Toshiba Corp. has agreed to accelerate its payments to Georgia Power to help the utility finance completion of the troubled Plant Vogtle nuclear expansion.
The deal announced December 5 comes four days after a recommendation from state regulators that the project be abandoned if Georgia Power cannot make it financially viable, and also to lessen the risks of the project’s cost to ratepayers. It comes one day after written testimony from a Georgia Public Service Commission (PSC) staff member and two consultants said that $542 million in expenses from the project in the January-June 2017 period, including $498 million in liens and prepetition amounts owed to former project manager Westinghouse and its subcontractors, should not be eligible for full cost recovery by the utility. The panel recommended Georgia Power should only be able to recover $44 million of those costs—the non-Westinghouse portion—from ratepayers.
The panel also said Georgia Power must show the costs incurred in the first half of 2017 were “reasonable and prudent,” noting the PSC could reject recovery of that $44 million.
Toshiba, the parent company of former lead project contractor Westinghouse, as part of today’s agreement said it will pay $3.2 billion to Georgia Power and its three project partners by December 15. Georgia Power will receive about $1.47 billion of that payment as the utility seeks to complete the oft-delayed construction of two AP1000 reactors at the plant near Waynesboro, Georgia.
Toshiba in June 2017 agreed to pay $3.68 billion to Georgia Power and its partners, in installments from October 2017 to January 2021. Today’s agreement amounts to the remainder of those scheduled payments.
Southern Co., the parent of Georgia Power, has estimated the cost of the Vogtle expansion at nearly $20 billion, and some estimates put the price tag as high as $29 billion. The original project cost was estimated at about $14 billion, before continued problems with construction contributed to cost overruns and an eventual bankruptcy filing by Westinghouse in March of this year.
The project originally was expected to be completed in 2016. The current timetable calls for the two new units to be in operation in 2022.
Paul Bowers, chairman, president and CEO of Georgia Power, said in a statement after the agreement was announced: “We are pleased to have reached this constructive agreement with Toshiba regarding the parent guarantees for the Vogtle project and every dollar will be used to benefit our customers. We remain committed to making the right decisions for our state’s energy future and continue to believe that completing both Vogtle units represents the best economic choice for our customers and preserves the benefits of carbon-free, baseload generation for Georgia electric customers.”
The Georgia Public Service Commission (PSC) will hold hearings next week on the future of the project. Members of PSC’s Public Interest Advocacy Staff on December 1 filed a document with state officials that said Georgia Power needs to share more of the risk of the ballooning costs of completing the expansion, and if it cannot, the project should be abandoned. Jacob Hawkins, a spokesman for Georgia Power, on December 4 told POWER that the utility is “absolutely sharing in the financial risk of the Vogtle project, including severe consequences for delays in place under an agreement with the Georgia PSC.”
The PSC hearings next week are part of a review by the commission to determine whether the Vogtle project should continue, or be canceled. A vote by the commission is expected in February 2018. A similar project in South Carolina—construction of two AP1000 reactors at the V.C. Summer Nuclear Generating Station, also led by Westinghouse—was abandoned earlier this year, though SCANA Corp. later asked for more time to consider its options with the project. Westinghouse said its bankruptcy filing was a result of financial losses from cost overruns at both the Summer and Vogtle projects.
In Monday’s testimony before the Georgia PSC, Steven Roetger, lead Vogtle analyst at the PSC, William Jacobs, an executive consultant at GDS Associates, and Ralph Smith, a senior regulatory consultant at Larkin & Associates, wrote “Given all of the concerns regarding Company and Contractor performance to date, including cost overruns and the inability to meet previously submitted schedules for commercial operation, Staff believes it is not appropriate to allocate all of the Company’s forecast cost increase to ratepayers. Staff recommends that a portion of such costs should be found to be unreasonable, and that certain costs should be ‘modified’ from the Company’s request.”
That testimony was consistent with the recommendations of the PSC’s Public Interest Advocacy Staff, whose members in their Dec. 1 filing said the Vogtle project remains uneconomic, and that Georgia Power and its shareholders should carry the burden of risk in continuing the project.
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).