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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The long-running controversy over the $7.5 billion Kemper County integrated gasification combined cycle (IGCC) power plant in Mississippi could be reaching a conclusion. In late November, the plant's owner, Mississippi Power Company (Gulfport, Mississippi), a unit of the Southern Company (NYSE:SO) (Atlanta, Georgia), in conjunction with its largest industrial customer, filed a proposed settlement with Mississippi utility regulators. The Mississippi Public Service Commission (MPSC) (Jackson, Mississippi) is scheduled to begin a hearing on the case today, December 4, and a decision is expected in January.
The plant was designed to gasify locally mined lignite, capture up to 65% of carbon dioxide (CO2) emissions and pipe those emissions into a nearby enhanced oil recovery (EOR) field. KBR's proprietary Transport Integrated Gasification (TRIG) technology was deployed at the plant. Originally developed when natural gas prices were significantly higher than they are today, and with the prospect of a carbon tax on the horizon, changes in the power market, coupled with reversals at the plant, have undermined the plant's economics.
Missed deadlines and cost overruns have plagued the plant for years. Building the 582-megawatt Kemper County IGCC cost Mississippi Power and its corporate parent about $7.5 billion, but about $6 billion of investments in the plant's syngas technology have been written off. Still in question is about $1.5 billion in so-called "uncapped" costs, which the utility claims it is eligible to recover. Those costs include constructing a lignite mine, CO2 pipeline, as well as other costs such as interest, independent monitors and improvements to design, among other things, Mississippi Power said.
The utility, its customers, the staff of the MPSC and other intervenors have been negotiating for months over how much of the $1.5 billion in contested outlays can be recovered from customers. For more on this project, see June 23, 2017, article - Will Kemper County IGCC Become the World's Most Expensive Gas-fired Power Plant?, June 14, 2017, article - Kemper County Plant Delayed Again, Will Need Costly Repairs and May 3, 2017, article - Kemper County IGCC Delayed Again, Expected to be Operating by End of May.
Under an agreement filed with regulators November 21, the utility's customers would have to pay about $118 million for the plant in the first year, down from the utility's lowest previous offer of $123 million, according to an Associated Press (AP) report. The utility also agreed to absorb about $50 million in regulatory costs and accept a lower return on equity on its Kemper County IGCC investments that can be recovered from customers.
But there's still between $125 million and $175 million in costs separating the utility and the MPSC staff, the AP article said. The staff believes the utility should not recover that sum because it was tied to the gasifier. The utility said it cannot accept further write-offs from the plant.
"I think it's a good agreement," Mississippi Power President Anthony Wilson said of the settlement filed November 21. "There are some things in it that I wish were different. What I can't do is write more money off," he told the AP.
The plant has been operating for several years burning natural gas. Mississippi regulators prohibited the use of the coal gasifier earlier this year after repeated delays in bringing that technology online. If a final regulatory decision allows the utility to recover $1.5 billion to build the plant, the utility will have paid nearly $2,600 per installed megawatt of generating capacity - roughly three times the current cost to build a high-efficiency, natural gas combined-cycle generator.
The settlement that was filed November 21 was between Mississippi Power, Chevron Corporation (NYSE:CHV) (San Ramon, California), the Chemours Company (NYSE:CC) (Wilmington, Delaware) and some federal government agencies. Chevron's Pascagoula oil refinery is the utility's largest customer.
"Although the original concept of the Kemper County plant was sound, a lot of factors - including the dramatic reduction in natural gas prices and a decline in crude-oil prices - have since come together to work against the plant and its economics," commented Britt Burt, Industrial Info's vice president of research for the Global Power Industry.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
The plant was designed to gasify locally mined lignite, capture up to 65% of carbon dioxide (CO2) emissions and pipe those emissions into a nearby enhanced oil recovery (EOR) field. KBR's proprietary Transport Integrated Gasification (TRIG) technology was deployed at the plant. Originally developed when natural gas prices were significantly higher than they are today, and with the prospect of a carbon tax on the horizon, changes in the power market, coupled with reversals at the plant, have undermined the plant's economics.
Missed deadlines and cost overruns have plagued the plant for years. Building the 582-megawatt Kemper County IGCC cost Mississippi Power and its corporate parent about $7.5 billion, but about $6 billion of investments in the plant's syngas technology have been written off. Still in question is about $1.5 billion in so-called "uncapped" costs, which the utility claims it is eligible to recover. Those costs include constructing a lignite mine, CO2 pipeline, as well as other costs such as interest, independent monitors and improvements to design, among other things, Mississippi Power said.
The utility, its customers, the staff of the MPSC and other intervenors have been negotiating for months over how much of the $1.5 billion in contested outlays can be recovered from customers. For more on this project, see June 23, 2017, article - Will Kemper County IGCC Become the World's Most Expensive Gas-fired Power Plant?, June 14, 2017, article - Kemper County Plant Delayed Again, Will Need Costly Repairs and May 3, 2017, article - Kemper County IGCC Delayed Again, Expected to be Operating by End of May.
Under an agreement filed with regulators November 21, the utility's customers would have to pay about $118 million for the plant in the first year, down from the utility's lowest previous offer of $123 million, according to an Associated Press (AP) report. The utility also agreed to absorb about $50 million in regulatory costs and accept a lower return on equity on its Kemper County IGCC investments that can be recovered from customers.
But there's still between $125 million and $175 million in costs separating the utility and the MPSC staff, the AP article said. The staff believes the utility should not recover that sum because it was tied to the gasifier. The utility said it cannot accept further write-offs from the plant.
"I think it's a good agreement," Mississippi Power President Anthony Wilson said of the settlement filed November 21. "There are some things in it that I wish were different. What I can't do is write more money off," he told the AP.
The plant has been operating for several years burning natural gas. Mississippi regulators prohibited the use of the coal gasifier earlier this year after repeated delays in bringing that technology online. If a final regulatory decision allows the utility to recover $1.5 billion to build the plant, the utility will have paid nearly $2,600 per installed megawatt of generating capacity - roughly three times the current cost to build a high-efficiency, natural gas combined-cycle generator.
The settlement that was filed November 21 was between Mississippi Power, Chevron Corporation (NYSE:CHV) (San Ramon, California), the Chemours Company (NYSE:CC) (Wilmington, Delaware) and some federal government agencies. Chevron's Pascagoula oil refinery is the utility's largest customer.
"Although the original concept of the Kemper County plant was sound, a lot of factors - including the dramatic reduction in natural gas prices and a decline in crude-oil prices - have since come together to work against the plant and its economics," commented Britt Burt, Industrial Info's vice president of research for the Global Power Industry.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
