Dive Brief:
- Southern Co. will need to return $234 million in Phase II investment tax credits to the U.S. Internal Revenue Service (IRS) if its Kemper coal facility is not running by April 19, Bloomberg reports.
- While Southern subsidiary Mississippi Power expects the entire project to be placed in service during the first half of 2016, the company said it will likely be after the IRS deadline.
- The original cost estimate of $2.8 billion has more than doubled as the project development has dragged on, with some backers stepping away from the Mississippi plant.
Dive Insight:
Two months and change is apparently worth $234 million.
Southern is closing in on completion of its Kemper coal facility, despite a litany of delays and rising costs. But while it expects a first-half startup next year, the precise date is likely to fall after an April 19 deadline when the company would need to return tax credits to the federal government.
In a statement issued Thursday, Southern also said the company revised its cost estimate to include approximately $15 million in cost increases primarily related to startup and commissioning activities, as well as operational readiness. Customers will not pay for this increase, the company said.
“The power plant portion of the project is already in service and has been providing safe, reliable electricity for our customers for more than a year,” said Mississippi Power President and CEO Ed Holland. “Our November rate hearing before the [Public Service Commission] is only asking for cost recovery for this portion.”
The Kemper facility began generating gas power last year, but is not expected to begin burning the synthetic gas until next year. Located in Kemper County, the 582-MW facility would be the first Mississippi Power baseload plant built in more than 30 years. The plant is is one of two coal gasification plants in operation in the United States today, along with Duke's Edwardsport plant in Indiana.
Mississippi Co. has already watched costs for the plant balloon from an estimated price tag of $2.8 billion to more than $6 billion.
“As we’ve said many times before, the review of the project’s schedule and cost estimates will be ongoing,” said Holland. “Customers will not pay a penny more for the cost of the project than what is approved by the PSC.”
And approximately $13 million per month in financing costs and $7 million per month for items such as operating expenses and carrying costs are expected to be incurred, Southern said. Those costs are not capped and are eligible for rate recovery.
Southern said it anticipates supporting Mississippi Power’s cash needs in returning the funds to the IRS.