Green Light for New Nuclear Power Continues in Georgia

This blog was written by Sara Barczak, former Regional Advocacy Director with the Southern Alliance for Clean Energy.

Guest Blog | August 16, 2016 | Energy Policy, Nuclear

Update: The PSC issued the final order in the 14th VCM on August 23, 2016 — find it here.

On the heels of giving Georgia Power the go-ahead to explore building possibly two nuclear reactors at an undeveloped site in Stewart County along the Chattahoochee River near Columbus, today the Georgia Public Service Commission (PSC) unanimously approved an additional $160 million in expenditures for the at least 39-month delayed nuclear expansion of Plant Vogtle near Waynesboro along the Savannah River. It’s important to note that Commissioner Bubba McDonald was the sole dissenting vote on the Stewart Co. decision, responsibly mentioning concerns not only about the harm to utility customers but also about negative impacts to the Chattahoochee, which is at the center of the decades long Tri-State Water War among Georgia, Florida and Alabama.

The Commission has approved all of the Company’s Vogtle Construction Monitoring (VCM) applications for expenditures, most recently the 14th, which has now amounted to over $3.27 billion. SACE intervened again, as we have in all the semi-annual VCM reporting proceedings, including submitting a hard-hitting final brief that offered what we considered several common-sense recommendations:

  • Georgia Power should submit revised operation dates that incorporate the construction schedule slippage that has occurred since the January 2015 Integrated Project Schedule was filed.
  • The Company should file a mitigation strategy that supports the revised operation dates.
  • The Commission should expand the scope of its semi-annual VCM review to also verify the reasonableness of the Company’s operation dates, the total costs of all financing and capital and construction expenditures to include all amounts to be paid by ratepayers, including all taxes and other costs, and total construction costs including any amount found to be prudent.

We believe that a healthy dose of honesty is long overdue given the very large financial burden customers are facing because of the significant and costly schedule delays. A new construction schedule based in reality needs to be made public with commercial operation dates that actually reflect achievable completion dates.

What were some of the key items revealed during the 14th VCM? (Read our brief for all of them):

  • The PSC Advocacy Staff was adamant in their assertion that mitigation has not been successful in eliminating construction schedule variances, now six years into construction. Their testimony stated, “Since the beginning of construction on the Project to the present, mitigation has been ineffective in eliminating delays and only recently slightly effective in reducing existing delays.”
  • The PSC Staff witnesses are again predicting delays and so far, they’ve been right every time (it’s already happened three times since the original April 1, 2016 for Unit 3 and April 1, 2017 for Unit 4). The Commission knows it too as Nuclear Intelligence Weekly reported in July, “A member of the Georgia Public Service Commission (PSC), Tim Echols, told a conference in Paris last week that Vogtle-3’s commercial operation date (COD) is now 2020, with Vogtle-4 expected on line a year later in 2021; …” Why can’t this information be admitted publicly?
  • Though Georgia Power admits that its share of the Project has increased from $6.113 billion to $7.878 billion, they’re resistant to telling customers what that really means in total dollars to their customers. According to expert testimony for the Advocacy Staff, $5.8 billion is the current estimated overall impact on the ratepayer revenue requirement from delays and cost overruns over the anticipated 60-year life of the project.
    • “. . .the delay caused the ratepayer revenue requirement to be approximately $1.7 billion greater during the construction period than it would have been had the Units been brought online at the original commercial operation dates of April 1, 2016 and 2017.”
    • Additionally, the increase in the capital and construction cost from $4.323 billion to $5.440 billion will increase the ratepayer revenue requirement by approximately $4.1 billion over the life of the units.
  • Financing costs continue to represent the largest share of the project’s cost overruns. Georgia Power customers are already paying more than 9.7 percent on their monthly bills in Nuclear Construction Cost Recovery costs due to anti-consumer state legislation passed in 2009 to incentivize building new reactors. An estimated $2.4 billion in financing costs is associated with the current 39-month delay. (And it’s actually more than that — during the 13th VCM hearing in December, SACE was able to confirm that the approximately 46 percent tax gross up rate should be included, which amounts to an additional $1.264 billion in financing costs.)
  • When you take all costs into account such as tax gross up on the financing costs, replacement fuel costs given the current delay, etc. Vogtle’s total estimated project costs have ballooned from $14 billion to nearly $22 billion. (Remember Georgia Power is 45.7 percent owner, Oglethorpe Power is 30 percent, MEAG 22.7 percent and the City of Dalton 1.6 percent).

What else is happening?

Separate from the VCM reporting process (under the cover of darkness is seems like), what appears to be an expedited prudency review is underway of all project costs to-date including the litigation settlement costs between the Owners and lead contractor Westinghouse. The settlement amounts to over $916 million in cost increases to the utility owners, with Georgia Power’s share at $419 million, which includes $69 million for “change orders relating to cyber security and site security integration issues which were not part of the Major Claims litigation.” One key missing item is what all the costs to-date figure actually is, which seems like a basic starting point one would think? The AJC’s Matt Kempner got to the heart of what this proceeding is really about in his column, “Georgia Power aims to dump its overruns on you.”

As required in the Order for this separate proceeding, Georgia Power filed a report in April and SACE extensively commented, along with others, on that report in May. The PSC Staff is now reviewing the materials and must report to the Commission on the status of any settlement negotiations with Georgia Power by mid-October. Unlike prior prudency reviews, it doesn’t appear that any public hearings or expert witness testimony will occur. Maybe it’s the out-of-sight-out-of-mind approach? Regardless, it doesn’t bode well for ratepayers.

Clearly much needs to be done to ensure that consumers have the protections they deserve and it’s not all in the hands of the PSC. Certainly the State Legislature needs to step up and correct the mistake that is Georgia’s Nuclear Energy Financing Act, SB 31, which allows the big power companies to charge customers in advance for financing costs associated with new nuclear generation. Often referred to as Construction Work in Progress (CWIP) it’s more accurate to call it “Corporate Welfare in Progress.” From our vantage point, the Company has no real incentive to modify its behavior as long as it is being rewarded financially for its poor performance. That needs to stop before Georgians are further harmed from what is becoming yet another nuclear boondoggle, one that customers definitely cannot afford.

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