Georgia Power and Georgia’s Public Service Commission (PSC) on Monday agreed, after long negotiations, that the state agency will withdraw a proposed risk-sharing mechanism for the company’s $14 billion two-reactor nuclear expansion at Plant Vogtle, in Waynesboro, Ga., but it will retain the right to strike down costs as “imprudent” even after they have been verified and approved in the established semi-annual cost review process.
PSC staff said in documents filed on Monday that the PSC’s ability to review construction costs—even after the expansion has been completed—and exclude any costs thought imprudent from the company’s rate base provided significant protection for the company’s ratepayers. This especially applies if the final cost of construction exceeds the certified cost of $6.1 billion, staff said.
The agreement stems from two issues that remained unresolved when the PSC certified the need for the two new AP1000 reactors at Plant Vogtle in March 2009. Both issues related to how potential cost overruns would be allocated between Georgia Power and its ratepayers.
The first issue, according to the PSC, involved Georgia Power’s contention that the PSC could not disallow costs as imprudent once the agency had verified and approved them at a regular semi-annual hearing to review incurred construction costs. PSC staff had argued that the commission could disallow such costs if it thought them imprudent.
The second unresolved issue was the PSC staff recommendation for a risk-sharing mechanism. The staff had proposed that if the cost of the plant exceeded the $6.1 billion originally approved by the commission by more than $300 million, Southern Co.’s stockholders should bear some of those costs, even if the cost overruns were prudent.
Southern Co. had fought the proposal, saying it could scare off investors and dent profits. The Augusta Chronicle reported that company executives said at hearings that they would not have considered constructing new reactors if the risk-sharing mechanism had been in place at the time.
Unable to negotiate an agreement, on April 5 this year, the commission voted to hold further hearings on the issue. The PSC will now vote on the proposed settlement on Aug. 2.
Sources: POWERnews, Georgia PSC, The Augusta Chronicle