By Dave Williams
State energy regulators are due to decide this month whether to let Georgia Power Co. charge customers for more than $1 billion in cost overruns at the Plant Vogtle nuclear expansion.
The Atlanta-based utility is asking the Georgia Public Service Commission(PSC) to declare “reasonable and prudent” $700 million in additional financing costs incurred as a result of a 39-month delay in the project schedule and a $350 million legal settlement with Vogtle contractor Westinghouse Electric Co.
“Every dollar, and every day, that has been invested has been necessary to complete these new units safely and correctly,” Georgia Power President and CEO Paul Bowers wrote in a document filed with the PSC last spring. “The new units could not have been built for less money or in less time than it has taken.”
The PSC voted last February to launch a review this year of the cost overruns Georgia Power has incurred while building two additional reactors at the nuclear plant south of Augusta. Under the schedule the PSC set, the agency’s staff has until Oct. 19 to present its recommendations.
The commission approved the Plant Vogtle expansion back in 2009 at an estimated price tag of $14 billion. Georgia Power’s share of the project was quickly reduced from $6.4 billion to $6.1 billion after the General Assembly passed legislation letting the utility begin recovering its costs while building the reactors rather than waiting until they go into service.
By 2013, it had become clear the work was running behind schedule. The 39-month delay prompted Georgia Power to seek recovery of $700 million in additional financing costs.
“We anticipated challenges in building the first new U.S. nuclear units in more than 30 years,” Bowers wrote. “The cost and schedule adjustments over the past several years have been a part of the assessed, known risks.”
The delay was caused in part by a legal dispute that broke out between Georgia Power and Westinghouse resulting in a lengthy lawsuit. Because of that ongoing litigation, Georgia Power and the commission’s staff reached an agreement in the summer of 2013 to put off the PSC’s prudency review of Georgia Power’s spending until no earlier than 2019, when the first reactor was due to be completed.
But commissioners changed their minds when Georgia Power and Westinghouse settled the lawsuit last January. After Georgia Power added $350 million in litigation costs to their request, the PSC voted to conduct the review this year.
The decision to speed up the review didn’t set well with the project’s critics. Bobby Baker, an energy lawyer representing the Southern Alliance for Clean Energy, questioned how the PSC make a decision on Georgia Power’s spending before the work is completed.
“What if something unforeseen happens during construction?” he asked. “They can’t retroactively go back and make an adjustment later.”
Baker also questioned the process the PSC is using for the review and compared it unfavorably to hearings the commission conducted in 1989, when the first two reactors at Plant Vogtle were built.
“In the first prudency hearings, there were weeks of public hearings with witnesses and cross-examination,” he said. “Now, you’ve got this very closed-door review that’s going on. We don’t know if there’s going to be any kind of hearing on the staff’s recommendation or if they’re going to present a settlement agreement.”
Atlanta-based consumer advocate Georgia Watch is asking the PSC to force Georgia Power’s shareholders to foot the bill for the project’s additional costs.
“If the commission grants the requests of Georgia Power Co., it unfairly places all of the risk of future project delays and cost overruns as well as of the burden of the current delays and overruns on the backs of Georgia Power ratepayers,” Georgia Watch Executive Director Liz Coyle wrote in a filing to the PSC last May.
Georgia Power spokesman Jacob Hawkins said the PSC already has concluded all spending on the project thus far was reasonable.
“We believe all costs to date have been prudently spent and have been reviewed and approved unanimously by the PSC through an open and transparent … process,” he said.
Georgia Power and its Vogtle partners say the project remains a better deal for customers than base-load power generation alternatives including natural gas.
“When viewed in terms of their life cycle costs and benefits, these new units remain the most economical choice for our members,” Michael Smith, president and CEO of Oglethorpe Power Corp., wrote in May in a filing to the PSC. “Oglethorpe remains fully committed to the completion of Vogtle Units 3 and 4.” The company owns 30 percent of the new nuclear units.
Plant Vogtle Timeline
- March 2009— The Georgia Public Service Commission (PSC) approves the construction of two additional nuclear reactors at Plant Vogtle.
- January 2011— Georgia Power Co. begins collecting financing costs for the project through an early cost recovery plan designed to save $300 million.
- February 2013— Georgia Power notifies the PSC the project is $737 million over its original budget forecast.
- September 2013— The PSC votes not to decide whether the additional expenses were “prudent” until the first of the two reactors is completed.
- January 2015— Georgia Power announces the project has fallen 39 months behind schedule.
- January 2016— Georgia Power announces a $350 million legal settlement with the project’s primary contractor, Westinghouse Electric Co.
- February 2016— The PSC votes to launch an immediate prudency review of the cost overruns instead of waiting until the first reactor is completed.
- Oct. 19, 2016— Deadline for the the PSC’s staff to present its recommendation on prudency
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