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Cost Escalations Reported on Power Plant Projects

July 15, 2008

By Wagman, David

Power generators are revising upwards the cost to build or complete a number of new power plant projects across the United States. Duke Energy told Indiana state regulators that the 630 MW Edwardsport coal-fired power plant currently under construction will cost $365 million more than was previously thought.

Kansas City Power & Light now expects its Iatan 2 coal-fired power plant to cost almost $2 billion, a 15 percent increase from two years ago and 47 percent higher than the original $1.3 billion price tag.

And Georgia Power said it could cost $6,300/kW to build 2,200 MW of new nuclear capacity at the Vogtle Electric Generating Plant near Waynesboro, Ga.

At Edwardsport, Duke Energy said the total revised cost estimate is now $2.35 billion, or $3,730/kW. Regulators granted the company permission last November to build the power plant. Regulators will need to approve any cost increase for the plant. The plant is scheduled to be completed in 2012.

The company will retire an existing plant (with coal and oil units built between 1944 and 1951) once the new plant is completed nearby. Duke Energy also filed with state utility regulators a request for approval of plans for studying partial carbon capture and underground storage at the plant. If approved, the studies would look at the plant site’s suitability and costs for capturing and storing carbon dioxide, a primary greenhouse gas.

Kansas City Power & Light said it now expects its Iatan 2 coal- fired power plant to cost almost $2 billion, a 15 percent increase from two years ago and 47 percent higher than the original $1.3 billion price tag. The cost is estimated to range from $2,083/kW to $2,204/kW.

The utility said that based on the top end of the new estimate ranges, the combined increase in projected costs of the Iatan 1 environmental project and the new Iatan 2 unit is approximately 19 percent.

KCP&L owns around a 55 percent share of the new unit. In December 2006 it estimated its share of the construction cost would be $837 million to $914 million. In its most recent estimate, the utility said its share of the total projected cost has increased to a range of $994 million to $1.051 billion.

The in-service date for Iatan 2 continues to be the summer of 2010.

KCP&Lalsosaidits70percentshareofthe projected cost of the Iatan 1 environmental project has risen to a range of $330 million to $350 million. This represents an increase of 33 percent compared to the top end of the previous range estimate of $255 million to $264 million as of December 2006. The expected in-service date for the Iatan 1 project is now February 2009 compared to the previous estimate of year-end 2008.

“Though we are seeing cost increases in the Iatan projects, they are in line with what the industry as a whole is experiencing,” said Bill Downey, president and CEO.

Georgia Power said it could cost $6,300/kW to build 2,200 MW of new nuclear capacity at the Vogtle Electric Generating Plant near Waynesboro, Ga. The estimate came as the utility moves toward submitting a nuclear self-build proposal to Georgia regulators. Regulatory rules require market bids to be compared with self-build proposals, but the utility said no market bids were received.

The plant would consist of two Westinghouse AP1000 units, with a capacity of 1,100 MW each. The units would enter service in 2016 and 2017, respectively.

Under an EPC contract signed earlier this year, the Vogtle co- owners (Georgia Power, Oglethorpe Power, MEAG Power and Dalton Utilities) will pay a purchase price that will be subject to certain price escalation and adjustments, as well as adjustments for change orders and performance bonuses. The estimated plant value to be placed in service also includes the financing costs for each co- owner, transmission and other costs that are the responsibility of the coowners and expected inflation costs.

Georgia Power said it expects to submit a final recommendation to regulators on August 1. A final certification decision is expected in March 2009.

Under terms of a separate joint development agreement, the co- owners must finalize their ownership percentages by July 2 except for allowed changes, under certain limited circumstances, during the Georgia regulatory certification process. Georgia Power’s proportionate share of the estimated in-service cost of the two units, based on its current ownership interest of 45.7 percent, is approximately $6.4 billion, subject to adjustments and performance bonuses under the EPC contract.-David Wagman

Copyright PennWell Publishing Company Jun 2008

(c) 2008 Power Engineering. Provided by ProQuest Information and Learning. All rights Reserved.




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