POWER August 2016 - 42

GENERATION TRANSITIONS
" The issue of coal and carbon is
worldwide. "
-Tom Fanning, chief executive officer, Southern Co.
technology does not exist anywhere else in
the world, " he said.
The Kemper plant is currently running on
natural gas, generating considerable power
for the grid, but has had difficulty with the
lignite gasification. Fanning said that successful
lignite fluidization and gasification
was just a matter of weeks away at the time
of our June interview.
Southern Co.'s Generating Profile
Southern Co. has 46,549 MW of generating
capacity, with 40% from coal, 40% from
natural gas, 16% nuclear, and 2% hydro,
according to the company's website.
The holding company operates through
four regional, state-regulated, vertically
integrated utilities: Alabama Power, Georgia
Power, Gulf Power (Florida), and Mississippi
Power, Georgia Power being the
largest. The company also includes Southern
Nuclear, operator of six nuclear units
at three sites: Georgia Power's Plant Vogtle,
with two operating units (for a combined
2,430 MW); two units at the Hatch
site in Georgia (1,848 MW total capacity);
and Alabama Power's two Farley units (totaling
1,800 MW).
The nuclear units in Georgia are jointly
owned with Oglethorpe Power Corp., Municipal
Energy Agency of Georgia, and Dalton
Utilities, although Georgia Power is
per County project. Fitch Ratings also dinged
Southern with a one-notch downgrade to below-investment-grade.
Mississippi
Power has seen the Kemper
County project turn into what the Wall Street
Journal called " a costly mess. " Southern now
faces a Securities and Exchange Commission
(SEC) investigation related to Kemper and a
project price tag that has ballooned to nearly
$7 billion, more than double the original cost
estimate. Rebecca Smith, the Wall Street
Journal's long-time utility beat reporter,
wrote, " The SEC is looking into Southern's
financial controls and disclosures for the
Kemper County Energy Facility in Mississippi,
the company disclosed in a regulatory
filing this month, amid claims by a former
project manager that it misled the public
about how long construction would last. "
The company in 2010 forecast that the
project to gasify local lignite for power generation
and capture the carbon dioxide emissions
for use in enhanced oil recovery would
cost $3 billion. Since then, Kemper has seen
costs escalate dramatically as the project
42
the licensee and operator.
The company has one of the largest
coal-fired generating fleets in the U.S.,
providing over 18,500 MW of capacity.
The system's largest coal-fired plant is
the Scherer plant in Georgia, at about
3,600 MW. According to the U.S. Energy
Information Administration,
Scherer
is
the largest coal-fired plant in the U.S.,
followed by Southern's 3,400-MW Plant
Bowen. Scherer burns Powder River Basin
coal and Bowen burns Central Appalachian
and Illinois Basin coal.
Among Southern Co.'s approximately
18,500 MW of gas-fired capacity, Georgia
Power's McDonough-Atkinson plant is the
largest, at 2,500 MW. The Southern system
also features many gas units, both
combustion turbines and combined cycle
units, added to locations at existing coalfired
plants
consistently missed construction milestones.
Smith reported, " To date, Southern has paid
back $368 million in federal tax credits for
missing deadlines, but believes it will be able
to keep $407 million in grants from the Energy
Department. "
On April 26, the day before Southern Co.'s
Mississippi
Q1 earnings
announcement,
Power revealed another $61 million Kemper
cost overrun. The Jackson, Miss., ClarionLedger
said, " Although the unit of Atlantabased
Southern Co. will absorb about $35
million of the cost, customers could pay for
$26 million in interest if the Mississippi Public
Service Commission eventually approves.
The utility is absorbing $2.7 billion in overruns
so far, and Southern Co. will write off
$53 million before taxes from its quarterly
earnings. "
" We have had bumps in the road in Kemper, "
Fanning told POWER. He added that at
the time of the original cost estimate, only
" about 10% " of the engineering design for
the project had been completed. That's not
unusual for advanced technologies. " This
www.powermag.com
Nuclear Delays and Overruns
Southern's other large conventional investment
is the addition of two new 1,000-MW
Westinghouse pressurized water reactors at
the existing, two-unit Vogtle station (Figure
2). That project has also seen major cost
overruns and project delays. Vogtle Units
3 and 4 are the product of the much-hyped
but little-realized " nuclear renaissance " the
nuclear industry envisioned late in the administration
of President George W. Bush. It
was cut short by the major recession of 2008,
along with falling natural gas prices as a result
of the success of hydraulic fracturing.
The Vogtle project got an $8 billion federal
loan guarantee under the terms of 2007
energy legislation. It won Nuclear Regulatory
Commission approval for a combined
construction and operating license in 2012.
At the time, Southern said the two units
would be commercial in 2016 and 2017, at a
cost to the company of $6 billion. Today, the
best estimate is that the two units could be
commercial around 2020 at a cost of nearly
$10 billion. Those figures are from the company-other
assessments put Southern's
share of the project at around $14 billion.
The Georgia Public Service Commission
(PSC) in May began hearings on whether
the investments in Vogtle were " prudent, " a
term of utility law that allows the company
to recover its investments from customers,
even as they have escalated. It's unlikely that
state regulators will rule against the utility.
Commissioner Stan Wise indicated at a Platts
nuclear conference earlier this year (see " The
Global Nuclear Power Industry Faces Localized
Outlooks " in the April 2016 issue or online
at powermag.com) that he believes the
cost overruns and schedule delays have been
prudent.
But veteran energy journalist Dennis
Wamsted, writing for The Energy Collective,
recently argued that the state regulators have
been asleep at the wheel on Vogtle. He wrote,
" The real question though isn't whether
George Power has spent customers' money
(and believe you me it is customers, not the
utility, that are paying for this long-delayed,
much over-budget project) prudently, but
where in the hell the adults were when the
decision was made to go ahead with construction
in the first place. "
POWER | August 2016
http://www.powermag.com http://www.powermag.com

POWER August 2016

Table of Contents for the Digital Edition of POWER August 2016

Contents
POWER August 2016 - Cover1
POWER August 2016 - Cover2
POWER August 2016 - Contents
POWER August 2016 - 2
POWER August 2016 - 3
POWER August 2016 - 4
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