In a much-anticipated “reforecast” being released today, the utility is boosting the estimated total cost of Iatan 2, the 850-megawatt plant, to a new range of $1.82 billion to $1.92 billion — a 15 percent increase from the most recent estimates made in December 2006.
A “preliminary conceptual” estimate in 2005 pegged the cost of the plant at $1.3 billion, but that was before the plant project was increased in size, which accounted for some of the cost increase.
The company also estimated in late 2006 that the cost of the power plant and other improvements, including environmental upgrades on existing plants, would raise customer rates by 20 to 25 percent. Rates are now expected to rise by as much as 27 percent, company officials said Wednesday.
KCP&L has been struggling to contain material and labor costs that have swept the industry, driving up the prices of new plants.
The new cost estimates could change again after KCP&L reviews the plant’s cost at the end of the year when more engineering of the project is completed.
“I think this is as good and accurate of a forecast as can be put together,” said Bill Downey, president of KCP&L. “This is an industry under extreme pressure with regard to labor (and material) costs.”
Downey said KCP&L has been able to avoid even higher estimates because the utility had purchased many components of the plants before prices increased.
Iatan 2 is scheduled to be completed in summer 2010. The target date has been pegged at June 2010 but KCP&L officials said they have planned all along for it to be completed sometime during the summer of 2010.
The power plant has been an issue in a pending case before the Missouri Public Service Commission over whether it should approve the purchase of Aquila Inc. by KCP&L’s parent company, Great Plains Energy Inc.
Critics of the purchase, which includes the commission’s staff, have said that purchasing Aquila, plus building the power plant and other energy projects, could be more than Great Plains could handle. They have warned that Great Plains’ and KCP&L’s credit rating could suffer, which would raise customer rates further.
The cost of the power plant also has been the subject of anonymous letters sent to the commission that alleged pressure was being brought on KCP&L employees to keep the new estimate for the plant lower than it should be. KCP&L has denied those allegations.
“That is categorically, absolutely untrue,” Downey said Wednesday.
Lewis Mills, head of the Missouri Office of Public Counsel, said the new estimate needs to be reviewed and won’t be automatically accepted.
“How did they get that number?” he said.
Downey said the utility has the proof to show that the estimate is accurate as possible in an evolving economic environment.
“It’s a principled estimate that has backup to it,” he said.
KCP&L officials said that indications of problems began showing up a year ago, and by the fall there were “clear trends” to show that previous estimates for the power plant and an environmental upgrade at an existing Iatan 1 plant were not accurate.
The company in 2005 had said that its share of a “comprehensive energy plan” that includes the power plant, environmental upgrades, a wind farm and energy-efficiency projects would cost $1.2 billion.
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