Georgia Power’s Nuclear Expansion Project at Plant Vogtle to Seek Approval from State Regulators for Billions of Dollars in Cost Overruns

Atlanta, Ga. (February 3, 2016) – Just days after final briefs were filed in the 13th semi-annual Vogtle Construction Monitoring (VCM) docket, the Georgia Public Service Commission (PSC) today voted 4-1 to approve what could be described as an expedited prudency review of all project costs to-date including litigation settlement costs. Commissioner Wise filed a motion last Friday (amended today) in response to Georgia Power’s request for the Commission to approve the recent settlement agreement between the utility owners and lead contractor Westinghouse that was first announced in late October and only recently finalized. The settlement amounts to over $916 million in cost increases to the utility owners, with Georgia Power’s share at $419 million.

We will all gain a better understanding of what exactly was agreed to during today’s confusing session once the final order is issued, but it appears that the troubled project is going to receive some form of additional scrutiny this year given the significant cost increases and schedule delays that will be conducted in proceedings separate from the semi-annual VCM docket.

So once again, the simple question of “what is the current cost estimate for building two new Toshiba-Westinghouse AP1000 nuclear reactors at Southern Company’s Plant Vogtle in Georgia” clearly is anything but, which we outlined in a blog last month. It took our attorney, former PSC Commissioner Robert “Bobby” Baker, to ask key questions at the December hearing to tease out important details. Such as the fact that the 46 percent tax gross up rate on the approximately $2.4 billion in financing costs associated with the current 39-month delay should be included, which amounts to an additional $1.264 billion in financing costs.

And now with movement by the Commission to consider Georgia Power’s settlement approval request, we can increase those previous estimates by at least $419 million – bringing their share to nearly $10 billion, almost $4 billion above the original certified cost of $6.113 billion. (We’re guessing that $419 million doesn’t include the tax gross up but we’ll have to wait for a hearing to get clarification.) Since the Company owns 45.7% of the project, the total estimated current cost for the entire Vogtle project is now nearly $22 billion, a staggering increase since the $14.1 billion estimate in 2009.

And even though it was previously stated, it’s now really, really clear that all project benefits have been eliminated by the detriments (e.g. increased financing costs, replacement fuel costs, etc.). We didn’t say that, expert witness Phil Hayet on behalf of the PSC Advocacy Staff did.

In fact, nothing is simple when it comes to the expansion of Plant Vogtle. The project is at least 39-months delayed; though more than five years in, only 26 percent of construction is complete. Building new reactors on-schedule and on budget here in the U.S. certainly hasn’t happened yet – SCANA’s new reactors at their V.C. Summer nuclear plant are facing similar woes. And one cannot forget that it took over 40 years for TVA’s “new” Watts Bar Unit 2 reactor to finally receive it’s operating license (hold on, it’s not fully operational just yet).

All of this is why we strongly encourage the Commission to take the recommendations from our final brief into account when they render a decision on February 19th on the current 13th VCM proceeding. We offer up common-sense ideas that could help partially protect consumers from what appears to be an out-of-control project. (And let’s not forget that the Georgia State Legislature has a clear role too – to fix the mess they made by passing SB 31 back in 2009, the anti-consumer legislation that allows utilities to charge their customers in advance for billions of dollars in financing costs for new nuclear generation – often referred to as “CWIP” for construction-work-in-progress.) Our recommendations to the Commission include:

The Commission should immediately conduct a prudency review if it allows the Company to collect more than the certified financing costs of $1.695 billion because it will have granted the Company a de facto increase in the total certified cost of the Project and violated the terms of the 8 th Vogtle Construction Monitoring Review (“VCM”) Order.

Vogtle Construction Monitoring Review (“VCM”) Order. A viable mitigation strategy to meet the current commercial operation dates of June 2019 for Unit 3 and June 2020 for Unit should be presented in the 14 th VCM and pinning or constraining the construction schedule should be stopped because it masks and distorts the schedule impact of construction delays on critical path activities.

VCM and pinning or constraining the construction schedule should be stopped because it masks and distorts the schedule impact of construction delays on critical path activities. The Commission should affirm that the $6.113 billion certified cost for Georgia Power Company’s share of the Project costs is not an estimate.

Costs should be properly allocated where expenditures for Units 3 and 4 provide benefits to Units 1 and 2.

At the conclusion of today’s session, Commissioner McDonald said that at the next Energy Committee meeting he was going to offer a motion to initiate a proceeding to reexamine the Commission’s support of CWIP financing beyond the original approved decision and schedule. So more is in store, possibly adding to an already confusing situation. It’s not yet clear if the ship is beginning to turn ever so slightly and that the Commission is finally paying attention to the negative impacts this nuclear expansion project is having on today’s customers. If not, we’re all paying to be aboard a very expensive, sinking ship.

###