Public Service Commissioner Lauren “Bubba” McDonald knew he would likely lose but he brought it up anyway Tuesday as he met with fellow PSC members.
The issue: the nuclear cost recovery fee now being charged by Georgia Power in relation to the construction of two new nuclear reactors at Plant Vogtle. The fee is to help defray the costs of financing the project and is being paid up front by rate payers with the idea to actually help lower interest rates for the entire project cost. Fine, but McDonald says things haven’t exactly gone as planned. He told me in 2009 when he voted for the certification of Units 3 and 4 at Plant Vogtle that he “was given information from the company (Georgia Power) and experts that said this would be a $4.4 Billion project cost (for Georgia Power) and there would be a completion time frame of 2016 for the first reactor and 2017 for the next reactor.”
Now in June of 2017, the reactors are over budget by billions and the project dates which were pushed back to 2019 and 2020 are now questionable. Westinghouse, which is supposed to design and build the actual AP1000 reactor is going bankrupt. Georgia Power is involved in daily negotiations with Westinghouse on continuing construction. The next deadline is Friday. So with all that, McDonald asked the Georgia Power voluntarily stop collecting the money from its customers. “What I’m saying is I just think it’s the right thing to do until we know the direction of what’s going to happen with those nuclear plants and I do not know and evidently they don’t know,” said McDonald.
McDonald’s actions were applauded by the Southern Alliance for Clean Energy. “”I think it was a common sense approach to try to help today’s rate payers see a slight reduction in a burden that they’ve been shouldering for over six years now and unfortunately he didn’t even get to put his motion forward for a vote,” said Sara Barczak from SACE.
Georgia Power attorneys have said the utility can’t stop collecting the fee because it’s part of a 2009 law. That premise was backed up by Savannah’s Eric Johnson, who served in the state legislature in 2009 when the law was passed. “I don’t know how the PSC could change this when it’s a state law,” Johnson said. “If you want to change it, you change the law.”
Johnson actually headed the Georgia Senate back in 2009 serving as the Senate President Pro Tempore. He says the law was designed to help consumers, not hurt them by collecting financing costs up front instead of waiting until the project was over. “By allowing interest on the construction to start being put into their rates at the beginning, it does two things: it avoids sticker shock at the end and it saves interest costs,” he said. “And that still applies today no matter what’s going on with Toshiba and Westinghouse and the cost of the plant. We’re still reducing the amount of interest.”
Johnson says at the time it was “$300 million that we were saving taxpayers and consumers so I still think you would do it today.”
Johnson said the law had allowed a lower interest rate to be charged for the project. “The original estimates were that this would cost 12 percent in interest and by doing it this way it’s going to be less than 6 percent.” he said.
While Johnson said he couldn’t speculate on whether Georgia Power would do it again, i.e. if the company knew what it knows now if it would embark on this project, but he believes most lawmakers would pass the bill again. He says he anticipates that somehow the project will move forward and when it does “that lower interest and the up front costs already paid will be important for the customers.”
Johnson also said that the fee does have limits and there are caps on how it can go.
Georgia Power sent this statement:
Georgia Power’s recovery of financing costs during construction is required by state law. This structure was put in place because it saves customers hundreds of millions of dollars by reducing financing and borrowing costs, while also phasing the plant into rates over time helping to avoid “rate shock” at the end of the project.
Minimizing the impact of this project on our customer’s bills has been Georgia Power’s focus since the beginning — collecting financing costs during construction is actually one of the ways we have been able to reduce the overall rate impact of the project from the 12 percent estimated at certification to 6 – 8 percent currently. While we share the Commission’s desire to make the best decisions for the state’s energy future, we do not believe this motion is necessary as the Georgia PSC unanimously approved a stipulated agreement five months ago which set clear guidelines for the continued recovery of financing costs for the project under multiple potential scenarios.
Still, at the end of the day, Commissioner McDonald was still concerned. The PSC did not consider his motion and instead said the Attorney General should be consulted on the 2009 law. McDonald though still asserts the company could stop charging its customers. “You know,t he consumer is continuing to pay into this (fee) until Georgia Power decides whether it wants to pull the plug or not and I disagree,” he told us.