Kemper Project costs rise another $177 million

By Steve Wilson | Mississippi Watchdog

The cost of Mississippi Power’s Kemper Project plant continues to rise.

Additional construction and startup costs will likely cost $177 million, according to the an 8-K filing with the Securities and Exchange Commission. The Southern Co., Mississippi Power’s parent company, disclosed the filing Wednesday.

“Mississippi Power customers will not pay a penny of cost above the limit agreed to by regulators and legislators,” said Mississippi Power spokesman Jeff Shepard.

Most of the figure is in added labor costs, $152 million, with the rest coming from additional startup costs. The total cost of the project, which includes the lignite mine, 3,000-acre site, reservoir and drag line, is more than $5.2 billion.

Shepard said the added labor costs were due to weather, “craft labor turnover and unanticipated installation inefficiencies.”

The plant uses a first-of-its-kind process to convert lignite coal mined at the site into natural gas-like syngas to feed the 582-megawatt turbines. The plant is designed to capture 65 percent of the carbon from the gas stream and feed it into an underground pipeline for enhanced oil recovery.

The added costs don’t surprise Louie Miller, director of the Mississippi Sierra Club.

“I remember them talking a month ago about how Kemper is coming in for a landing,” Miller said. “Yeah, right. I feel the guys at Mississippi Power would lie when the truth would serve them better. They have zero credibility at this point. I just can’t believe how they insist that the ratepayers won’t be picking up the tab for this. It’s laughable.”

Under its agreement with the Mississippi Public Service Commission, the cost of the facility passed on to ratepayers is capped at $2.88 billion. Last year, the Mississippi Legislature passed a law allowing Mississippi Power to issue bonds up to $1 billion to help defray the added costs. The company is also receiving a $245 million clean coal grant from the federal government.

Kemper isn’t the only coal gasification power plant with problems. Duke Energy’s Edwardsport plant had its output fall to 1 percent of its capacity in February, according to a story in the Indianapolis Star. Duke Energy has spent $3.5 billion on the plant so far.

That might not be the end of the hits to the Southern Company’s bottom line. In the 8-K filing, the company says it can’t discount the possibility of further additional construction and startup costs.

More prudency hearings by the PSC on Kemper are scheduled May 19-23.

“The bottom line is they don’t even know if it’s (Kemper) going to work,” Miller said. “Their record isn’t the best, and I say, If you’re a betting man and you want to place a bet on this, good luck.”