Legal & Regulatory

Georgia Regulators: Change Vogtle Economics or Cancel Project

A new analysis by staff at Georgia’s Public Service Commission (PSC) says continuing construction of two AP1000 reactors at the Plant Vogtle nuclear facility near Waynesboro, Georgia, is not economic, and the group says that unless Georgia Power agrees to modify its conditions for completing the project to ensure it will be financially viable, the project should be canceled.

The recommendation, in a document filed with the state on December 1, comes just days before the full commission is scheduled to hold hearings on the plant’s future. Members of the PSC’s Public Interest Advocacy Staff, responding to Georgia Power’s Seventeenth Semi-Annual Vogtle Construction Monitoring Report, said “Staff concludes that completion of the Project is no longer economic on a to-go (forward looking) basis given the additional costs and schedule delays, even without considering the conditions requested by the Company [Georgia Power]. Staff opposes several of the conditions requested by the Company, which would effectively shift most of the financial risk of the Project to customers.”

The report lists several reasons for the staff’s decision, including that electricity from the new reactors would cost customers $1.6 billion more than other energy sources. It also says construction should be ended unless Georgia Power covers nearly another $4 billion in estimated costs for the project.

Jacob Hawkins, corporate communication manager at Georgia Power, said the utility is “reviewing the testimony and will discuss any areas where we disagree as part of the VCM [Vogtle Plant Construction Monitoring] hearings.” In an email to POWER, Hawkins said “Specifically, regarding ‘risk sharing’ noted in the testimony—we are absolutely sharing in the financial risk of the Vogtle project, including severe consequences for delays in place under an agreement with the Georgia PSC. Significant penalties as a result of the updated forecast equate to almost half a billion dollars from shareholders, which will reduce the cost paid by customers by approximately $750 million. In addition, Georgia Power carries the burden of proof on the prudency of any costs above the $5.68 billion threshold.”

The advocacy staff’s recommendation said “We conclude that certain costs already incurred by the Company are not reasonable to allocate to customers. Furthermore, we conclude that certain costs in the Company’s estimate of future costs are also unreasonable to allocate to customers and instead should be allocated to the Company and its shareholders.”

The Vogtle project has been plagued by construction delays and massive cost overruns, problems which led to the abandonment of the similar V.C. Summer nuclear expansion project in South Carolina earlier this year. However, the principals in that project—which was about 64% complete—later asked state officials to rescind that request, in the event a way was found to finance continued construction.

The Georgia PSC is set to begin hearings on Vogtle’s future on December 11 in Atlanta, Georgia, and the hearings could continue through December 14. The five-member PSC is responsible for issuing a final decision on the Vogtle project, a judgment which is expected in February 2018. The advocacy staff’s recommendation could factor into that decision.

Both the Vogtle and Summer projects have similar designs using AP1000 reactors. Both plants were negatively impacted when project leader Westinghouse filed for Chapter 11 bankruptcy in March 2017, citing financial losses from both nuclear expansions.

Georgia Power has said construction at Vogtle should move forward despite numerous setbacks, and in late August filed a recommendation with the PSC to continue work. The project owners at that time also replaced lead contractor Fluor Corp. with global engineering company Bechtel.

Southern Company’s cost estimates for the Vogtle expansion have reached nearly $20 billion—original estimates of the project’s cost were about $14 billion—and some estimates have reached as high as $29 billion. The new units at Vogtle were originally scheduled to come online in 2016. Georgia Power’s revised schedule calls for the new units to both be operating in 2022.

The PSC advocacy staff’s analysis said the project should only move forward if the PSC modifies Georgia Power’s conditions to “ensure the Project completion is economic compared to cancellation, provide an appropriate allocation of risks and costs between the Company and its customers, and determine now that the costs identified as unreasonable by Staff be borne by stockholders,” as opposed to ratepayers.

Georgia Power owns about half of the Vogtle project, with the remainder spread among Oglethorpe Power, Municipal Electric Authority of Georgia (MEAG Power), and the City of Dalton, Georgia. Georgia Power’s parent, Southern Company, did not immediately respond to requests from POWER for comment.

Analysts have said that if the Vogtle project is canceled, there is little chance the V.C. Summer project would be revived. The Summer project is the subject of federal investigations and lawsuits; South Carolina Gov. Henry McMaster is seeking a buyer for project owner Santee Cooper in order to recoup some of the project’s costs for the state’s electricity customers.

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

 

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