Georgia Public Service Commission (PSC) Chairman Stan Wise said his agency was “not going to make a decision to discontinue” construction of two new nuclear reactors at Plant Vogtle, instead putting the decision squarely in the hands of Southern Co. and Georgia Power at the PSC’s December 21 meeting to determine the fate of the expansion project.
The PSC today in a unanimous vote gave Georgia Power a new set of financial conditions the utility needed to accept to continue the project. The utility’s legal counsel said it would consent, keeping alive, at least for the moment, hopes for a U.S. nuclear power renaissance. The PSC put forth a 15-point motion with conditions for Georgia Power, including a reduction in the utility’s return on equity (ROE) from the project, saying the burden of additional project costs must be borne by the company’s shareholders and not its customers.
The two AP1000 reactors at Plant Vogtle near Waynesboro, Georgia, are the only new reactors currently being built in the U.S., after other projects succumbed to a litany of problems that also threatened to derail Vogtle, including cost overruns, construction delays, and project mismanagement—all problems cited by the Georgia PSC in its assessment of new conditions for the Vogtle expansion moving forward.
Project Would Have Been Second U.S. Cancellation This Year
Wise said the PSC wanted Georgia Power and its partners to go forward with Vogtle, which would otherwise have become the second major U.S. nuclear project canceled this year. A similar nuclear expansion at the V.C. Summer plant in South Carolina was abandoned in July, and that project faces a slew of lawsuits and government investigations into the problems that led it to be halted.
PSC commissioners Chuck Eaton and Tim Echols, the latter a vocal proponent of nuclear power, noted the agency is “prepared to disallow every single penny of imprudent expenditures” as construction continues, and will not accept construction delays. But they cited the importance of nuclear power “in a day when baseload coal plants are disappearing,” and said there is no “crystal ball to forecast natural gas prices” in the future.
“[Reducing the ROE] should serve as a powerful incentive to the company to work as fast and as safe as they can to finish this project,” said Echols, who drafted the motion. Said Eaton: “Given the hostility toward coal, I still believe nuclear needs to be part of a diversified mix.”
The commission, in addition to cutting Georgia Power’s ROE on the project, is requiring the utility to give ratepayers part of the “parent guarantee” payment Westinghouse parent company Toshiba paid last week as a result of the Westinghouse bankruptcy. Georgia Power’s customers will receive three monthly $25 credits on their bills beginning no later than 3Q2018. Echols proposed calling the payments, which would be a separate line item on monthly bills, the “Vogtle Settlement Refund.”
Georgia Gov. Nathan Deal in a statement said, “I commend the Public Service Commission for its vision and foresight in approving continuation of the Plant Vogtle expansion while holding the owners accountable to ratepayers,” with the governor noting the jobs that have been provided by the plant’s construction and the positions it will create once in operation.
Deal, a Republican, is term-limited; the election for his successor is next year and the Vogtle project is expected to play a role in the outcome depending on the candidates’ positions.
Georgia Power ‘Got What They Wanted’
In fact, John Noel, owner of an energy efficiency company and a Democratic candidate for a spot on the PSC, in a statement said “Georgia Power got what they wanted. This decision means even more money will be poured down the bottomless rat hole of the unneeded Plant Vogtle. The main concern of the PSC and Georgia Power now is how best to put a positive spin on the costly boondoggle. But the people of Georgia are fed up with the long stream of rationalizations and broken promises about Vogtle. It’s time we had Commissioners with the fortitude to place blame where it belongs and start protecting electricity customers. The relationship between the PSC and the utility is just too cozy.”
Today’s action by the PSC came after Georgia Power said it wanted to continue the project, asking the PSC to accept the utility’s increased cost estimate of $12.2 billion for its 45.7% share of the project. The total project cost for the utility and its three partners has been estimated as high as $25 billion, but costs for the other three partners—Oglethorpe Power, MEAG Power, and Dalton Utilities—is not publicly reported to the commission.
Reaction from opponents of continuing construction was swift. “Most people have to pay for their mistakes, but Georgia Power is still profiting from theirs,” said Kurt Ebersbach, senior attorney for the Southern Environmental Law Center (SELC). “There’s something wrong with a system that rewards this kind of failure.”
Dr. Stephen A. Smith, executive director of the Southern Alliance for Clean Energy (SACE) in a statement said. “Today’s decision on the massive cost overruns and mismanagement of the Vogtle nuclear units is a sad day for electric power customers in Georgia, they clearly have been manipulated by Georgia Power and abandoned by the Georgia Public Service Commission. Only a monopolist non-completive structure coupled with a ‘captured’ regulator would reward hundreds of millions of dollars mismanagement, delays and incompetence. This nuclear project is clearly not economic, it still has years to go before completion with billions of dollars of additional cost exposure to hard working Georgia families and small business, it’s simply a horrible deal for electric power customers. As the last new nuclear power plant standing this should be a lesson: these nuclear facilities cannot be built on time nor on budget, their size and scale allow them to be ripe with corruption and mismanagement and we still have a long way to go with this failing project. We can do better.”
Along with Georgia’s governor, there were others who applauded the decision to continue the project. David Holt, president of the Consumer Energy Alliance, said in a statement: “Energy animates every aspect of our lives and modern economy, and an energy mix that’s balanced, broad and diverse—one which utilizes every resource it has on hand, safely—is the only way to grow this way of life and enhance grid reliability while lowering household energy costs. The state PSC’s decision today to better support nuclear power in Georgia helps do just that.”
Substantial Costs to Cancel
The cost of canceling would have been between $730 million and $760 million, with Georgia Power paying $330–350 million. The PSC moved its decision on the project to today, up from its previously scheduled date in February 2018, at the request of Georgia Power, which was concerned about recent congressional action that threatened the financial viability of the Vogtle project. The tax bill moving forward in Congress provided an incentive to make a decision on the project’s future by year-end because a cancellation now, rather than in 2018, would have preserved $150 million in tax advantages for the project partners.
The tax bill also does not include a provision to extend a credit for nuclear power projects to those placed in service after January 1, 2021, when the current federal production tax credit for new nuclear power generation is scheduled to expire. Georgia Power has estimated that tax credit would be worth about $800 million for the project; the new Vogtle reactors are scheduled to come online in November 2021 and November 2022, respectively. However, the U.S. Senate Finance Committee introduced legislation December 20 that would extend the federal tax credits, and the PSC said it’s incumbent upon Congress to extend the credits to keep the Vogtle expansion on track.
The Vogtle project has been plagued by delays. The reactors were originally scheduled to be online in 2016 and 2017, and costs have doubled from an original $6.1 billion budget for Georgia Power’s share. Westinghouse, the project’s original contractor, declared bankruptcy in March after its parent company, Toshiba, wrote off more than $6 billion in losses from its nuclear business, which also included the V.C. Summer project.
Georgia Power has contended that completing construction of the new reactors would make more economic sense than canceling the project, and was more viable than building an alternative, such as a natural gas-fired plant, a solution proposed by the PSC.
PSC: Cap Cost at $9 Billion
PSC staff, in final filings on December 19, said the project’s cost should be capped at $9 billion, the amount the commission said it would take to cancel and replace Vogtle’s nuclear power with a gas-fired generator. The staff’s proposal was about $1.5 billion less than Georgia Power said it needed, including a penalty payment to Southern Co. from Toshiba.
The PSC staff in the filing—and a point reiterated in discussion prior to today’s vote—said “a portion of the company’s proposed costs resulted from the mismanagement of the project” and therefore shouldn’t be billed to customers.
An analysis by the Southern Alliance for Clean Energy (SACE) shows Georgia Power’s 2.5 million ratepayers on average have been paying about $100 annually in “nuclear cost recovery fees” to help finance the project’s continued construction, with residential customers paying more, allowing lower costs for industrial customers under Georgia’s 2009 Nuclear Energy Financing Act.
For more information about the events leading up to today’s decision, read POWER’s recent coverage of the Vogtle expansion:
- Georgia PSC Will Decide Vogtle’s Fate on December 21
- Vogtle Hearings Underway; Tax Law Change Could Speed Resolution
- Toshiba Will Make Remaining Vogtle Payments by mid-December
- Georgia Regulators: Change Vogtle Economics or Cancel Project
- DOE Offers Another $3.7 Billion in Loan Guarantees for Vogtle Project
- Westinghouse Asks Court to Stop Cancellation of Vogtle Contract
- Vogtle Partners Will Proceed with Beleaguered Nuclear Expansion
- Bechtel In, Fluor Out as Vogtle Construction Continues
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)