MISS. POWER SAYS KEMPER ON BUDGET; SIERRA CLUB QUESTIONS COSTS

Tamar Hallerman
GHG Monitor
3/15/13

The costs of constructing Mississippi Power’s Kemper County gasification plant previously capped by the state regulators has remained steady at $2.88 billion through the end of January, the Southern Company-owned utility told state regulators last week in its most recent monthly status report on the progress of the 582 MW plant. However, the Mississippi Sierra Club is raising questions about some costs in the report, accusing Mississippi Power of using “Enron-style accounting” tricks to hide cost increases. A Mississippi Power spokesperson denied any accounting tricks and said there are “no new numbers in the report that would be rolled into our customer rate base.”

In its report, Mississippi Power told the state Public Service Commission (PSC) that it has spent $2.2 billion to date on the integrated gasification combined cycle facility, which is roughly 75 percent complete ahead of startup testing slated for the third quarter of this year and commercial operations in May 2014. Mississippi Power said that concrete work is 93 percent complete at the facility and structural steel erection is 71 percent finished, while CO2 and natural gas pipeline work is nearly complete, according to the report, which described the project as overall “on schedule.”

In the report’s section listing project expenses that are exempt from the cost cap, figures indicate a more than $125 million cost increase since the previous month. According to the report, the costs for the CO2 pipeline and nearby lignite coal mine that will supply the plant’s feedstock have stayed steady at $377 million. But that cost chart also indicates that expenses for things like interest accrued during construction, the independent monitors hired by the PSC to keep tabs on construction and buffer money for more efficient design work, jumped by $125.4 million since December, when the previous report was filed. The Mississippi Power spokesperson said the company just reformatted its monthly report, creating the appearance of new numbers when there aren’t any. “These are the same numbers that have previously been reported in our monthly reports,” the spokesperson said. “We simply structured the January report to put the costs in the appropriate places.”

Sierra Club Sees ‘Shell Game’

In response, the Mississippi Sierra Club said Mississippi Power used “Enron-style accounting” in the report by “moving” some of the expenses that had been reported as capped costs to the uncapped section in order to make it look like the plant is still on budget. “It’s a shell game,” Director of the Mississippi Sierra Club Louie Miller said in a statement. “It’s time for the Public Service Commission to do its job and call Mississippi Power out on its Enron-style accounting. Mississippi Power needs to explain why costs jumped by $125 million in one month, and why more than $170 million in costs are now showing up in the so-called uncapped spending category.”

In a subsequent interview, Miller said that exempted costs at the facility now total $870 million, nearly $350 million above the amount initially approved by the PSC. “At the end of the day, this facility is a runaway train in terms of spending. Mississippi Power has 14 more months before the plant is scheduled to begin commercial operations. That’s 14 more months to continue to run the costs up on this thing in a breathtaking fashion,” he said. “When you can go over $125.4 million in one month, you’ve got problems. And at the end of the day, they’re going to continue to ask the ratepayer to cover their mistakes and cost overruns.” 

The dust-up is the most recent example of the back-and-forth that has occurred between Mississippi Power and the Sierra Club since the Kemper plant’s beginnings. While the latter has fought consistently in court and in the media for the project to be defunded and for the utility to switch the facility to natural gas, Mississippi Power has accused the Sierra Club of spreading misinformation about the plant, the state’s first new power generation facility to be built in three decades. Mississippi Power received a $270 million Department of Energy grant under the Clean Coal Power Initiative in 2009 to capture 65 percent of carbon emissions from the IGCC facility for storage via enhanced oil recovery, as well as $133 million in federal investment tax credits. The PSC approved a 15 percent rate increase for the Kemper plant last week, allowing Mississippi Power to begin collecting roughly $125 million in rate recovery next month. The regulators also approved a 3 percent rate increase to kick in next year for the utility’s roughly 186,000 customers in southern Mississippi.