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Cost Pressures, Delay Worries Sour Two Southern Co. Projects

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Courtesy of Southern Co.
Report notes schedule, budget snares at Kemper IGCC project.
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Two Southern Co. subsidiaries are grappling with cost pressures, possible start-up delays and criticism of its management at two of the largest power-related construction projects now under way in the U.S.

Mississippi Power's 582-MW integrated gasification combined-cycle project in Kemper County, Miss., will be the nation's first IGCC plant to capture most of the carbon dioxide generated during gasification; Georgia Power's two-unit, 2,200-Mw expansion of the Vogtle nuclear station in Burke County, Ga., involves the first new nuclear units approved by the Nuclear Regulatory Commission in more than 30 years.

In late November, Burns & Roe Enterprises (BRE), the Mississippi Public Service Commission's public utilities staff consultant, reported that the Kemper project is likely to cost between $3 billion and $3.15 billion, considerably more than the $2.4-billion "soft cap" and the $2.88-billion "hard cap" the PSC has set as limits for what Mississippi Power could recover from its ratepayers.

BRE also found there is "a low probability" that Mississippi Power can meet the IGCC project's targeted May 2014 commercial-operation date without additional spending and a more intense work pace; that a November-December 2014 on-line date is more likely; and that there "is still a technology risk" associated with the project's "transport integrated gasification" technology, which could lead to further delays and still-higher costs.

BRE recommended that Mississippi Power and its oversight affiliate, Southern Co. Services (SCS), "develop remedial actions to both minimize further delays in schedule and … develop schedule acceleration plans."

Among other things, the consultant said SCS should monitor and update its pipe-fabrication, pipe-installation and electrical-installation plans; provide additional labor and labor training; and "reevaluate the balance between the cost of accelerating the schedule and the cost of delaying commercial operation."

BRE also said the utility should consider accelerating the start-up of the combined-cycle portion of the plant so it could operate at least initially on natural gas; also, the utility should create detailed procedures "to anticipate any challenges" the plant's lignite gasifier may face during commissioning, start-up and testing.

Sierra Club Study: Pull the Plug

Earlier in November, the Sierra Club released a study by a consultant, the Institute for Energy Economics & Financial Analysis, that said the project already is over budget and behind schedule. Louie Miller, state director of the Mississippi chapter of the Sierra Club, said the PSC "needs to step in and pull the plug before customers are made to foot the bill for Mississippi Power's $3-billion mistake."

Mississippi Power maintains the project will be completed by May 2014. "It's important to note that URS [Corp.], the commission's independent monitoring firm, recently filed a report that stated that they believe the facility has a 72% probability to be less than or equal to $2.88 billion [in cost]," the utility stated.

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