At a recent editorial board meeting, Mississippi Power president and CEO Ed Holland said work on the Kemper plant is “about 99 percent complete.”
“If you had gone there six, eight months ago and stood up in the top of the facility and looked down, you would have seen pipe and other equipment out in the laydown yards. Go up there today, and it’s virtually cleared — all that’s been installed. We are in full-fledged start-up mode right now, with testing of the various systems.”
The plant has endured criticism regarding cost overruns, but Holland said even though the Public Service Commission capped the capital cost of construction at $2.88 billion, they also allowed for additional uncapped costs to be recovered.
“And that amount, it was for things like the lignite mine, it was for things like the CO2 pipeline and the water pipeline that goes from Meridian to the plant. Those are not capped, and the total amount for those costs is about $1.2 billion. So if you add the $2.88 billion and the $1.2 billion, the amount that the commission has authorized for recovery is around $4 billion, and the cost overrun is around $2.1 billion, and that is the amount that’s been written off by Southern Company.”
Holland said most of the overruns are associated with piping and cable the company had to install in the plant to finish construction.
“We underestimated by a significant amount how much of that we would need. The original engineering and design led to a price of ‘X.’ As we went through the process and refined the engineering and design work by an order of magnitude, we had to increase the amount of piping and cable. This is not at all unusual for first-of-a-kind technology. The commission — and it was very wise on their part — they put a cost cap on what the customers would pay, and as a result of that, every bit of the cost overrun is being paid for by the shareholders.”
Mississippi Power customers were recently asked to pay higher rates for Kemper after Mississippi regulators granted an emergency rate increase.
“In 2009 and 2010, when we were asked how much rates were going to go up when Kemper came online, we told everybody who asked that they were going to go up somewhere between 34 and 38 percent. We didn’t try to hide the fact that there was going to be a significant rate increase. Since that time, we’ve worked diligently to try to find ways to mitigate the impact of that rate increase. The last thing we want to do is to raise rates. We spend hour after hour trying to find ways to take cost out of the business, to try to keep rates as low as we possibly can, and we take that obligation very seriously.”
Beginning Monday, Mississippi Power customers can opt to choose their refund either in the form of a check or a credit on their bill. Holland said the company will begin issuing refunds in the near future, and customers can expect to see theirs by November or December.
“We’ll make that refund, but we’ve got to have rates sufficient to keep our company solvent, and that’s why we got the emergency relief in early September, and why we’re asking for permanent relief in November.”
The plant has been generating electricity by burning natural gas since August 2014. Since that time, Kemper has been producing more than 700 megawatts of electricity. Officials are beginning to test the gasifier by feeding sand through it, and plan to begin testing with lignite coal by December or January. Kemper is expected to have a staff of more than 500, including 250-300 permanent Mississippi Power employees and 200-250 North American Coal Corp. employees.
“It’s important to note that Kemper (County) went from one of the lowest per capita-income counties in the state to one of the highest, as a result of construction of this facility. The tax base in Kemper County, because of the facility, has multiplied considerably. We hope and think that they’ve hired some strategic planners to help them better the way of life in Kemper County, and there will be some huge benefits.”
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