Cost of Kemper Project lost in the numbers

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When talking about costs for Mississippi’s controversial Kemper Project integrated-gasification power plant, it’s easy to get lost in the numbers — especially when the numbers get into the billions.

By Steve Wilson | April 7, 2015 |

Photo Credit: Southern Company

When talking about costs for Mississippi’s controversial Kemper Project integrated-gasification power plant, it’s easy to get lost in the numbers — especially when the numbers get into the billions.

The cost for the power plant, which will convert high-moisture lignite coal into a natural gas-like substance called synthesis gas to burn in its power-generating turbines, is up to $6.206 billion.

According to the second certificate of necessity and convenience issued in 2012 for the plant by the Mississippi Public Service Commission, the $6.206 billion in costs are subject to the $2.88 billion cost cap that limits the amount the company can seek from its 186,000 customers through rate increases.

Photo by Andrew Matthews | PA Wire

Photo by Andrew Matthews | PA Wire

COSTLY BEHEMOTH: Costs for the F-35 fighter jet are soaring. A Marine Corps’ version is priced at $251 million.

But let’s look at that $6.206 billion in other terms. The Kemper Project’s price tag would add up to:

  • The entire state budget of Mississippiin fiscal year 2016.
  • 63 Lockheed Martin F-35A Lightning II fighter jets, the U.S. Air Force’s newest fighter plane. The manufacturer says the fighter jet costs about $98 million.

Let’s look at it in one other way. If $6.206 billion in $1 bills were stacked, they’d reach 421 miles high or blanket 1,585.6 acres, or 2.4 square miles.

Mississippi Power spokesperson Natalie Anne Campen said the $6.206 billion price tag for the facility includes the cost of the plant, the associated lignite mine on site, the carbon dioxide pipeline to supply two oil exploration companies, regulatory costs, financing costs and write downs of $2.05 billion absorbed by Mississippi Power’s parent company, the Southern Company. A write down is the deliberate reduction of the book value of an asset, and in the case of Kemper was done for tax purposes.

The plant’s costs include:

  • $2.4 billion in plant costs recovered from customers in the form of rate increases, plus $640 million in what the company calls “exceptions and exemptions.” That adds up to $3.04 billion.
  • $1.118 billion in alternate financing — provided by a $1-billion bond authorized by the Mississippi Legislature — and construction costs that Campen said “were not cost overruns and the company intended to collect all along.” Thanks to the settlement agreement with the PSC, Campen said financing costs would be recovered without a profit for Mississippi Power.
  • The $2.05 billion write down by the Southern Company.

The final amount is certainly subject to change. The Mississippi Supreme Court ruled in February that Mississippi Power must issue refunds on a previous 18-percent rate increase because the PSC hasn’t ruled yet on whether costs incurred for construction are just, or prudent. The company has asked the Court for a rehearing, along with the PSC.

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