Sierra Club to fight Southern Co coal project

HOUSTON (Reuters) - The Sierra Club has appealed a state utility commission vote that allows a Southern Co utility to build an expensive advanced coal-fired plant.

The Sierra Club, an environmental group that is working to stop construction of all new coal plants, called the commission vote "an unprecedented flip-flop."

The Sierra Club said on Thursday it filed an appeal in chancery court in Harrison County, Mississippi, on the need certificate issued by the Mississippi Public Service Commission for a 582-megawatt integrated gasification combined-cycle (IGCC) plant in Kemper County, Mississippi.

On May 26, the commission voted 2-1 to revise conditions it placed a month earlier on Mississippi Power Co's plan to build the Kemper County IGCC facility.

The commission relented on two issues at the utility's request: agreeing to raise the price cap it placed on the project by nearly $500 million to $2.88 billion and allowing the utility to begin charging customers for some plant costs years before it begins to generate electricity.

"The actions of the majority are arbitrary, capricious, beyond legal authority, and unsupported by substantial evidence," the Sierra Club said in its filing.

A day after the May vote, Mississippi Power said it would move forward to build the plant after saying earlier the commission's financial limits would likely kill the project.

The environmental group's appeal echoed comments made by Commission Chairman Brandon Presley in his dissenting opinion criticizing the May vote.

Presley said the project was too risky for ratepayers and urged the utility to delay Kemper until more is known about carbon regulation costs and the natural gas prices.

The Kemper plant will burn Mississippi lignite coal and has garnered support from economic development groups and Mississippi Governor Haley Barbour for jobs it will create.

Mississippi Power spokesman Verdell Hawkins said Friday the Sierra Club suit had no merit.

The Sierra Club also wants the commission to force Mississippi Power to disclose confidential information on how much the new plant will raise rates for the company's small customer base of less than 200,000.

The Kemper facility would be "far and away the most expensive generating facility ever proposed in Mississippi, or just about anywhere else," the filing said.

"We think they underestimated the rate impact," said Louie Miller, Sierra Club's Mississippi representative.

During hearings, Mississippi Power argued that Kemper would be lowest-cost option for new power, but a variety of comparisons with natural gas-fired generation showed the plant might never provide savings for customers, depending on the direction of future gas prices.

The utility has said it expects customer rates to increase by one-third over the next decade -- with or without Kemper -- as it meets future power needs and complies with environmental regulation. It said fuel savings from Kemper would eventually allow rates to stabilize.

IGCC technology heats coal to convert it into a synthesis gas that is processed to remove sulfur, mercury and other pollutants before being sent to a traditional combined cycle power plant to produce electricity.

(Editing by Sofina Mirza-Reid)