Mississippi Power makes another cost adjustment to Kemper IGCC project

Southern (NYSE:SO) utility Mississippi Power has reported another cost increase to the price of the 580-MW Kemper County coal gasification power plant, but is still hopeful that the project will be in commercial operation by Jan. 31.

That’s the crux of a Securities and Exchange Commission (SEC) filing by the utility on Jan. 6.

The latest project $34m price increase was included in the latest status report on the Kemper integrated gasification combined cycle (IGCC) project that the utility made with the Mississippi Public Service Commission in Docket No. 2009-UA-14.

The $34m price increase is attributed to some hiccups in the gas clean-up system for the advanced lignite coal plant. The $34m is an increase to the $2.88bn cost cap, a Mississippi Power spokesperson confirmed Jan. 10.

The Jan. 6 status report on Kemper County said there are still issues with the “gas clean-up systems” for gasifier B. The utility said the project “continues to expect that the Kemper IGCC will be placed in service by January 31, 2017.” The schedule reflects the time expected to complete the integration of all systems necessary for both combustion turbines to simultaneously generate electricity with syngas.

The next steps for the facility include the integrated operation of both gasifiers. Each gasifier previously has produced electricity using clean syngas. Sustaining adequate nitrogen supply, among other items, remains a risk to achieving integrated operation of both gasifiers. If integrated operation of both gasifiers does not occur by mid-January, the expected in-service date and related cost estimate for the Kemper IGCC may require further revision.

Any extension of the in-service date beyond January 31, 2017 is currently estimated to result in additional base costs of approximately $25m to $35m per month, which includes maintaining necessary levels of start-up labor, materials, and fuel, as well as operational resources required to execute start-up activities.

But additional costs may be required for remediation of any further equipment and/or design issues identified. Any extension of the in-service date would also increase costs for the Cost Cap Exceptions, which are not subject to the $2.88bn cost cap established by the Mississippi PSC.

The quarterly report for the quarter ended Sept. 30, 2016, set the Kemper IGCC cost cap at $2.88bn, net of net of $245m of grants awarded to the project by the Department of Energy (DOE) under the Clean Coal Power Initiative Round 2 (the initial DOE Grants) and excluding the cost of the lignite mine and equipment, the cost of the carbon dioxide (CO2) pipeline facilities, allowance for funds used during construction (AFUDC).

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.