Mississippi Power CEO Ed Holland discusses Kemper County’s Plant Ratcliffe with the Hattiesburg American editorial board. Lici Beveridge/Hattiesburg American
During an editorial board meeting Wednesday at theHattiesburg American, Mississippi Power president and CEO Ed Holland said work on the plant — officially known as Plant Ratcliffe — and its associated lignite coal mine is “about 99 percent complete.”
“If you had gone there six, eight months ago and stood up in the top of the facility and looked down, you would have seen pipe and other equipment out in the laydown yards,” he said. “Go up there today, and it’s virtually cleared — all that’s been installed.
“We are in full-fledged start-up mode right now, with testing of the various systems. We have certain milestones that we set out for us to get to — commercial operation sometime in the first half of 2016.”
The plant has endured its share of recent criticism after a series of cost overruns and delays. The plant and mine originally were estimated to cost $2.8 billion, but in early September Mississippi Power announced the costs had been pushed to nearly $6.3 billion.
But Holland said even though the Public Service Commission capped the capital cost of construction at $2.88 billion, they also allowed for additional uncapped costs to be recovered.
“And that amount, it was for things like the lignite mine, it was for things like the CO2 pipeline and the water pipeline that goes from Meridian to the plant,” he said. “Those are not capped, and the total amount for those costs is about $1.2 billion.
“So if you add the $2.88 billion and the $1.2 billion, the amount that the commission has authorized for recovery is around $4 billion, and the cost overrun is around $2.1 billion, and that is the amount that’s been written off by Southern Company.”
Holland said most of the overruns are associated with piping and cable the company had to install in the plant to finish construction.
“We underestimated by a significant amount how much of that we would need,” he said. “The original engineering and design led to a price of ‘X.’ As we went through the process and refined the engineering and design work by an order of magnitude, we had to increase the amount of piping and cable.
“This is not at all unusual for first-of-a-kind technology. The commission — and it was very wise on their part — they put a cost cap on what the customers would pay, and as a result of that, every bit of the cost overrun is being paid for by the shareholders.”
Mississippi Power customers recently were asked to pay 18 percent higher rates for Kemper after Mississippi regulators granted an emergency rate increase. That came after Kemper opponent and Southern District Democratic PSC candidate Tom Blanton of Hattiesburg won an appeal to the state Supreme Court to overturn an earlier 18 percent rate increase and force $350 million in refunds.
“In 2009 and 2010, when we were asked how much rates were going to go up when Kemper came online, we told everybody who asked that they were going to go up somewhere between 34 and 38 percent,” Holland said. “We didn’t try to hide the fact that there was going to be a significant rate increase. Since that time, we’ve worked diligently to try to find ways to mitigate the impact of that rate increase.