fund Kemper, but the state Supreme Court has ordered a refund claiming the Public Service Commission improperly approved the increase. Mississippi Power is fighting that order, and has threatened to hike rates 40 percent if it is forced to refund the previous increase.

While the Kemper experiment may eventually work, it now seems ridiculous to spend $6.2 billion to construct a lignite power plant when natural gas facilities can be purchased for much less. For example: Tennessee Valley Authority recently purchased a natural gas plant in Ackerman for $340 million.

So why didn’t Mississippi Power simply purchase that plant or a similar gas facility? Could it be that the company gets a guaranteed return of 10 percent on whatever they buy or build? What’s greater — 10 percent of $6.2 billion or 10 percent of $340 million?

It’s hard to see how the Kemper plant could be considered a prudent investment at this point, and it’s wise of SMEPA to pull out of the deal to buy a portion of it.