Vogtle Hearings Underway; Tax Law Change Could Speed Resolution

Hearings on the future of the Vogtle nuclear expansion project are underway in Atlanta, Georgia, and events of the past few days could impact how quickly the Georgia Public Service Commission (PSC) and Georgia Power reach a decision on whether construction of two new nuclear reactors continues or is halted.

This week’s hearings, which are scheduled to conclude on December 14, are expected to pave the way for a PSC decision on the project’s fate in February 2018, but pending changes to the federal corporate tax rate structure under consideration by Congress may accelerate that timetable.

PSC chairman Stan Wise on December 1 asked Georgia Power, the project’s lead utility, about how changes in corporate tax law could affect the project. Georgia Power CEO Paul Bowers on December 6 responded that a change in the U.S. corporate tax rate from 35% to 20% would provide economic impetus for the utility to make a decision by year-end, particularly if the decision is to abandon the project.

Bowers, in his response letter to the PSC, said: “If the decision were to be made that it is in the best interest of customers to cease the construction of Plant Vogtle Units 3 & 4, making that determination prior to December 31, 2017 would preserve the Company’s ability to utilize the current higher federal tax rate under what is known in simple accounting terms as an abandonment deduction.” Bowers in the letter said an abandonment declaration prior to year-end would enable Georgia Power “to realize an approximately $150 million larger tax benefit under the current 35 percent tax rate. These benefits would offset project costs and be passed along to customers through the traditional ratemaking process.”

Work continues on the two AP1000 reactors under construction at the Vogtle site near Waynesboro, Georgia. Global engineering management company Bechtel is leading work under the direction of Southern Nuclear, part of Southern Co., the parent of Georgia Power. Under the current construction schedule, Unit 3 at Vogtle is expected to come online in November 2021, with Unit 4 startup scheduled for November 2022. The oft-delayed project was first approved in 2009 and originally scheduled for startup in 2016.

The original lead contractor, Westinghouse, filed for bankruptcy in March 2017, citing cost overruns from both Vogtle and a similar nuclear expansion project at the V.C. Summer Plant in South Carolina. The Vogtle project is the only large-scale nuclear construction underway in the U.S. after the Summer expansion was canceled earlier this year.

This week’s hearings concern Georgia Power’s latest Vogtle Construction Monitoring (VCM) report on the expansion project. During hearings in November, the project owners—Georgia Power, MEAG Power, Dalton Utilities, and Oglethorpe Power—all reiterated their recommendation to move forward with the project, which they announced in their 17th VCM filing on August 31, 2017.

PSC staff prior to this week’s hearings asked Georgia Power to consider the agency’s recommendations, which include moving forward with the project if the PSC agrees with the conditions in Georgia Power’s filing for continued construction. The PSC’s other recommendation is to cancel the project if the agency does not agree to approve the conditions.

The PSC’s Public Interest Advocacy Staff filed a document with the state on December 1 outlining those recommendations, saying, “Rather than approving the Company’s [Georgia Power’s] request, Staff recommends the Project go forward only if the Commission modifies the Company’s proposed conditions to: 1) ensure that completion is economic compared to cancellation, 2) provide an appropriate allocation of risks and costs between the Company and its customers, and 3) determine now that the costs identified as unreasonable by Staff be borne by the Company and its shareholders, or at the least ensure that unreasonable costs are not prematurely approved without an in-depth review of the prudence and reasonableness of actual costs after they are incurred.”

Georgia law requires the PSC, within 180 days of the filing of VCM, to verify and approve or disapprove project expenditures, and approve or disapprove proposed revisions to forecast costs, schedules and configurations. After this week’s testimony in Atlanta from staff and others before the PSC, Georgia Power can file rebuttal testimony by December 29, then present that testimony before the PSC from January 8 to 10, 2018. The current PSC schedule calls for an agency decision on the project on February 6, 2018. The statutory deadline for a ruling in February 27, 2018.

—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)