JACKSON, Mississippi — Mississippi Power Co. announced Tuesday it will likely have to repay a $234 million federal tax credit because its Kemper County power plant won't be in operation by April 19.
The unit of Atlanta-based Southern Co. said it probably won't meet that deadline to start producing carbon dioxide at the $6.3 billion plant it's building in eastern Mississippi, although Mississippi Power CEO Ed Holland said the company still believes it will put the plant into commercial operation by June 30.
"We still believe, as we had previously disclosed, that the plant will come online in the first half of 2016," Holland said.
It's the second batch of tax credits Mississippi Power could repay because of Kemper delays. The company had to repay $133 million to the federal government because it missed the original May 2014 deadline to put the plant into operation. Southern Co. began construction with little of the plant designed as it raced to claim the tax credits, and those monitoring the construction have said that was a prime cause of overruns and delays that followed.
Mississippi Power also said Tuesday said it will spend $15 million more on redesigns, rework and maintenance, as well as training additional plant operators. Holland said the plant is beginning to test the gasifier by feeding sand through it, and plans to begin testing with lignite coal by December or January.
The plant has been generating electricity by burning natural gas since August 2014. But its key parts, designed to gasify lignite for fuel and later strip out carbon dioxide and other byproducts from the plant's exhaust, had been scheduled to start operation by March 30. That carbon dioxide is supposed to be sold to companies that would pump it into the ground to force out oil. The reduction in carbon dioxide emissions would reduce the plant's contribution to global warming, which is why federal officials are supporting the project.
Critics deride the plant as a "science project," while Holland downplays the risk that it won't work as designed.
Because of accounting rules, Holland said Southern Co. won't write off the lost tax credits from profit and won't add it to the more than $2 billion in overruns it's already written off.
The company could seek to recover the lost tax credits from customers, but Holland said Mississippi Power thinks it can identify other tax benefits to shield customers.
With Kemper playing a leading role in November's Public Service Commission elections, getting regulators to tack more costs onto the bill that customers would ultimately have to pay could be difficult. Most candidates seeking the three posts voice heavy skepticism about the plant.
Every month's delay increases the bill for the plant by another $25 million to $30 million, including $13 million per month in interest on debt.
Mississippi Power said it plans to borrow from Southern Co. to repay the tax credits. Southern is also lending money to pay $353 million in refunds of rate increases that the state Supreme Court ruled illegal and $301 million to repay a deposit to South Mississippi Electric Power Association. SMEPA dropped plans to buy 15 percent of Kemper.
The company won an emergency 18 percent rate increase from the Public Service Commission in August, saying it was on the verge of running out of cash. Regulators must agree that Mississippi Power's spending on $1.1 billion in equipment now generating electricity was prudent in order for the company to avoid repaying that as well. That decision is scheduled for December.
Follow Jeff Amy at: http://twitter.com/jeffamy