October 1, 2013 9:38:28 AM
JACKSON -- If Mississippi Power Co. misses a May deadline to complete construction of a $4.3 billion power plant in Kemper County, it will be forced to repay $133 million in federal tax credits.
However, the company says that because of accounting rules, it wouldn't write the amount off from profit and wouldn't add it to the $990 million in overruns it's already written off.
Company spokeswoman Amoi Geter said that decision could come this week.
Mississippi Power President Ed Holland told The Associated Press recently that officials were reviewing the schedule and could push it back.
"We still think that May date is achievable," Holland said. "It's a challenge, and we're in the process of evaluating how achievable it is."
Geter says Mississippi Power received tax credits in 2009 to encourage it to build a coal-fueled power plant emitting less carbon dioxide, with a five-year deadline to complete construction.
Rainy weather and additional work have pushed back the schedule, Holland said. More than 6,000 workers are on the site, a workforce that's been ramped up as Mississippi Power has tried to stay on schedule. But Holland says there are now so many workers on site that it can be hard to squeeze them into the same spaces, creating congestion that limits productivity.
Monitors employed by the Public Service Commission have warned that some work remains significantly behind, particularly certain kinds of cabling. URS Corp., one of the two monitors, wrote in its August report that internal worst-case scenarios could call for months of delays in completing the plant and starting it up. The company hopes to start the gasifier, a key part of starting the whole plant, by December.
"The startup schedule is compressed, there's no doubt about that," Holland said. "But we think it's doable."
Lower labor productivity is one of the factors that could drive up costs even more. Southern Co. shareholders are already absorbing $990 million in overruns, and the company has warned costs could go up again. But Chief Financial Officer Moses Feagin said the $133 million in tax credits, which would be repaid from cash or by reducing future tax credits, would be only an indirect drag on future profit. He also said adding the $133 million to the $990 million in overruns would be adding "apples and oranges."
Under a settlement approved in January, Mississippi ratepayers will have to pay for $2.4 billion of the plant's price, plus pay for up to another $1 billion in bonds that Mississippi Power won't make a profit on. That's not counting the additional hundreds of millions for costs of the mine and pipeline.
The PSC voted 2-1 to approve a 15 percent rate increase to start paying off the plant's debt even before it begins operations, followed by an additional 3 percent increase in 2014. Mississippi Power has said it's likely in 2014 to seek an additional increase of at least 4 percent over 20 years to pay off the bonds.
The federal government offered the tax credits to Kemper because the new plant is designed to limit carbon dioxide emissions.
The Environmental Protection Agency cited Kemper when it issued emissions rules recently. The plant will limit emissions by gasifying a soft form of coal called lignite and burning the gas to create electricity.
Southern Co. officials, however, say Kemper may not be a good model for the national rule.
"Because the unique characteristics that make the project the right choice for Mississippi cannot be consistently replicated on a national level, the Kemper County energy facility should not serve as a primary basis for new emissions standards impacting all new coal-fired power plants," Southern Co. spokesman Tim Leljedal wrote in a Sept. 20 email.
Opponents jumped on that statement as one more reason to criticize the plant.
"Kemper backers, at the highest levels, promised the public that Kemper would herald the future of the domestic coal industry and make Mississippi a leader in carbon capture technology," said state Sierra Club director Louie Miller. "Now the chickens have come home to roost."
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