IN-SERVICE DATE FOR KEMPER COUNTY REVISED TO FOURTH QUARTER 2014

Karen Frantz
GHG Monitor
11/01/2013

Mississippi Power’s flagship carbon capture and storage facility at Kemper County is now expected to come online in the fourth quarter of 2014, the utility’s parent company, Southern Company, told investors this week. The announcement comes on the heels of information released in early October that Kemper County would not be able to meet its originally planned May 2014 in-service date as a result of “lower than expected production rates and delays from wet weather.” In a call with investors Oct. 30, Southern Company Chairman, President and CEO Tom Fanning said, “After recalibrating our assumptions on the rate of pipe installation we have revised the in-service date to the fourth quarter of 2014.”

The 582 MW Kemper County gasification project is currently undergoing peak construction in eastern Mississippi and is expected to be the first utility-scale power generation facility with CCS. But capital costs of the project have increased in recent months and Southern Company shareholders have been forced to absorb cost overruns because Mississippi Power is limited in what it can collect in rate recovery from its customers. Moreover, the utility must repay the Internal Revenue Service $133 million to cover soon-to-be-expired tax credits as a result of the construction delay. The U.S. government awarded the incentives to the project in 2009 as part of a program to encourage advanced coal generation. However, Mississippi Power had to bring Kemper online before the credits expire in May 2014.

Fanning said that “in conjunction with the schedule change, we have recorded an additional pretax estimated loss of $150 million.” Total write-offs for the project are now $1.14 billion as of Oct. 30, according to Southern. Fanning also said Southern Company estimated the incremental costs for a delay to be approximately $15 million to $25 million dollars per month. “Our new estimate is consistent with that projection and also retains a $100 million contingency,” he said.

Several regulatory steps are also on the horizon for Kemper, Fanning said, including hearings on the rate plan expected to occur in the first quarter of 2014. In addition, “Mississippi Power will file information supporting prudence of its procedures and controls over the costs that are currently under review” by mid-December, with hearings on those costs expected to start in May. The prudence review of costs incurred during construction of the Kemper facility are required by a settlement agreement that Mississippi Power reached with the PSC in January, and costs incurred up until March 31, 2013 will be reviewed in the first prudence hearing and a second hearing will be held for costs incurred from April 1, 2013 to the project’s completion. Fanning said that “tremendous progress continues to be made at the site.” He said pipe installation is nearly halfway complete, both combustion turbines have been fired and the entire two-on-one combined cycle has been synced to the grid.