By Eileen O'Grady
(Reuters) - Mississippi utility regulators on Friday voted to allow a unit of Southern Co to continue building an $2.8 billion coal-gasification power plant in the state despite a court ruling that overturned the existing certificate issued two years ago.
With only two days meeting notice and no discussion, the Mississippi Public Service Commission (PSC) voted 2-1 to issue a temporary certificate so that Southern Co's smallest utility, Mississippi Power, can keep building the 582-megawatt integrated gasification combined-cycle (IGCC) power plant in Kemper County, according to the commission order.
The Sierra Club, which successfully challenged the Kemper IGCC project, immediately filed an appeal at the Mississippi Supreme Court to block the certificate.
The PSC order, supported by commissioner chairman Leonard Bentz and commissioner Lynn Posey, stated that the halting the project would lead to "unnecessary costs" that would cause substantial injury to the utility and its customers.
According to a state filing, Mississippi Power said interrupting construction at the Kemper site could cost between $250 million and $500 million.
"Any delays to this project would mean significant costs to our customers," said Jeff Shepard, Mississippi Power spokesman in a release. "Today's ruling means we can continue building a sound energy future for our customers."
The Kemper certificate, issued by the PSC in May 2010, was thrown into doubt earlier this month when the Mississippi Supreme Court ruled 9-0 that the commission failed to show evidence that the plant would benefit the utility's customers as required by state law. The court sent the case back to the PSC. [ID:nL2E8EGETM]
Commissioner Brandon Presley who has consistently opposed the Kemper project for its high price tag and untried technology called Friday's action to issue a temporary certificate "squarely contrary to state law."
In his dissent, Presley said the order "totally misinterprets" the state statute "to Mississippi Power's advantage and to the detriment of MPC's customers."
"There is no way allowing construction to continue at Kemper is a temporary act," Presley told Reuters. "Nobody with any sense would argue that. It's not what the law says."
Bentz who represents most Mississippi Power customers in the southeast corner of the state, declined to comment through a spokeswoman while Posey, who represents Kemper County in central Mississippi, could not be reached late Friday.
"It's an absolute bailout of Mississippi Power," said Louie Miller, director of the Sierra Club in Mississippi.
In its appeal filed after Friday's meeting, the Sierra Club asked the Supreme Court to rule that "Mississippi Power is not exempt from the law, and the Public Service Commission does not have the authority to bypass state law, according to a statement.
Miller suggested that Mississippi Power customers would be better served if Mississippi Power converted the plant to run natural gas rather than lignite as gas prices have fallen dramatically since Kemper County was proposed several years ago.
According to state filings, Mississippi Power has spent more than $1.1 billion on the Kemper County IGCC plant and has committed to contracts valued at $1.5 billion. It is expected to begin producing power in 2014. The utility has less than 200,000 customers.
Kemper opponents, including independent power producers, said Mississippi Power could only justify customer savings by using a natural gas scenario that projected gas prices would rise from $11 per million British thermal units in 2014 to $22 per mmBtu in 2050.
U.S. gas prices are the lowest in a decade due to booming output from shale-rock formations.
IGCC technology heats coal to convert it into a synthesis gas that is processed to remove numerous pollutants before being sent to a traditional combined-cycle power plant to produce electricity.
Kemper was designed to showcase a gasification technology developed by another Southern Co subsidiary to burn Mississippi lignite and had support from state economic development groups and then-Governor Haley Barbour.
(Reporting By Eileen O'Grady; Editing by Bob Burgdorfer and David Gregorio)