Nearly $2 Billion more approved for Plant Vogtle cost, one group says ultimately you pay the price

The Georgia Public Service Commission (PSC) approved new costs to build two new nuclear reactors at Plant Vogtle, increasing the official cost by nearly $2 Billion. Georgia Power, which is building the project with two other partners, is responsible for about 47 percent of the cost. Now its official cost (including financing) will be increased to about $8 Billion.

The PSC says the project will provide needed energy for years to come and helps customers in the short term by not allowing Georgia Power to increase a nuclear fee on bills for the next four years. The fee has been used to pay financing costs for the huge project.

But some groups that objected to the deal, including the Southern Alliance for Clean Energy says rate payers will pay the price long term to get the reactors built and operational. Sara Barczak with the Southern Alliance for Clean Energy told us recently, “the problem with this big capitol project is that a delay means money and customers will pay and that’s not a good deal for the customer.”

Tuesday, the group issued a statement in reaction to the PSC decision. “Approval of the Vogtle settlement creates the largest rate impact for Georgia Power customers based on the least public review in PSC history. With today’s decision the Georgia Public Service Commissioners have wrongly rewarded Georgia Power, its partners and shareholders and lead Contractor Westinghouse for years of mistakes that will cost utility customers billions of additional dollars,” said Barczak.

The group contends the reactors which are now 39 months behind schedule and perhaps as long as 45 months are “a boondoggle and it’s likely to get even worse as more schedule delays are highly likely, which will add even more to the price tag.”  (See full statement below)

But the PSC said its decision will ensure reliable energy in the short term and give relief to customers by not increasing the nuclear fee. 2017 Commission Chair Stan Wise said “This agreement is an extraordinary balance of interests among all the parties. It delivers $325 million in savings to current customers.”

Wise said the agreement also provides penalties for Georgia Power if the project is not completed by the new date of December 31, 2020.

Critics charge that the PSC’s action makes Georgia Power less responsible for justifying cost overruns than it might have been and points out that the total cost of the project (which is being built by three partners including Georgia Power) is now about $18 Billion which includes tens of millions in up front financing costs.

FROM PUBLIC SERVICE COMMISSION TUESDAY:

ATLANTA, December 20, 2016 – Georgia Power ratepayers will benefit  immediately as a result of the Georgia Public Service Commission (Commission) unanimous approval today of an agreement in the Commission directed review of the construction costs of Georgia Power Company’s Nuclear Plant Vogtle Construction Project in Docket 29849. Over the next four years, customers will see a reduction of approximately $325 million in costs towards the construction of units Three and Four at Plant Vogtle.

Both Commission Chairman Chuck Eaton and Commissioner Stan Wise praised the Commission Staff for reaching the agreement with Georgia Power in this docket. “It’s never an easy process, and the nature of stipulations is that both parties give up a lot. But we are able to front load a lot of the $325 million in savings to give ratepayers immediate relief,” said Eaton. “I think the Staff and Company has done a great job.”

Commissioner Stan Wise, who will become the Commission Chair in 2017, said, “This agreement is an extraordinary balance of interests among all the parties. It delivers $325 million in savings to current customers. The agreement also provides significant back end reductions through reductions in the Company’s ROE should construction costs exceed the $5.68 billion or the project is delayed beyond December 31, 2020.”

“This agreement will benefit ratepayers now rather than waiting until these units begin operation,” said Commissioner Doug Everett of Albany.  “Plant Vogtle remains a necessary part of our overall generation mix to provide reliable, carbon free energy for more than 60 years,” Everett added.

“Today’s vote means savings for consumers now and in the future. It also gives the Company powerful incentives to make sure this project stays on schedule,” said Commission Vice-chair Lauren “Bubba” McDonald. “Plant Vogtle is an important economic engine for this state to keep rates low and affordable.”

Current customers will see a reduction of approximately $325 million in rates over the next four years as a result of the agreed upon reductions in Georgia Power’s allowed return on equity (ROE) associated with its Nuclear Construction Cost Recovery (NCCR) tariff and deferring the cash recovery of certain other related financing costs. The impact of reducing the allowed ROE on project financing costs reduces shareholder earnings by approximately $115 million over the same period.  If the project is not in commercial operation by December 31, 2020, additional reductions in ROE are provided for in the settlement agreement.

In keeping with the approved agreement, the Commission approved a zero ($0) increase for 2017 in the NCCR. The Commission also approved a motion by Commissioner McDonald to require Georgia Power to show the estimated amount customers will save in a message box on future bills beginning in the first quarter of 2017. The savings will be included on the bills quarterly and include estimates for the typical residential customer. This order will remain in effect as long as the NCCR tariff is in place.

The Commission directed Staff and the Company through a February 5, 2016 Order to review the reasonableness of all costs incurred in the project through December 31, 2015 and whether the capital cost forecast should be adjusted.  Under the stipulation as approved, the capital cost forecast of Georgia Power’s share of the plant would be adjusted to $5.68 billion including a $240 million contingency.  State law provides a process for making periodic adjustments in the forecast when justified. Under the terms of this settlement, staff and Georgia Power Company agreed no costs incurred through 2015 were imprudent and the recent settlement reached between the plant owners, including Georgia Power, and contractors on the project is reasonable and prudent.

Plant Vogtle is a nuclear power electric generating plant near Waynesboro, Georgia. When fully operational, Units Three and Four now under construction will produce 2,200 Megawatts of electricity, enough to power about 500,000 homes. Plant Vogtle Units One and Two have been in commercial operation since 1987 and 1989 respectively.

The Commission certified Georgia Power’s share of the construction cost of Plant Vogtle Units Three and Four on March 17, 2009 at $6.114 billion. Georgia Power owns 45.7 per cent of Plant Vogtle with its partners, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia and the City of Dalton Utilities.

FROM SOUTHERN ALLIANCE FOR CLEAN ENERGY TUESDAY:

Atlanta, Ga. (December 20, 2016) ///PRESS RELEASE/// Today the Georgia Public Service Commissioners unanimously approved a controversial settlement agreement that fails to provide substantial protections to Georgia Power customers for billions of dollars in increased costs associated with the likely 45-month delayed nuclear reactors under construction at Plant Vogtle in Burke County along the Savannah River

Below are statements from the Southern Alliance for Clean Energy’s High Risk Energy Choices Program Director Sara Barczak and Robert “Bobby” Baker, an attorney representing the Southern Alliance for Clean Energy (SACE) and a former member of the Georgia Public Service Commission (PSC) for 18 years. SACE was an intervening party in the Vogtle Supplemental Information Review process, which the clean energy organization criticized as a limited, expedited and non-transparent proceeding.

From Sara Barczak:

“Approval of the Vogtle settlement creates the largest rate impact for Georgia Power customers based on the least public review in PSC history. With today’s decision the Georgia Public Service Commissioners have wrongly rewarded Georgia Power, its partners and shareholders and lead Contractor Westinghouse for years of mistakes that will cost utility customers billions of additional dollars. The still under-construction nuclear reactors at Plant Vogtle are now a confirmed boondoggle and it’s likely to get even worse as more schedule delays are highly likely, which will add even more to the price tag.”

From Robert “Bobby” Baker:

“The Commission’s decision to approve the Vogtle settlement with limited Staff review and a single hearing sets a dangerous precedent that drastically undermines the chances that a full prudency review for both units will ever be done. The Vogtle settlement review process for billions of dollars in costs was unorthodox and not transparent because no reports or audits were produced by the Commission Staff and the witness panel had a limited understanding of the reports produced by Georgia Power.”

As outlined in SACE’s final brief, what started as a request from Georgia Power Company earlier this year to review the $350 million in litigation settlement costs with lead Contractor Westinghouse was quickly transformed into a de facto expedited prudency review that increased the current certified cost agreed to in 2009 for the Vogtle Project from $6.113 billion to approximately $8 billion. Only a one-day public hearing was held with limited testimony from a combined panel consisting of just two Commission witnesses and two Company witnesses, who were not fully familiar with the expert witness testimony filed in April by the Company. This limited proceeding paled in comparison to the prudency review for the original Vogtle Units 1 and 2, which took weeks of public hearings, contained extensive testimony from senior Georgia Power Company officials, consultants and accounting experts and created an enormous public record on which the Commission based its decision.

Some concerns identified in SACE’s final brief as a result of the Commission’s approval today of the settlement include:

  • The claimed $325 million in cost savings to customers over the next four years does not represent complete cost savings—the real reduction is approximately $115 million or $29 million per year. This represents a creative manipulation and reinterpretation of a reduction to the return on equity level used on the Project’s financing and a short-term deferral of financing costs that eventually will be paid by ratepayers.
    • According to the panel testimony, of the $325 million in projected savings to customers over the next four years “approximately $185 million will never be paid by any customers” but approximately $70 million of this amount is based on taxes the Company will never pay because of the reduction to shareholder earnings. The real reduction for customers is therefore approximately $115 million, but even that amount is not agreed upon by the Commission Staff.
    • In comparison, even with the approved settlement, customers will pay $385 million in financing costs in 2017 alone through the Nuclear Construction Cost Recovery tariff.
  • A total of $1.552 billion in additional Project costs caused by the Company acknowledged 39-month construction delay was permanently waived or conceded by the Commission and will never be subject to any possible prudency review in the future.
    • By approving the settlement, the Commission waived any future review of $700 million in additional financing costs incurred due to the Company acknowledged 39-month construction delay, the $350 million in Georgia Power’s share of the litigation settlement costs with its Contractor and the $502 million in additional fuel costs incurred by the 39-month construction delay.
  • Vogtle’s forecasted capital project cost will increase by $1.262 billion to $5.680 billion and that includes $2.380 billion in yet-to-be-spent capital costs that have now been deemed “prudent and reasonable” in advance of those costs being spent.
    • This is a bad deal for ratepayers because the burden of proof has shifted from the Company to justify the higher cost for the two new nuclear units onto either the Commission Staff or some third-party that might challenge the prudency of the higher costs in the future.
  • A de facto extension of the construction schedule from the Company acknowledged 39-month delay to 45 months with the likelihood of further delays, with no guarantee of significant penalties for the Company if additional delays occur.
    • This despite testimony from the PSC Staff and expert consultants in the 15th semi-annual Vogtle Construction Monitoring (VCM) proceeding that was extremely critical of the lack of progress being made on the project, including extreme skepticism that even the 45-month delayed commercial operation dates may met. Further delays will cause additional, significant cost increases.

Additional Information:

Originally Vogtle reactor Unit 3 was scheduled to come online April 1, 2016 and Unit 4 one year later. Georgia Power’s 15th VCM report had schedule estimates of June 2019 and June 2020 respectively, a 39-month delay, with their estimated share of the project cost as $7.862 billion. However, the now-approved settlement refers to the whole Project commercial operation as December 31, 2020, which represents a 45-month delay. The current certified cost for Georgia Power’s share of the project is approximately $6.113 billion, which represented an original $4.418 billion for capital costs. Over $1.8 billion in pre-collected financing costs have been charged to ratepayers due to anti-consumer state legislation passed in 2009 to incentivize building new reactors. The financing costs represent the largest share of the project’s cost overruns. The original approximately $14.1 billion Vogtle project is now estimated to cost well over $20 billion. Georgia Power is 45.7% owner in the project (remaining utility partners are Oglethorpe Power (30%), MEAG (22.7%) and the City of Dalton (1.6%)).

 

 

 

 

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