PSC looking into timing, amount of Kemper County Coal Plant overrun
$366 million in additional costs revealed after plant approved
by Clay Chandler
Published: June 15,2012
Sixteen days after the Mississippi Public Service Commission reapproved the certificate of public convenience and necessity for Mississippi Power Co.’s Kemper County coal plant, the company revealed to independent monitors an anticipated $366 million cost overrun for the project.
The revelation was included in monitors’ May report, which says MPC officials broke the news on May 10. The PSC reissued the plant’s certificate April 24, after the Mississippi Supreme Court said that 2010’s order granting the original certificate did not cite sufficient evidence from the record of proceedings.
Should Mississippi Power Company be allowed to spend over the $2.88 billion cap assigned for the Kemper County Coal Plant? Vote here
The company now puts the plant’s total construction cost at $2.76 billion, about 15 percent higher than the $2.4 billion projection in 2009. That’s closer to the PSC-imposed hard cap of $2.88 billion than a MPC spokesman said the company was April 24.
Jeff Shepard said then that the company anticipated an overrun in the neighborhood of $30 million. Shepard refuted assertions by the Sierra Club — which has filed a new round of litigation seeking to stop the plant’s construction — that the plant would incur an overrun in excess of $100 million, saying the company was “nowhere close” to that number. On March 30, when the PSC issued a temporary certificate for the plant, Shepard told reporters that the company anticipated no overrun at all.
Before MPC can recover from ratepayers any cost above $2.4 billion, the plant has to be in commercial operation, which is scheduled for May 2014. Commissioners also have to approve the recovery, provided the overrun meets a set of conditions, including proof that additional costs will save ratepayers money in the long term.
“We are committed to bringing the Kemper project on line, within the cost cap, to provide clean, safe and reliable energy to our customers,” MPC spokesperson Cindy Duvall said in a press release.
The company said the newly revealed overrun would have no rate impact on customers. Estimates for how much the plant would raise power bills for MPC ratepayers have varied. The April 24 order from the PSC granting the new certificate said rate increases would peak at 30 percent when the plant came online in 2014, before decreasing as MPC paid off plant-related debt. A 2009 MPC filing said rate increases would peak at 45 percent.
That number has been disputed by Southern District Commissioner Leonard Bentz, whose district is home to the vast majority of MPC’s nearly 200,000 customers. Mississippi Power officials did not respond to messages seeking further comment last week. Bentz said in a statement he expects MPC to build the plant for the original estimate of $2.4 billion.
“Any impact on the ratepayer will have to be approved by the Commission,” Bentz said. “And I won’t personally approve anything unless it is prudent and in the best interest of the ratepayer.”
The report issued by monitors said the plant’s construction was 22 percent completed; as of the end of March, it added, the company had spent $1.14 billion on the project. The report also said that monitors are in the process of reviewing PSC-submitted questions that seek to clarify the reasons for the additional $366 million in construction costs.
“That’s supposedly the outside limit, but we’ve got folks looking at the numbers,” said Central District Commissioner Lynn Posey. “Quite honestly, I was surprised at the overrun. We had heard for a long time that it was on schedule and on budget.”
Posey said, based on a preliminary review, that it’s possible the additional costs could meet the standard that requires long-term savings for ratepayers. “Nevertheless, this is a big overrun, and we’re serious about thoroughly checking it out,” he said. “We intend to see why we didn’t find out about it earlier and why it’s as much as it is. I think it raises everybody’s eyebrows.”
Northern District Commissioner Brandon Presley, who has voted against the project since its start, said MPC waiting until after the plant’s certificate had been reissued to reveal an overrun proves the company is not operating in good faith.
“I said from the beginning that there was a probability of this happening. That’s one of the reasons I voted against it. It’s a disservice to my colleagues. It’s a disservice to Mississippi Power customers.”
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