Analyst hired by Kansas utility regulators blames KCP&L management for Iatan 2 plant overruns

By Bill Draper, AP
Thursday, September 9, 2010

Analyst blasts KCP&L leaders on power plant costs

KANSAS CITY, Mo. — An analyst hired by Kansas utility regulators says poor management by Kansas City Power & Light, coupled with an engineering firm’s desire to have a bigger role in the project, resulted in a huge cost overrun at Iatan 2 power plant north of Kansas City.

But KCP&L officials believe testimony in June by Walter Drabinski — hired by the Kansas Corporation Commission to review the Iatan 2 project and help decide how much of the Weston, Mo., plant’s overruns should be paid for by the utility’s customers — is misleading.

For starters, KCP&L disagrees with the cost figures put forth by Drabinski, president of Vantage Consulting Inc. Drabinski contends the project started with a $1 billion price tag and ended up at $2 billion.

KCP&L spokesman Chuck Caisley said the project’s budget actually was estimated at $1.68 billion in December 2006 and should end up costing $1.98 billion. That’s an 18 percent difference — well below what Caisley said is an industry standard of 30 to 40 percent for projects as complex as Iatan 2.

“That’s the most fundamental disagreement we have with the Vantage report,” Caisley said in an interview with The Associated Press. “We don’t have this plant doubling in cost.”

Also, he said, construction costs rose because of an increase in the amount of power produced by the plant from 800 megawatts to 850.

“We think we did a pretty good job in this,” Caisley said.

The Kansas City Star first reported Thursday on Drabinski’s June 24 testimony, much of which had not been made available to the public until recently.

In that testimony, Drabinski said KCP&L wasn’t prepared for the scope of project or the number of people required to complete the plant. He faulted the utility for trying to manage the project on its own rather than hire another company to do it, which he said was the industry norm.

By recommending the company manage the project itself, including procurement of materials, bids and contractor coordination, the engineering firm assured itself a bigger slice than it might have had if the utility hired a company to oversee the whole project, Drabinski said.

The utility considers Iatan 2 the cornerstone of its comprehensive energy plan, which also includes work at its Iatan 1 plant, a wind farm and improved conservation measures.

Drabinski criticized the company for not starting construction of Iatan 2 until after KCP&L’s comprehensive energy plan was finished, despite advice from consultants to start earlier.

Drabinski also cited conflicts between project managers and contractors that caused poor morale and decreased worker productivity.

Caisley said such problems are common in projects that require a high level of expertise.

“Whenever you have a large, complex project like this and a problem arises, you can expect spirited disagreements between smart people who have been doing this for a long time,” he said.

Testing at Iatan 2 was completed when the plant produced more than 350,000 megawatt hours of electricity over about three weeks in July and August. Company officials said the additional power helped prevent KCP&L from having to buy outside electricity to meet demands during a heat wave.

Missouri and Kansas regulators must confirm the results before the plant can go online full time. Commissions in both states will use the results when making decisions on pending rate cases.

KCP&L is seeking rate hikes of 14.5 percent in Missouri and 11.5 percent in Kansas to help pay for Iatan 2. If those requests are approved, bills for the utility’s customers will have roughly doubled in the past four years.

The company serves about 660,000 customers in Missouri and 240,000 in Kansas.

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