Kemper, Now Slated to Start in Late June, Will Need Costly Post In-Service Improvement Projects

Mississippi Power’s Kemper County integrated gasification combined cycle (IGCC) project is now expected to be in service by the end of June, but the company expects it will need post in-service improvements. It also said timing of when it will file a case to address the recovery of costs not currently reflected in rates is uncertain.

The Southern Co. subsidiary said on June 5 that it filed a rate plan with the Mississippi Public Service Commission (MPSC) that would allow current rates for recovery of portions of the Kemper project’s existing combined cycle gas turbine (CCGT) plant to remain in place. If approved, that filing will not increase customer bills, it said.

It added, however, that discussions with the MPSC continue on the status of the project and the nature and timing of a rate filing to address recovery of the remainder of the Kemper project costs, which includes its gasification component.

Mississippi Power wants a timely resolution of such a filing, which will likely require a settlement between the company and the Mississippi Public Utilities staff as well as other parties. The settlement “may include other operational or cost recovery alternatives. And, “[a]lthough the ability to achieve a negotiated settlement is uncertain, Mississippi Power intends to pursue any available settlement alternatives and will also continue to consider other possible operational and cost recovery options,” it said.

As POWER reported, an economic viability analysis conducted by Southern Co. suggests that the Kemper IGCC is only economic in higher natural gas price scenarios. Under medium and low natural gas price scenarios, the existing Kemper CCGT, which has been generating power since August 2014, has “a lower net present value of life cycle costs than the Kemper IGCC.” One alternative could be to run the plant as just a CCGT, as Southern Co. President and CEO Thomas Fanning has suggested. 

The 582-MW Kemper County energy facility is designed as an IGCC to convert locally mined lignite to synthesis gas, using novel TRIG technology to capture up to 65% of its carbon emissions. But owing to a number of technical hurdles, the project has been delayed nearly three years. It was originally projected to be placed into service in May 2014.

The newest delay is pegged to schedule adjustments needed for maintenance activities conducted during May “that extended the time necessary to establish sustained, integrated operation of both the project’s gasifiers for syngas production used to produce electricity,” the company said in a statement. It includes work to repair a leak in one of the particulate control devices for Gasifier A, minor modifications to both gasifiers’ ash removal systems, repairs to the sour water system, and completion of an outage for Gasifier B to address leaks and “make modifications to the syngas coolers on both gasifiers.”

The company also noted that it has “achieved periods” of running the plant as designed, integrating operation of both gasifiers as well as the combustion turbines to produce sulfuring acid and ammonia, and to capture and transfer carbon dioxide. So far, the project has operated a total of 200 days using lignite.

In a financial filing with the Securities and Exchange Commission on June 5, Mississippi Power said that it anticipates a handful of post in-service improvement projects, including the “redesign and eventual replacement of the syngas cooler superheaters sooner than originally expected, primarily as a result of the leaks experienced.” That project could span 18 to 24 months and cost about $164 million, which has already been added to the latest cost increase. Other projects could require relocation of the ash loading process and “other minor enhancements.”

The capital projects will add to costs and “further negatively impact certain economic aspects of the Kemper IGCC,” the company said. “Mississippi Power’s evaluation of additional post-in-service improvement projects is expected to continue.”

A monthly status report filed with the on June 5, meanwhile, shows that total project costs have now crossed $7.5 billion—a figure that factors in mine, carbon dioxide pipeline, and other accounting costs. Total costs exceed the $2.88 billion cost cap set by the MPSC by $3 billion.

The project’s original cost estimate outlined in a 2012 certificate of public convenience and necessity order was $2.4 billion, net of $245 million in grants awarded to the project by the Energy Department under the Clean Coal Power Initiative Round 2. That figure didn’t include the cost of the lignite mine and equipment or the cost of the carbon dioxide pipeline facilities.

 

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine