Vogtle’s Escalating Costs Concern Lawmakers, Stakeholders

The Vogtle nuclear expansion’s “ever-escalating” cost is concerning several members of Georgia’s General Assembly, according to a letter sent to partners building the much-delayed project.

Twenty lawmakers from both houses of state government—19 Republicans and one Democrat—sent a letter to the board of directors at Georgia Power Co., Oglethorpe Power Co. (OPC), and Municipal Electric Authority of Georgia (MEAG Power), lamenting continuing cost increases, and their impact on local utility rates, despite a change in project management eight months ago.

The lawmakers urged the utilities to ensure a cost cap is established before the utilities vote in support of moving forward with the project, as required by the amended co-owners agreement, before September 24. Georgia Power holds a 45.7% stake in the two-unit Plant Vogtle expansion, while OPC (30%), MEAG Power (22.7%), and Dalton Utilities (1.6%) hold the remaining shares. MEAG Power could vote as early as today (September 20). A 90% vote for the project is required for the project to continue.

Dalton Utilities has already voted to move forward with the project, and Georgia Power has not wavered in its support for the project, noting in a statement on Tuesday that project partners had agreed to proceed with Vogtle and “everyone acknowledged and accepted all possible risks. Georgia Power has voted to move forward, and we hope the co-owners will also vote in favor to fulfill their obligation.”

In a separate letter to utilities on Tuesday, meanwhile, Georgia Gov. Nathan Deal urged co-owners to stay on course to build the embattled nuclear expansion, which would be the first new reactors in the U.S. in decades. “Given the project’s critical economic impact to the state of Georgia. I strongly encourage Vogtle 3 & 4 project co owners to continue to work to complete the construction of Plant Vogtle units 3 & 4,” Deal wrote. “I am counting on the project co-owners to follow through on the commitments you made to the citizens of Georgia, ratepayers, and myself.”

The governor added that while he is certain a legislative solution to resolve short-term concerns could be attractive, he is “not convinced that changing our state’s electrical tax structure, rate payment structure or expanding who falls under the purview of the Public Service Commission is the correct path forward.” However, he said, “walking away at this point would be breaking our promise,” presumably referring to commitments the utilities made. 

Legal Complications

As the fate of project grows murky, a legal battle is also brewing that involves the City of Jacksonville, Florida, and JEA, the city’s municipal utility that serves about 458,000 electric customers. The entities on September 11 asked a federal appeals court for a declaratory judgment on a power purchase agreement (PPA) the utility entered into with MEAG in 2008 for power from Vogtle Units 3 and 4, which were originally scheduled for completion in April 2016 and April 2017.

Completion dates have since been extended by five years: Unit 3 is expected to come online in November 2021, and Unit 4 in November 2022. “A new unlimited cost-plus reimbursement agreement was implemented without JEA’s approval in June 2017 after the project’s initial general contractor, Westinghouse, declared bankruptcy. The amended agreement has increased JEA’s liability from $1.4 billion to more than $2.9 billion—an uncapped and rising amount,” the company noted.

MEAG Power on September 11 filed its own lawsuit in the Northern District of Georgia in Atlanta, claiming that the Florida entity became “irreversibly obligated” when the company entered into the PPA to pay its share regardless of “whether or not the project is completed or is operating or operable.”

On September 18, JEA also filed a petition for declaratory order with the Federal Energy Regulatory Commission (FERC), asking the federal body to recognize the PPA as subject to the commission’s jurisdiction under the Federal Power Act (FPA), even though JEA and MEAG are public entities that are generally exempt from FERC regulation. That exemption “applies only to activities that are intrastate in nature,” it said.

“If the Plant Vogtle power purchase agreement falls under the scope of the FERC, it will also be subject to the FPA’s just and reasonable standards,” JEA said in a statement on Tuesday. “JEA believes the agreement fails to meet these standards due to continuing cost increases and completion delays. Initially expected to cost $9.5 billion in direct costs ($14.8 billion total after including indirect and financing costs) in 2008, the total cost-to-completion estimates have increased to more than $30 billion, with no guarantee the amount will not rise again.”

A Project Recap

After Westinghouse Electric filed filed for voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in March 2017, crippled by financial setbacks stemming from the half-built AP1000 reactor projects at the Vogtle expansion in Georgia and the V.C. Summer expansion in South Carolina, the future of the V.C. Summer and Vogtle projects was left uncertain. In July 2017, SCANA Corp. and Santee Cooper abandoned construction of Units 2 and 3 at V.C. Summer.

At Vogtle, Southern Co. subsidiary Southern Nuclear assumed the project management reins from Westinghouse in May 2017, and progress continues on Units 3 and 4. This August, however, Georgia Power announced that a capital and construction cost forecast for its share of the project had increased from $7.3 billion to $8.4 billion.

The companies based their new forecast on a revised cost-to-complete estimate from Southern Nuclear. The revised forecast includes about $700 million in additional projected costs, which Southern Nuclear said are “reasonable, necessary, and prudent”—but it chose not to ask the Georgia Public Service Commission (PSC) to approve them “so soon after receiving the Georgia PSC’s approval of the capital forecast last year.”

In August, the PSC moved to accept public interest advocacy staff and advisory staff recommendations that Georgia Power file more detailed discussion of project risks in future semi-annual construction monitoring reports. The PSC noted it had certified Georgia Power’s share of the construction cost of Plant Vogtle Units 3 and 4 on March 17, 2009, at $6.114 billion.

In their letter to the project co-owners on Wednesday, lawmakers added that while Southern Co. has pledged that its shareholders will absorb Georgia Power’s share of the increase, the cost increases put a “disproportionate cost burden on [electric membership cooperatives (EMCs)] and city utility customers—our local utilities don’t have the luxury of shareholders to absorb these additional costs and will have to increase rates even higher. This approach is unfair and anti-competitive.”

 

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine).

UPDATED (Sept. 20): Adds details from Gov. Deal’s letter.