The Mississippi Public Service Commission is ordering one of the state’s two investor-owned utilities, Mississippi Power, to reduce its surplus generation capacity by 2027.
The PSC issued the order on December 17 that instructs Mississippi Power to retire 950 megawatts of generation capacity or explain to the commission with evidence why it needs to continue to operate some of this excess capacity.
The order says the economic evidence available to the commission makes a compelling case for the early retirement of some portion of the utility’s fossil-fueled generation fleet.
The order sets a deadline of April for the company to reach a plan on how it intends to meet the requirements of the order.
One of the conditions of the settlement reached between the PSC and the utility over the controversial Kemper Project power plant in February 2018 was there would be a comprehensive examination of Mississippi Power’s generation capacity and whether there was any surplus that could be retired, saving customers from paying for added operation and maintenance costs for unneeded plants.
The biggest question is how the company will proceed when it evaluates its generation capacity. The Public Utilities Staff (which is a separate yet complimentary entity to the elected PSC) hired Bates White to analyze the utility’s reserve margin plan filed in August 2018 and its report was included in the order.
The report says that, in the absence of changes to Mississippi Power’s portfolio, that the company’s reserve generation margin would be greater than 40 percent through 2028, compared to a targeted reserve margin of less than 15 percent. The report also says that from 2021 to 2023, the utility exceeds its summer capacity need by more than 1,000 megawatts.
Bates White concluded that the increased demand that Mississippi Power predicted when it asked the PSC for permission to build Kemper in 2010 hasn’t and won’t materialize. Bates White said that the projections are for a decreased need for generation capacity for the next decade, followed by minimal growth in the longer term.
Mississippi Power has six generation plants in its portfolio, with the three biggest cogs being Plant Daniel located near Moss Point and Plant Watson in Gulfport and Plant Ratcliffe in Kemper County (also known as the Kemper County Energy Facility).
Mississippi Power operates a power plant exclusively for Chevron’s Pascagoula oil refinery and receives electricity from a plant in Greene County, Alabama that was converted from coal to natural gas.
There is also Plant Sweatt in Meridian, which is the utility’s smallest and oldest generation facility with only 3.94 megawatts of generation capacity from one gas-fired turbine.
Another facility, Plant Eaton that was located near Hattiesburg, was retired in 2012.
Plant Daniel has two gas-fired combined cycle units (1.07 gigawatts generation capacity) along with two coal-fired units (500 megawatts capacity) and is the state’s largest power plant in terms of capacity.
According to the Bates White report, analyses performed by Mississippi Power and updated since 2018 show that the best course of action would be for the utility to retire one of its units at Plant Watson and the two units in Greene County, Alabama.
That would leave 500 megawatts of excess capacity, which could take the form of the retirement of another of Watson’s units and the retirement of two units at Plant Daniel, which generates electricity for Gulf Power, which was a former Southern Company subsidiary in Northwest Florida that was sold to NextEra Energy in 2019. The purchase agreement for electricity from the two units at Plant Daniel expire in 2024.
Plant Ratcliffe (7.69 megawatts of capacity) was originally designed to be fueled by synthesis gas produced from a form of low-grade coal known as lignite using an expensive and complex chemical process.
The $7.5 billion plant (ratepayers will end up paying $1 billion for it while the company will pick up the remaining $3 billion) in Kemper County was also meant to have an elaborate component that removed 65 percent of the carbon emissions and other byproducts from the gas stream for sale to industrial customers. Running the plant on syngas would’ve reduced its capacity to 582 megawatts through parasitic loads from running the processes required to transform lignite into syngas and remove the pollutants.
The plant was supposed to cost $2.4 billion, but the cost ballooned by 212.5 percent to $7.5 billion.
Since Mississippi Power could never get the plant working on a reliable basis and costs continued to escalate, the Mississippi Public Service Commission, the utility and intervenors reached a settlement in 2017 that ended all attempts to get the gasifer units (which converted lignite to syngas) operational. Dismantling of the gasifer units and remediation of the lignite mine are scheduled for completion by 2024.