In an apparent first salvo in a public relations campaign to shift blame for the Kemper power plant boondoggle away from himself and corporate management and onto state regulators, Southern Company chief executive officer Tom Fanning admitted this week that the Kemper plant is not economically viable as a coal-burning power plant.
The startling reversal came during an earnings call Thursday at a time when Southern faces intense scrutiny from federal and state regulators and the Securities and Exchange Commission (SEC) — and as its Mississippi Power Company subsidiary, the plant’s owner, faces a Moody’s downgrade over Kemper’s skyrocketing costs and failure to operate despite being three years past its promised operating date. Southern took a 27 percent hit to its fourth quarter net income thanks to Kemper schedule delays.
During the call, Fanning acknowledged that Kemper can only be feasible if it runs on natural gas as financial analysts questioned him about a just-released “economic viability” study by Southern that found that low gas prices for the long-term mean the plant can’t profitably gasify lignite in the gasifiers Southern spent most of $7.1 billion to build.
Fanning called a “reduction in the longterm gas price forecast” an “overwhelming change, the big change. Obviously, there are others. It is a point in time. When we had this plant certificated, we all thought that gas prices were going to be double digits and there was some spread that were way higher than where we are now.”
Fanning’s comments came as the company announced it will soon file a rate case with the Mississippi Public Service Commission (PSC) seeking to recover its costs for the plant.
Although Fanning has often reassured Mississippians that they are protected by a $2.88 billion cost cap agreement limiting their liability for the plant’s runaway budget, he has failed to mention that once the plant is declared operational, the cap won’t protect them from additional costs of some $4 billion. That includes $200 million a year in operation and maintenance costs, a disturbingly high figure that keeps going up for the novel “clean coal” plant.