Weston power plant to cost 15 percent more

KANSAS CITY, Mo. (AP) -- Kansas City Power & Light now expects its Iatan 2 power plant near Weston 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 utility, owned by Great Plains Energy Inc., has since increased the size of the 850-megawatt plant, which has generated some of the surge in cost. It also said it's having to deal with rapid inflation of material and labor costs affecting most of the construction industry.

The company's "reforecast," released Thursday, provides a new range of between $1.82 billion and $1.92 billion.

The new cost estimate will raise customer bills by up to 27 percent, KCP&L said, which is higher than the original prediction in 2006 of between 20 percent and 25 percent.

KCP&L President Bill Downey added that the company may raise the price again when more engineering on the project is completed at the end of the year.

"I think this is as good and accurate of a forecast as can be put together," Downey told The Kansas City Star. "This is an industry under extreme pressure with regard to labor (and material) costs."

He added that the company avoided an even higher revised estimate by buying many components of the plant before prices increased.

KCP&L expects to complete Iatan 2 in summer 2010.

The Missouri Public Service Commission is considering the cost of the plant's construction as it decided whether to approve Great Plains Energy's purchase of Aquila Inc.

Critics of the acquisition, including the commission's staff, have said the cost of building Iatan 2 and buying Aquila could overload the utility, hurting its credit rating and forcing higher customer rates down the road.

Some individuals have sent anonymous letters to the commission, claiming Great Plains Energy was pressuring staff to keep the new cost estimates for Iatan artificially low, which the company denies.

"That is categorically, absolutely untrue," Downey said.

Missouri Public Counsel Lewis Mills, who represents consumers before the commission, said he would need to review the new cost estimate before he would accept it as fact.

"How did they get that number?" he said.

Downey responded that the new price tag was "a principles estimate" and that the company has proof that the number is as accurate as possible in the current economic environment.

Company officials said they began seeing signs about a year ago that previous estimates for construction of Iatan 2 and the addition of pollution-cutting improvements at existing power plants were too low.

In 2005, KCP&L said its share of a "comprehensive energy plan," including Iatan 2, the environmental upgrades, a wind farm and energy-efficiency projects, would be $1.2 billion.

A year later, the number had risen to between $1.52 billion and $1.62 billion.

The latest estimate places the company's share at between $1.89 billion and $2 billion. That includes a 33 percent increase for the environmental upgrade at Iatan 1 to a range of $330 million to $350 million.

The utility owns 70 percent of Iatan 1 and 55 percent of Iatan 2. Aquila and Empire District Electric own the rest.

The rising cost estimate for the energy plan will likely generate fresh controversy over how state regulators have assured KCP&L that it will recoup its costs. While expenses considered imprudent can't be shifted to rate payers, consumers are expected to pay for most of the plan's cost and there isn't a cap to how much rates may eventually rise.