Delays push cost of Kemper power plant to $6.4 billion

JEFF AMY, Associated Press

Further delays and other problems mean Mississippi Power Co.'s Kemper County power plant is likely to cost another $159 million.

JACKSON, Miss. (AP) — Further delays and other problems mean Mississippi Power Co.'s Kemper County power plant is likely to cost another $159 million, the company announced Tuesday.

The unit of Atlanta-based Southern Co. made the disclosure on the eve of the parent company reporting quarterly earnings Wednesday.

The total cost of the plant is now $6.4 billion.

Mississippi Power says it will absorb at least $110 million in increases. But the company's 186,000 customers could have to pay another $49.4 million to cover interest, regulatory costs and legal fees if the Mississippi Public Service Commission eventually approves. That decision likely won't come until sometime next year.

Customers have resumed paying 18 percent higher rates for Kemper after Mississippi regulators granted an emergency rate increase when Mississippi Power said it was running out of money. That came after Kemper opponent and Southern District Democratic PSC candidate Thomas Blanton won an appeal to the state Supreme Court to overturn an earlier 18 percent rate increase and force $377 million in refunds. Mississippi Power is in the process of disbursing those refunds.

The plant and associated lignite coal mine were originally supposed to cost $2.8 billion at most, but customers could pay almost $4.2 billion if the Mississippi Public Service Commission approves. The utility is absorbing more than $2 billion in overruns.

Mississippi Power spokesman Jeff Shepard said that much of the cost increase came from last month's announcement that the plant wouldn't go into full operation until as late as June 30. He said that the company needs to spend more to fix problems and keep workers on hand during that extended startup phase.

"As testing is conducted, corrections to equipment have to be made and we must ensure we have enough labor support onsite to complete the process," Shepard wrote in an email.

The company said it spent an extra $20 million in September and expects to spend another $90 million through June 30.

Kemper is supposed to gasify lignite coal and burn the resulting gas, stripping out much of the carbon dioxide and other chemicals. The plant has been running for more than a year powered by natural gas. Mississippi Power is currently testing one of the two gasifiers by pumping sand through it.

"This is one of the most important steps toward completion of the project," Mississippi Power CEO Ed Holland said in a statement. "It demonstrates the first gasifier and related systems are working as designed to support the project's generating capability of producing syngas from lignite."

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