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Mississippi Power approved to recover costs for coal plant upgrades

Mississippi Power Co. will be able to recover costs for upgrades at the Victor J. Daniel Jr. coal-fired plant, the Mississippi Public Service Commission ruled on Oct. 24. But the power plant's fate is still up in the air as utility regulators continue to evaluate the Southern Co. subsidiary's reserve margin plan.

The Mississippi PSC voted to approve Mississippi Power's request to spend about $62.5 million for three coal combustion residual projects at the 1,146-MW Daniel plant: closing an ash bond, building a wastewater facility and converting bottom ash collection facilities. (Miss. PSC Docket 2019-UA-116) Commissioner Brandon Presley said the PSC is granting the utility's request "noting that to not do so would put the company in the position of violating federal law."

Mississippi Power, which shares ownership of Daniel's two units with former sister company Gulf Power Co., said the U.S. Environmental Protection Agency's coal combustion residuals, or CCR, rule requires the utility to start on their projects no later than Nov. 1 and ensures that the utility no longer mixes coal ash and non-ash waste streams into Daniel's ash pond by Oct. 31, 2020, followed by closure of the pond within a 5-year period once closure activities begin.

Mark Loughman, Mississippi Power's director of environmental affairs, said the agency's changes to its coal ash rules in 2018 caught them by surprise and propelled them into a tight turnaround for coal ash projects.

"All Southern Co. facilities have been scrambling to alter their compliance plan," Loughman said.

The Sierra Club, which filed a motion to hold the hearing on the projects, said the projects and the cost recovery are not needed and the utility failed to consider all options, including retiring the plant and asking the EPA for an extension.

"The rule does have alternative closure conditions, which allows an extension into 2023 if the units associated with the coal ash pond are going to be shuttered. That was not discussed in that original application," said Robert Wiygul, legal counsel for the Sierra Club's Mississippi Chapter.

Moreover, Gulf Power has notified Mississippi Power that it plans to retire its 50% stake in the coal plant by 2024. Loughman said it is currently unclear what that will mean for Mississippi Power's plans to continue running the plant.

While Mississippi Power, the PSC and the Sierra Club debated the economics of Daniel and its role in ensuring reliability, the commissioners said further arguments regarding the plant's benefit and potential retirement should be made in proceedings for the utility's reserve margin plan. (Miss. PSC Docket 2018-AD-145)

"I get the impression that we're being asked to substitute or to somehow argue or debunk the idea that there could be those sort of issues," Presley said. "Nobody in this room is going to be explaining that if [reliability issues] happen but us, and I think that it's a heavy burden to tout."

As part of the PSC's order to allow cost recovery, Mississippi Power will be required to submit monthly reports on its expenditures for the CCR projects to the PSC. The utility will not be able to recover costs that Gulf Power is responsible for. Gulf Power is a subsidiary of NextEra Energy Inc.

"The company will be put on notice that if at the conclusion of the reserve margin plan docket, this commission determines that early retirement of Plant Daniel serves a public interest and that the portion of CCR projects are no longer needed, the company will immediately cease those efforts and any dollars committed after that date will not be recovered by Mississippi ratepayers," Presley said.

According to S&P Global Market Intelligence data, the plant had a capacity factor of 26.74% in 2018. Unit 1 began commercial operations in 1977 and unit 2 came online in 1981.