Public Service Commission staff say Georgia Power should share Vogtle risks and costs or cancel project

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By Anne Maxwell – WBJF (Watch now)

ATLANTA, Ga. (WJBF)- The staff of state regulators are now asking for Georgia Power to take more responsibility for cost overruns in construction of reactors 3 and 4 at Plant Vogtle. NewsChannel 6 first exposed that construction on Plant Vogtle has allowed the company’s shareholders and financiers to make more than $1 billion in profit on an over-budget and behind schedule project by charging customers for construction and a return monthly on their power bills.

Now, analysts are asking that the company share more of the project’s financial risk with customers or cancel construction.

In the first Public Service Commission hearing since Vogtle contractor Westinghouse went bankrupt, the multi-billion dollar nuclear project in Burke County is at a crossroads. In the wake of the bankruptcy, Georgia Power, the largest owner of the project, executed a cost-to-complete analysis to determine if continuing with construction of reactors 3 and 4 is worth it.

The company recommended continuing construction with no cap to spending. The Public Service Commission will make a decision on whether to approve, deny or modify the company’s recommendations on December 21.

“Billions of dollars are at stake,” said Liz Coyle, who is the executive director of consumer advocacy group Georgia Watch.

The Public Service Commission’s Staff recommends that the commission hold the company more accountable going forward. The staff says the company’s conditions shift most of the risk to customers, to the tune of a negative economic benefit of $1.6 billion. In layman’s terms: it would be cheaper build another type of power plant in a different location than continue with this project.

The staff analysts recommend that the commissioners should only approve continuing construction if it provides economic benefit to customers, which would require the company to bear some of cost overruns and risks going forward.

“I believe what the commission will do is have a vote, and set a standard that the company can either accept or reject,” said Georgia Public Service Commission Chairman Stan Wise. “If they accept it, it is essentially a go vote; [they] will continue the project.”

Saff’s analysis now puts the cost of the project to be twice as much as originally planned. For Georgia Power’s 45 percent stake in the project, it was supposed to cost $6.1 billion. Now, it’s estimated to double. Add that $12.2 billion to the 55 percent stake of the project’s other owners, and the total estimated price tag is well over $20 billion. The completion date has also been extended 68 months.

According to financial reports, Georgia Power has not suffered because of the delays and costs. In fact, they are making money off the project, even though the reactors have not produced enough electricity to light a single bulb.

The company is allowed to collect a set rate of return on its investments, usually around ten percent. So the more the company spends on Vogtle, the more it makes. And it’s all coming from a monthly charge on your power bills.

The staff says with the cost overruns so far, the company is set to make nearly twice what it would have if construction stayed on schedule. In their testimony, the staff says the profit the company will collect will increase from about $7.4 billion to about $12.6 billion over the life of the units; that’s more than a $5 billion profit on cost overruns and delays that Georgia Power customers will pay via their power bills.

Tom Fanning, the CEO of Georgia Power’s parent company, Southern Company, has said Southern’s dividends have risen every year under his leadership. He also has said Southern’s shares have risen since the company announced its intention to ask the PSC for permission to continue working on Vogtle 3 & 4, according to Bloomberg.

“We remain confident that the unified recommendation to move forward with construction represents the best choice for customers while preserving the benefits of a new carbon-free energy source for our state,” said Georgia Power spokesperson Jacob Hawkins in an email to NewsChannel 6. “We also understand that this is a complex and difficult decision and it is ultimately the decision of the Georgia PSC on whether or not we will move forward with the Vogtle project.”

He says the company is sharing the financial risks, noting that a commission agreement about delays has resulted in a nearly $500 million penalty to shareholders. However, the PSC staff says this reduction will only prevent the company’s profit from increasing to about $13.1 billion.

Georgia Power also announced Thursday that it has received the total $1.7 billion owed it by Toshiba, the parent company of Westinghouse. However, the PSC staff’s analysis included this money in its analysis, so it does change the conclusions presented in their testimony.

Source: WBJF

Copyright © 2017 WBJF

One comment on “Public Service Commission staff say Georgia Power should share Vogtle risks and costs or cancel project

  1. To date, neither the Georgia Public Service Commission nor the utility, Georgia Power Company, differentiate between “current customer” (those paying the finance costs), and the “future customer” (those who will bear the costs deemed reasonable and/or prudent by the GA PSC). On one side, “Nuclear and Electric Industry Experts” have been quick to testify that “the project is in the best interests of the customer and should be continued”. On the other, Intervenor groups are just as quick to disagree! After all, our “customer” money is also at risk.
    The completion risk of the project assigned to “customers” is of two types: (1) financing costs – to be paid by the customer through SB31 (2009) mandates a monthly, non-voluntary payment by “current customers” through the Nuclear Construction Cost Recovery (NCCR) tariff. This “legislated” directive takes the place of market-investors (i.e. banks, wall street) and company shareholders, who have all balked at anticipated, historical “cost overruns and schedule delays” that have plagued each and every nuclear power plant constructed in this country. (2) The second type falls upon those “future customers” whose then-rates will be adjusted upward, upon completion, to be paid for – essentially for the economic life of the completed project. Rate Shock will immediately become quite apparent –
    at this transition – to “future customers”, many of whom have not been born yet.
    In response to claims of “customer protection”, as touted by Georgia Power Company and the Georgia Public Service Commission, The Concerned Ratepayers of Georgia say, “Actions speak louder than words”, and there is little realistic evidence that suggests the Georgia Public Service Commission serves as an “effective voice and advocate / protector” of the Georgia Power Company customer. Several have publicly stated their pro-project completion preferences.
    Speaking of fairness, the “Current Customer” has been taken for granted by both the State legislature and the utility. Functioning as a multitude of individual “construction lenders” to the project, none have been given the opportunity to decide for themselves the rationale for this project. There has not been any suggested “compensation” for a monetary interest-rate to be applied to money advanced for project continuance by the “customer”. (Funding such as this has been described in Peter Bradford’s intervenor testimony as “Dumb Money”, taken advantage of by utilities seeking project funding).
    As the commission struggles to make decisions as to the status of this project, and how best to “protect the customer”, at least one advocacy group (CRG) recommends” (1) “a complete return (NOW) of all customer funds”, $2 Billion, plus, received currently through the NCCR tariff – for a mismanaged project that was not needed at certification, and not needed now; and (2) a transparent, public-sponsored review of the allocation of previous costs incurred, to date, by the consortium, its new contractors, and the utility – as those proposed to be shared by customers OR by shareholders. (proposed as a “Trust – But Verify” recommendation by advocacy group(s)).

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