Kemper IGCC Celebrates Key Milestone, Suffers New Cost Increases

Mississippi Power has revealed a new cost increase of $110 million for its Kemper County integrated gasification combined cycle (IGCC) facility. But, the company said that it has tested one of two gasification units—reaching what it says is the project's "most significant milestone yet"—and that it does not expect any new delays.

Testing the gasifiers involves injection of sand into the equipment under operational conditions. "The test is used as a major step before injecting lignite in the gasifiers for final operational testing," the company explained on Oct. 27. 

On Schedule, For Now

It means that the plant that lags two years behind schedule, afflicted by steep cost overruns, is expected to come online in the first half of 2016, said Ed Holland, chairman and CEO of Mississippi Power. “This is one of the most important steps toward completion of the project. It demonstrates the first gasifier and related systems are working as designed to support the project’s generating capability of producing syngas from lignite,” he said.

Syngas will be supplied to Kemper's combined cycle power plant, which has been operating successfully using natural gas since August 2014. “Following the completion of the testing of both gasifiers, our next step will be to inject lignite into the gasifiers and produce syngas, which is expected to occur in the first part of next year," Holland said.

New Cost Increases

In its monthly report for September filed with the Mississippi Public Service Commission (PSC) on Oct. 27, the utility's cost estimates are about $110 million higher than in a previous report. 

Those increases include about $20 million in adjustments related to startup and commissioning activities, as well as "operational readiness activities during the month." Significantly, they also include approximately $90 million in additional schedule costs for the months of April–June 2016. 

"These costs are in addition to previous adjustments made in the July and August reports, bringing the total adjustments subject to the cost cap for the third quarter to approximately $150 million. Customers will not pay for any of this increase in capped costs," the company said. 

According to an Oct. 27 filing made by Mississippi Power's parent company Southern Co., the project's total costs now amount to about $6.4 billion. The total estimated Kemper IGCC cost subject to the $2.88 billion cost cap as of Sept. 30 was about $5.11 billion. 

"Mississippi Power does not intend to seek rate recovery for any costs related to the construction of the Kemper IGCC that exceed the $2.88 billion cost cap, net of the DOE Grants and excluding the Cost Cap Exceptions," the filing says. 

Southern Co. also revealed that if the plant does not begin service before June 30, 2016, (Mississippi Power anticipates the units will start commercial operations on or sometime after April 19, 2016) it will cost the company about $25 million to $30 million per month, including costs for start-up activities, labor, materials, fuel, and operational resources. 

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)