Kemper coal gasification plant costs rise $18M

Dive Brief:

Southern Co. has informed federal regulators that the pricetag on its Kemper coal gasification facility has risen again, this time by $18 million, the Atlanta Business Chronicle reports.
The controversial plant in Mississippi is now expected to cost almost $7 billion, following years of cost overruns above the $2.9 billion approved by regulators.
And the pain may not be over, Southern said in its 8-K filed with the U.S. Securities and Exchange Commission. Should the in-service date of the plant be extended past August, up to $50 million in additional costs could be added through allowances for funds used during construction (AFUDC), labor, materials and fuel.

Dive Insight:

While Kemper's in-service is approaching, at least on paper, the pricetag keeps rising. Southern, which owns Mississippi Power, the utility constructing the plant, told regulators "any extension of the in-service date beyond August 31, 2016 is currently estimated to result in additional base costs."

Those additional costs would include $25 million to $35 million per month, which Southern said includes maintaining necessary levels of start-up labor, materials, and fuel, as well as operational resources required to execute start-up and commissioning activities. And the utility added that "additional costs may be required for remediation of any further equipment and/or design issues identified."

A delay would also increase costs for the cost cap exceptions established by the Mississippi Public Service Commission, including up to $15 million for AFUDC, carrying and operating costs.

The Kemper facility actually began generating gas power in 2014, but is not expected to begin burning the synthetic gas until summer. Located in Kemper County, the 582-MW facility would be the first Mississippi Power baseload plant built in more than 30 years and is one of two coal gasification plants in operation in the United States today, along with Duke's Edwardsport plant in Indiana.

Rising costs have turned off some backers, however. Last year, South Mississippi Electric announced it would not follow through with its plan to purchase a stake in the plant, citing delays and cost overruns since the purchase agreement was signed in 2010.