As a vote by owners on the fate of the Vogtle nuclear expansion project hangs in the balance, the City of Jacksonville, Florida, and JEA—the city’s municipal utility that serves about 458,000 electric customers—filed a complaint in the Fourth Judicial Circuit Court of Florida on September 11 asking for declaratory judgment on a power purchase agreement (PPA) the utility has in place with the Municipal Electric Authority of Georgia (MEAG Power).
MEAG Power is a 22.7% stakeholder in Vogtle Units 3 and 4, which are under construction at a site near Waynesboro, Georgia. JEA entered into the PPA with MEAG Power in 2008. Provision of power was to have begun from the two new units in April 2016 under the original agreement.
The complaint for declaratory judgment seeks to clarify the validity of the amended PPA, which was never approved by the Jacksonville City Council. JEA and the City of Jacksonville believe the agreement violates the Florida state constitution and should be declared “ultra vires,” that is, void and unenforceable. In a statement, JEA said the suit was filed in an effort to protect its ratepayers and allow it to continue delivering the most-affordable power possible.
On the same day, MEAG Power filed a lawsuit of its own in the U.S. District Court for the Northern District of Georgia, accusing JEA of a breach of contract that threatens plans for the project. Its lawsuit seeks a court order that would force JEA to abide by its agreement with MEAG Power.
Due to recently announced project cost escalations, plant co-owners—Georgia Power (45.7%), Oglethorpe Power Corp. (30%), MEAG Power (22.7%), and Dalton Utilities (1.6%)—are required to decide by September 24 whether to continue construction. For the project to proceed, approval by 90% of the owners is required, which means Georgia Power, Oglethorpe Power, and MEAG Power must all vote to continue for the project to proceed.
“Despite the fact that there has been no vote yet and not all the facts are known, JEA has indicated a clear intent to breach its contract, abandon its obligations, undermine MEAG Power’s ability to perform, and attempt to force MEAG Power’s hand in the vote,” MEAG Power’s complaint says.
“This is wrong, JEA knows it’s wrong, and JEA knows the harm this will do not only to MEAG Power but to the Participant communities involved in the Plant Vogtle Units 3 & 4 project and that rely on MEAG Power for their wholesale electric supply,” said MEAG Power Senior Vice President and General Counsel Peter Degnan.
JEA said Vogtle Units 3 and 4 were originally expected to cost $9.5 billion in direct costs ($14.8 billion total, including indirect and financing costs). The total cost of the portion attributable to JEA was expected to be $1.4 billion, and the project cost was capped under the 2008 agreement.
However, now the project’s total cost-to-completion estimates have increased to more than $30 billion, with no guarantees that costs won’t continue to grow, and with a delayed completion date of November 2021. JEA says the new “unlimited cost-plus reimbursement agreement” was implemented without its approval in June 2017 after Westinghouse—the project’s initial general contractor—declared bankruptcy. The amended agreement has already increased JEA’s liability to more than $2.9 billion, and it is now uncapped.
“It has become clear that this purchase agreement should be considered ‘ultra vires’ since it was implemented without the approval of the City Council, which violates Florida law,” said JEA Interim CEO and Managing Director Aaron Zahn. “A favorable judgment from the court deeming the agreement void will have the added benefit of providing relief to ratepayers across northeast Florida from having to shoulder the financial burden of this project.”
MEAG Power’s filing says JEA’s actions have hindered the public corporation’s ability to fulfill its obligations and secure financing.
“This was not an action we wanted to take, but we filed this lawsuit to protect the interests of the Participant communities that we serve,” said MEAG Power President and CEO Jim Fuller.
—Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).