MEMORANDUM - 3 - November 26, 2012
An average rate base was developed for the first year of operation. The rate baseconsisted of the “Current View”
cost estimates for the Kemper County IGCC, Mine and CO
Pipeline, the “Projected Allowance for Funds Used During Construction (‘AFUDC’) – Non-Mine,”additional AFUDC for 2012 through the in-service date, and reductions for accumulated bookdepreciation and deferred taxes. AFUDC was estimated and capitalized until the Kemper County IGCC is placed in-service.Specific publicly available O&M expenses were not available for the Kemper CountyIGCC, Mine and CO
Pipeline. Therefore, the estimated O&M expense of $75 million
wasallocated to these three items.Fuel cost and any potential fuel savings were not considered in the analysis. These datawere confidential and therefore were unavailable. Because of the unique nature of the plant’sprimary fuel source (new lignite mine), it was not feasible to estimate the fuel cost. The lignitefuel will be obtained from a Mississippi mine that is currently being developed.Considering the extremely high cost of Kemper County IGCC, the potential for significantsavings from fuel is questionable and has not been established by MPC based on current gasprices. Further, MPC’s documents reveal that Kemper County IGCC’s “Break Even FuelPricing” would require natural gas prices to be in the $11/MMBTU range in 2014 and increasingsubstantially thereafter. Currently, the price of natural gas is only in the $4/MMBTU range,which is much lower than the Kemper County IGCC “Break Even” presented by MPC. Inaddition, the plant will also use natural gas as a fuel source. The split between energyproduced by lignite and natural gas was unavailable, so any estimate of the fuel costs and/or potential benefit would have been arbitrary. Also, to develop the fuel cost it would be necessary
Monthly Status Report filed by MPC through May 2012, Docket No. 2009-UA-14.
See Assumption 3.