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Southern Co finds more labor issues at Kemper coal plant - filing

By Eileen O'Grady

HOUSTON, April 2 (Reuters) - Southern Co's Mississippi Power unit said it has identified more labor and construction problems at its $5 billion coal-gasification power project in Kemper County, Mississippi, the company said in a filing with regulators on Wednesday.

Mississippi Power said it was reviewing additional cost overruns related to lower construction productivity at the 582-megawatt Kemper County plant, one of only two integrated gasification combined-cycle (IGCC) plants in the country.

The productivity problems were "due in large part to adverse weather, unexpected excessive craft labor turnover and unanticipated installation inefficiencies," the utility said in a statement.

Mississippi Power said it has identified at least $177 million in likely cost increases, including $152 million in construction costs and $25 million in start-up costs.

Such added costs would push the estimated price tag for the delayed Kemper plant to $5.22 billion, well above the $2.88 billion construction cap approved by the Mississippi Public Service Commission.

Completion of the Kemper plant has been delayed by about six months to the fourth quarter.

Southern has previously taken $704 million in charges related to rising costs at Kemper which has been cited as a model for future coal-plant design by the U.S. Environmental Protection Agency as it works to limit carbon pollution from coal plants.

Southern Co officials have asked the EPA not to use Kemper as a standard for the industry. U.S. Secretary of Energy Ernest Moniz toured the site in November.

Mississippi Power, Southern's smallest utility, owns the plant and can only recover up to $3.8 billion for the Kemper costs through customer rates and the sale of securitized bonds. Customers began paying higher rates for Kemper last year after a lengthy regulatory battle.

At the time the plant was proposed, it was expected to cost about $2 billion.

(Editing by G Crosse)