http://www.cleanenergy.org/2015/01/30/group-warns-regulators-of-further-risks-to-georgia-power-customers-as-newly-announced-delays-and-cost-increases-plague-new-vogtle-nuclear-reactors/

SACE | Southern Alliance for Clean Energy

Group Warns Regulators of Further Risks to Georgia Power Customers as Newly Announced Delays and Cost Increases Plague New Vogtle Nuclear Reactors

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Georgia Public Service Commission urged to protect consumers in upcoming vote on construction monitoring docket

Contact: Jennifer Rennicks, SACE, jennifer@cleanenergy.org, 865-235-1448

 

Atlanta, Ga. (January 30, 2015) ///PRESS RELEASE/// On the heels of news that Southern Company’s nuclear expansion at Plant Vogtle along the Savannah River has an additional 18-month delay on top of the already confirmed 21-month delay, the Georgia Public Service Commission (PSC) today received recommendations from the Southern Alliance for Clean Energy (SACE) that could help protect consumers from some of the risks by the mounting schedule delays and subsequent cost increases. In their brief filed today an intervener in the 11th semi-annual Vogtle construction monitoring docket (VCM) docket, the consumer advocate demanded that the Commission require the utility to provide a full Integrated Project Schedule (“IPS”) when the 12th VCM is filed at the end of this month and deem it an imprudent act if the utility does not. Among other requests, SACE asked that the PSC prevent the Company from collecting any return on equity in the pre-collected portion of the financing costs. The Commission’s final decision on whether to approve an additional $198 million in expenditures is scheduled for February 19. Georgia Power, subsidiary of the Southern Company, is the majority owner and is regulated by the PSC.

SACE’s brief stated that while the Company during the 11th VCM did not officially acknowledge that the already 21-month delayed current commercial operation dates of December 31, 2017 for reactor Unit 3 and December 31, 2018 for Unit 4 are unrealistic and unsupportable, evidence from the December 16 hearing pointed to a delay of at least one more year, to late 2018 and 2019 respectively, or longer. At that hearing the Staff Advocacy panel stated, “We’ve provided significant evidence to the contrary, that there is an implicit almost additional year delay built into the production or the construction that is currently ongoing on the site.” Testimony showed that many critical path activities are severely delayed: the setting of the CA01 Module in the nuclear island is 369 days delayed; setting of the Shield Building transition panels at elevation 100 feet is 401 days delayed; and the setting of the CA03 Module is 501 days behind schedule.

New information filed by Southern Company with the Securities and Exchange Commission (SEC) late Thursday stated that the Consortium (Chicago Bridge & Iron and Westinghouse) predicts an additional 18-month delay.

The possibility of schedule compression also declines as these delays increase. The project still lacks a final IPS now six years into the project, which SACE argues is a critical misstep. The Advocacy Staff testified that the lack of an effective IPS to manage this complex Project “[i]n fact runs counter to any prudent project management, nuclear or otherwise, the Engineering, Procurement, and Construction Agreement requirements, and the nuclear industry’s own self-funded INPO Principles for Excellence in Nuclear Project Construction.”

With further delays come additional cost increases for the Toshiba-Westinghouse AP1000 reactors under construction at Plant Vogtle. Testimony from the PSC’s expert witness reaffirmed his calculation that for the Company “…the estimate of the impact of a delay remains about $2.0 million per day at this time.” With the construction schedule likely to be pushed back another 18 months given the recent filing with the SEC, this would add another $1.1 billion in costs and would be in addition to the $645 million in cost overruns for the Company’s portion of the project as reported in the December 2014 Monthly Status Report. These costs also do not include any portion of the over $900 million in costs being litigated by the Consortium and Owners in federal court.

“Southern Company’s and the nuclear industry’s 21st Century flagship nuclear expansion project at Plant Vogtle is suffering from the same problems that have historically plagued this industry: significant delays, massive cost overruns and project mismanagement. Vogtle is now more than three years delayed and the total project costs are at least $4 billion overbudget,” said Stephen A. Smith, DVM, Executive Director of the Southern Alliance for Clean Energy. “It’s fundamentally unfair to burden Georgia Power ratepayers with additional financing costs caused by construction delays and to allow the Company to increase its earning by having the cost overruns included in ratebase. The Company told the Georgia Public Service Commission and the public that they could build these reactors for $6.113 billion and that’s all they should be paid. Ratepayers should not be penalized for mismanagement by the Company or for the problems caused by the Company’s contractors. The Georgia Public Service Commission must remember that ratepayers were forced to pay early for this multi-billion dollar project and are carrying all the risk, while the Company’s shareholders are getting all the profit. The Commission has clear evidence before them now – there has to be a penalty delivered to the Company, not to their customers, for failing to deliver an on-time, on-budget project.”

Georgia Power ratepayers are currently paying an additional over 9.4% on their bills for the Nuclear Construction Cost Recovery (“NCCR”) Rider due to anti-consumer state legislation passed in 2009 to incentivize building new reactors. Since 2011 customers have paid over $1 billion since the Company began collecting the NCCR tariff for financing costs and taxes that would normally be recovered over the normal life of the facility. SACE’s brief argued that to allow the Company to over collect any financing costs above the current approved certified cost of $6.113 billion places an unnecessary financial burden on ratepayers.

SACE also highlighted that the PSC currently allows Georgia Power to collect its return on equity (“ROE”) of 10.95% on financing costs ratepayers are paying in advance. But typically a regulated utility’s ROE is provided to cover the cost of financing and to provide investors with an adequate incentive to offset the risk of investment. They also requested that the PSC prevent the Company from collecting any return on equity on the pre-collected portion of the financing costs arguing that this measure could help offset the project’s current cost overruns.

“By pre-collecting its financing costs before Plant Vogtle is operational Georgia Power has no risk and should not collect a return on equity through the NCCR rider,” said attorney Robert Baker, representing SACE. “Allowing Georgia Power to recover a return on equity is excessive, representing nothing but a huge financial windfall at the expense of ratepayersthat is unjustified, unnecessary and unearned.”

Additional information: Originally reactor Unit 3 was scheduled to come online April 1, 2016 and Unit 4 one year later, on April 1, 2017. The current certified cost for Georgia Power’s share of the project is approximately $6.113 billion. With the already affirmed 21-month delay, the Company’s cost estimate has increased to approximately $6.8 billion (Georgia Power’s 11th VCM Report, Table 1.1, p. 37). Georgia Power is 45.7% owner (remaining utility partners are Oglethorpe Power (30%), MEAG (22.7%), and City of Dalton (1.6%). With the 21-month delay, this means the original approximately $14.1 billion Vogtle project is now estimated to cost approximately $15.5 billion. With an additional 18-month delay, the full project cost estimates are over $18 billion.

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Founded in 1985, the Southern Alliance for Clean Energy is a nonprofit organization that promotes responsible energy choices that create global warming solutions and ensure clean, safe, and healthy communities throughout the Southeast. Learn more at www.cleanenergy.org.