PSC slams plan to pay for nuclear power plants

Georgia Power recently got some good and bad news, as it continues its push for new nuclear reactors in the state.

The good news: Neither the Georgia Public Service Commission’s public interest staff nor the state’s biggest industrial customers oppose the new reactors outright.

The bad news: Both the PSC staff and the industrial customers slammed the company’s proposal to begin charging for the new reactors five years before they’re complete.

In filings late last week, the staff said it was recommending approval of the reactors subject to adoption of a number of financial limits.

One of the limits was to deny Georgia Power’s request to begin charging for the reactors early, at least for now.

The staff also wants the PSC to tie Georgia Power’s allowed rate of return to whether it brings the multibillion-dollar nuclear project in close to budget.

That proposal would assign some of the nuclear expansion’s risks to Georgia Power shareholders instead of ratepayers and the construction group, the staff said, giving the utility an incentive to control delays and costs.

The early collection mechanism, called construction-work-in-progress funding, has been a top priority for Georgia Power.

Georgia Power plans to begin building two new reactors at its Vogtle nuclear plant near Augusta in 2011, pending federal license approval and state go-aheads.

It wants to begin charging for the reactors then, instead of waiting until the plants are complete in 2016 and 2017.

That’s normally when a utility would begin charging for a new plant, stretching the costs out over their 60-year lives.

The company says the early collection would lop about $300 million off the project’s total cost and would dampen rate shock. The company has estimated its costs at $6.4 billion.

But consultants for both the staff and industrial customers said the number was misleading.

They said Georgia Power’s figures ignore the time value of the money customers would be advancing the utility.

Using net present value estimates, the early collection would cost customers more than the traditional method for recouping utility costs. Such calculations attempt to account for inflation, the potential profits from other uses of the money and the risk the project might not get done.

The staffers said the early funding approval would cost customers between $218 million and $576 million in net present value dollars.

They said the early collection transfers too much of the project’s risk to ratepayers and provides too little incentive to the company to control costs.

The PSC has until March to decide whether to give Georgia Power a go-ahead on its nuclear plants, and set any conditions.

The PSC’s role is to decide whether the plan is in the economic interest of the state’s ratepayers.

The PSC staff’s general thumbs-up was a close call, according to filings.

Sheree Kernizan, the PSC utility division director, said the decision to back the reactors generally “was not easily reached,” and that the project “may prove uneconomic under a number of reasonable scenarios” and has significant economic and financial risks.

The staff said it weighed those risks against others like carbon legislation pushing up coal-fired power prices and natural gas prices again rising.

The states industrial customers, represented by the Georgia Industrial Group and the Georgia Traditional Manufacturers Association, weighed in only on the early funding issue.

The Southern Alliance for Clean Energy also filed comments last week.

The group says Georgia Power is not properly disclosing the projects impact on water supply issues, including required dredging of the Savannah River, and that is hasn’t realistically accounted for the difficulty of storing nuclear waste.

THE STORY SO FAR

Previously: In August, Georgia Power requested state approval of plans for two new reactors at its Vogtle nuclear plant near Augusta, including a request to begin collecting funding early.

Latest: The Public Service Commission’s staff and the state’s largest industries opposed the early collection in filings last week.

What’s next: Hearings on those and other recommendations begin Jan. 12.