Mississippi Power, a Southern Company subsidiary, is spending as much as $96.8 million to extend operations at the coal-fired Plant Daniel, despite the fact that the utility could save customers millions by shutting down the plant, and despite the decision’s inconsistency with Southern’s “low- to no-carbon” by 2050 goal which it touts to investors.
Plant Daniel has lost customers at least $245 million in the last three years, according to Synapse Energy Economics.
Mississippi Power, along with all utilities across the country, knew as late as April 2015 that federal regulations would require them to either close certain coal plants or to spend on new investments to address improperly stored coal ash. The utility instead resorted to legal action and delay, leading to a rushed request of the Mississippi Public Service Commission to approve the coal ash projects in July 2019.
The Mississippi Public Service Commission, led by two Democrats and one Republican at the time, voted unanimously on October 28, 2019 to approve the coal ash projects, consequently keeping Plant Daniel online until as late as 2046. Just five business days after the vote, the Environmental Protection Agency announced that it would be proposing extensions to the potential deadline for compliance by as much as three years, undercutting Mississippi Power’s argument for rushed approval.
Mississippi Power Delays Action, NextEra forces Southern’s Hand
A new federal coal ash regulation, commonly known as the coal combustion residual (CCR) rule, was first proposed by the Obama Administration in April 2015. The CCR rule as originally proposed gave utilities a compliance grace period if they would commit to shutting down an affected coal plant prior to October 2023. If the utility would not commit to closure, it would have to meet the CCR compliance requirements by October 31, 2020.
Rather than address compliance after the original CCR rules were issued, Southern Company, via its membership in the Utility Solid Waste Activity Group (USWAG), sued the EPA and ignored its coal ash issues at Plant Daniel. After three years of inaction since the CCR rule was finalized, Mississippi Power began analyzing its options for compliance with CCR rules in March 2018. However, the company neglected to conduct engineering or cost analyses in the event of an order by the Commission to close the plant.
On January 15, 2019, Gulf Power, which Southern had previously owned before selling it to NextEra Energy, notified Southern Company of its decision to retire its 50% ownership share of Plant Daniel no later than January 15, 2024 or “as early as practicable”.
Gulf’s notification complicated Mississippi Power’s position on Plant Daniel because the entities both owned 50% of each of the two coal-fired units at the plant; neither company owned one unit outright. Gulf Power’s exit meant that Mississippi Power would need to close the plant or take ownership of 100% of the units on-site, which would be increasingly difficult to win approval for considering the poor economic performance of the plant.
Plant Daniel Struggles to Provide Cost-Effective Energy to Customers
Plant Daniel’s performance has declined substantially over the last few years, dropping below 30% capacity factor since 2014, meaning it was only generating 30% of the power that it had the capacity to generate. Mississippi Power said it planned to increase utilization of Plant Daniel to between 32% and 64%, likely in an effort to make the plant appear more profitable, according to Synapse’s analysis.
Other analysts have also noted Plant Daniel’s poor economic position. Analysts from Morgan Stanley found in a January report that utilities could save customers money and increase earnings for investors by accelerating coal retirements and replacing the plants with renewable energy. In assessing Southern Company’s coal fleet, the analysts noted that Southern Company owned 2.2 gigawatts of coal capacity, including Plant Daniel, that would be uneconomic by 2024 at the latest due to lower-cost solar resources in the Southeast.
Mississippi Power argued to the Commission that a vote against approving the CCR project at Plant Daniel amounted to a vote to retire the two units “even though each unit has over 20 years of useful life remaining”. Mississippi Power disputed many of Synapse’s calculations; nevertheless, the company’s own calculations demonstrated a net savings to customers of $25 million if it closed Plant Daniel in 2022 rather than 2046.
Perhaps as a concession to the weak economic argument, Mississippi Power also pleaded with the Commission to approve the CCR projects and retain coal for “fuel diversity” saying that without Plant Daniel, the company’s owned capacity would be 100% reliant on gas.
Mississippi Power Joins Other Southern Operating Companies in Denying Low- to No-Carbon Goal
Mississippi Power began its long-awaited integrated resource planning (IRP) process in late December 2019 with an initial public workshop scheduled February 28, 2020. Mississippi Power has never published an IRP publicly. The company’s first public IRP draft is expected to be released prior to April 15, 2021.
At the February public workshop, Mississippi Power was asked about how the company’s IRP would comply with its parent company’s “low- to no-carbon” goal. In response, the company admitted, “Right now, there is no particular cap on Mississippi Power emissions and no particular requirement that we do anything other than maintain cost effective, reliable generation.”
Sister companies Alabama Power and Georgia Power have echoed Mississippi Power’s position about Southern’s climate goals. Alabama Power said, “We don’t have a share of that, per se. That is a Southern company enterprise-wide goal.” When asked by the Georgia PSC staff how Southern Company’s goals affected Georgia Power’s IRP, the utility responded that the goals “did not influence the target amount of renewables proposed.”
Southern Company previously has stated in its “Planning for a low-carbon future” report that IRPs were part of “robust process to get us there,” in reference to how it plans to reduce emissions.
Photo source: Mississippi Power