By Matthew Bandyk
The most recent delay in the construction of new nuclear reactors at the Vogtle plant in Georgia has eaten up a quarter of the billions of dollars in predicted benefits that the reactors are expected to bring Georgia Power Co. customers, representatives of the Southern Co.subsidiary said at a June 2 hearing.
But the Vogtle project will still save customers about $3 billion compared to alternatives, and the current schedule can be met, Georgia Power officials said at the Georgia Public Service Commission hearing.
The utility representatives were grilled by opposition groups over whether the nuclear reactors are still worth the growing costs. For Georgia Power, the answer is unambiguously yes, but environmental and consumer groups like the Southern Alliance for Clean Energy and Georgia Watch have been pushing back on that point, arguing that as the project continues to fall behind schedule, the economic benefits are slowly eroding.
Georgia Power is going through the hearing process on its most recent six-month update on the progress of the Vogtle units, which were intended to be complete in 2016 and 2017 under a contract signed with Westinghouse Electric Co. LLC and Chicago Bridge & Iron Co. NV, the contractors building the project. But earlier in 2015, the contractors estimated that they will not finish the units until 2019 and 2020 amid delays in placing concrete used for major plant components.
In the previous six-month update,Georgia Power cited $5.1 billion in savings for customers from the costs of completing the units compared to the costs of building new natural gas-fired power plants, the next cheapest way to provide a similar amount of new baseload capacity. But in the latest update, the utility reported more than $3 billion in benefits.
That change caught the attention of Georgia Watch Executive Director Liz Coyle, who during cross-examination asked Georgia Power what is stopping the benefits from dropping by another $2 billion in the approximately eight six-month periods left in the construction project.
Georgia Power Director of Resource Policy and Planning Alison Chiock said 25% of the decrease in benefits is from higher costs caused by the delay and that the remaining 75% is from updated, lower projections for the price of natural gas. “We are still showing overwhelmingly positive economics for the projects,” Chiock said. In 25 out of 27 scenarios for delay analyzed by the company, completing the units was still cheaper than building the gas plants.
Georgia Power’s analysis, however, is focused on the cost to complete the project, not taking into account the money already invested. The utility has spent $3 billion in construction and capital costs and about $800 million in financing costs through the end of April, Georgia Power disclosed in a recent status report.
Georgia Power said that while it cannot predict what will happen, the schedule is “achievable.” The opposition groups believe, however, that more delays are likely and that the costs will keep mounting. “Contractors are already missing milestones in their own revised schedule to completion,” Coyle said in an email.
Based on the new schedule, the utility is estimating about $7.5 billion for its share of the final costs of the project, up from the previous estimate by about $1 billion. Several years ago, the PSC certified $6.1 billion in capital and financing costs for the project.
Delivering the new reactors on time is also important for Georgia Power to use about $800 million in federal production tax credits. The Energy Policy Act of 2005 provides production tax credits to nuclear reactors that can come into service before 2021, according to Georgia Power’s most recent six-month update. The project has already fulfilled other prerequisites for the tax credits by beginning construction before 2014 and applying for a federal license in 2008. While the contractors’ current schedule has the second of the two reactors coming online in 2020, with the delays thus far it is appearing more possible that the project could miss the 2021 deadline, according to Southern Alliance High Risk Energy Choices Program Director Sara Barczak.
The cost figures are based on Georgia Power’s 45.7% ownership of Vogtle. The other owners are Oglethorpe Power Corp., the Municipal Electric Authority of Georgia, and the city of Dalton, Ga.
SOURCE: SNL Financial