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Sierra Club lawsuit costs ratepayers millions

November 14, 2012


Recently Louie Miller, spokesman for the Sierra Club, criticized the Legislature and me for “costing Kemper County residents millions.” Let me set the record straight.

The Sierra Club is fighting the construction of a cutting edge, clean coal electric power generation facility by Mississippi Power in Kemper County. It will be the first commercial scale carbon capture and sequestration system on an electric generation plant in the United States and will reduce carbon dioxide emissions to that of a natural gas-fired power station.

The Mississippi Public Service Commission (PSC) has found Mississippi Power needs more baseload electric generation capacity (baseload means a plant that runs 24 hours a day, seven days a week). 

The PSC has also determined the plant being built in Kemper County will be the safest, most reliable, cleanest and most affordable source for that baseload electricity for the 40-to-60 year life expectancy of the plant. 

The plant will use lignite coal, mined in Mississippi, and convert it to gas to generate the electricity. Mississippi landowners will sell the plant some $300-400 million of lignite over forty years of operation.  Before this facility, that lignite had essentially no value. 

During construction the Kemper County project is creating some 12,000 direct and indirect jobs. After completion the plant will have created more than 1,000 permanent direct and indirect jobs. 

The Sierra Club, a liberal environmental group, nationally opposes any new coal-fired power plants.  For years their “Beyond Coal” campaign said new power plants should be fueled by natural gas, not coal. But now, the Sierra Club nationally opposes natural gas-fired electric utility plants, too. 

So the Sierra Club’s position of no coal and no natural gas plants must mean they oppose new baseload plants in Mississippi. Reliability in providing electricity is essential to economic prosperity and job creation, not to mention the basic quality of life Americans demand and deserve. 

Look at the poor people in the Northeast with no electricity because of Sandy. Or remember the days after Katrina before our electricity was restored in a heroic performance by Mississippi Power and our co-ops. 

Some advocated to the PSC that the plant should run on natural gas, but the PSC studied this issue and made the right decision: Lignite is likely to be far cheaper in the long-term. 

While today’s cost of natural gas is $3.60 per 1,000 cubic feet, after falling below $1.80 less than a year ago; twice in the last decade it went above $10 and on a third occasion to $8. Some analysts are already predicting natural gas above $5 next year. 

The best measure of the volatility of natural gas prices came when the PSC required Mississippi Power to seek binding contracts from suppliers to buy natural gas at a fixed price for ten years. Through this certification process, it was revealed that no one would even make an offer to supply the gas for 10 years, at any price. 

Further, the company has contracts to sell byproducts of the plant, including captured carbon dioxide, for approximately $2 billion over 40 years — all of which will be used to reduce ratepayer bills. 

As with every new electric generating plant, rates will increase when Kemper first goes online, just as they did when Mississippi Power’s other generating plants, Watson and Daniel, went online. Today these plants continue to provide stable rates and reliable low cost electricity, as they have for decades. 

The Sierra Club’s claim that Kemper County residents will lose millions because of legislation related to this project is not true. The Kemper plant and its affiliated lignite mining operations will pay the county more than $7 million annually.  That doubles the local tax base and is a huge tax windfall for the county.

Kemper County officials supported 2009 legislation co-authored by some of the county’s legislative delegation to reduce taxes on the power plant because it was a win-win situation.  Kemper County will see its tax base double while Mississippi Power customers will, as a result of lower taxes, save millions of dollars on their power bills over the life of the plant.

Because of a lawsuit filed by the Sierra Club to stop the Kemper County plant, the PSC did not allow an 8 percent “construction work in progress” rate increase to go into effect. This rate increase, according to the court testimony, would have saved Mississippi Power customers $500 million through lower rates during the first 40 years of the plant’s being in service. 

Mississippi Power’s two biggest customers, South Mississippi Electric Power Association (SMEPA) and East Mississippi Rural Electric Power, both voluntarily put the pre-construction rate increase into effect to save themselves and their ratepayers hundreds of millions on light bills for the next 40 years. Thanks to the Sierra Club, regular customers didn’t get that relief. 

Haley Barbour is the former Governor of the State of Mississippi.

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