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Kemper service date pushed to June 30; Mississippi Power files to extend rates

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Kemper service date pushed to June 30; Mississippi Power files to extend rates

Mississippi Power Co. on June 5 again delayed by a month the target date for its full integrated gasification combined-cycle generation project in Kemper County to enter service. The Southern Co. subsidiary also filed with the Mississippi Public Service Commission requesting to leave current rates for recovery of the Kemper project intact.

Mississippi Power had been previously targeting the end of May to bring its controversial Kemper project, formally known as Plant Ratcliffe, fully online, running on syngas derived from onsite lignite as fuel. But on May 31 the utility warned the facility was not fully operational, marking another delay for the plant, costs for which have vastly exceeded initial forecasts.

In a June 5 filing, Mississippi Power said it worked during May to repair a leak in one of the particulate control devices for gasifier "A" to modify each gasifier's ash removal systems and repair the sour water system. But the utility also experienced leaks in syngas coolers for gasifier "B," which required an outage to deal with the leaks and to modify the syngas coolers on both gasifiers. Mississippi Power now expects the remainder of the Kemper IGCC project, including both gasifiers, to enter service by the end of June.

Based on experience gained during startup and testing over nearly 200 days of coal operation, Mississippi Power said it has completed an assessment of improvement projects necessary after Kemper enters service. "Specifically, achievement of long-term sustained operations is expected to require the redesign and eventual replacement of the syngas cooler superheaters sooner than originally expected, primarily as a result of the leaks experienced (estimated to be an 18 to 24 month process). Long-term operations are also expected to require relocation of the ash loading process and other minor enhancements," Mississippi Power stated in the filing, adding that these projects, "may further negatively impact certain economic aspects of the Kemper IGCC."

Total project costs for Kemper through April are $7.50 billion, according to the progress report submitted to state regulators. The latest estimate reflects an additional $22 million to reflect extending the project schedule through June 30, and an increase of $164 million related to operational improvement projects, for total capped cost increases of $186 million. Any extension of the in-service date beyond June 30 is expected to result in additional cost increases of $25 million to $35 million per month.

Additionally, Mississippi Power asked the PSC to continue recovery through rates of the costs of the operational portions of the Kemper project. The filing marks a decision on the part of the utility not to seek a full rate review of the troubled plant's costs ahead of it becoming fully operational. Instead, the utility is seeking continuation of a December 2015 decision by the PSC to allow recovery of $126 million annually for the in-service components of Kemper, which has been producing power running on conventional natural gas since mid-2014.

Mississippi Power said it continues work to develop a traditional rate case and rate mitigation plan to address recovery of the remaining components of the Kemper project, but the timing of that filing is "uncertain." The utility also expects the resolution of that filing would likely result in a settlement with the Mississippi Public Utilities Staff and other stakeholders.

The utility expects the PSC to make a decision on its June 5 request to continue current rates during the third quarter. (Mississippi PSC Docket No. 2009-UA-0014)