DO GEORGIANS GAIN FROM PSC VOTE ON NUKE PLANTS? Two views

Yes: Method means ratepayers will avoid a $300 million bill later

By STAN WISE

As we watch our nation mortgage our children’s future with more and more debt, here in Georgia we have instead instituted a pay-as-you-go approach to finance the expansion of nuclear power.

The Georgia Nuclear Energy Financing Act, passed by the Legislature and endorsed by the Public Service Commission, enables Georgia Power to use an accounting method called Construction Work In Progress, or CWIP, to finance new nuclear reactors. The measure retains the PSC’s authority to ensure only prudent costs are passed onto ratepayers.

Through CWIP, ratepayers avoid a future bill of $300 million in additional financing costs that pay the financing costs in construction. And by paying the $1.6 billion in ongoing finance costs during construction, the plant’s mortgage will be $2 billion less than it would be without CWIP, saving even more over time. CWIP also keeps rates low by insulating Georgia Power’s A-bond rating from downgrades that can lead to higher borrowing rates on other projects.

The concept isn’t new. It’s saved money for the customers of utilities throughout the country and here in Georgia.

Under traditional ratemaking consumers would still pay for the cost of the plant and the accrued finance costs during construction. However, those costs, which include bondholder interest and shareholders returns, were deferred until the plants went into service. This meant consumers paid the tab on hundreds of millions in financing costs for financing costs, which CWIP now avoids.

Why the opposition to CWIP? The staunchest opponents were the lobbyists of the consumer group Georgia Watch, which claims to be “neutral” on the issue of nuclear power. Their true interests are unknown because they do not disclose their donors or source of funding. But the group’s newest lobbyist, Angela Speir Phelps, is a former PSC member whose voting record might shed light on their agenda. She was the only commissioner who voted against a 2006 provision that provided funding for Georgia Power to study nuclear expansion.

Georgia Watch’s position on financing nuclear plants would actually make them cost more and produce rate shock. It is remarkable that in about seven years, when the new nuclear units go into service, a consumer group would support two back-to-back increases that total 12 percent — 3 percent more than they will be with the use of CWIP — as opposed to phasing in costs over seven years.

This group also claims CWIP produces prepaid profits. What they don’t acknowledge is that this is interest paid to bondholders and returns paid to investors — and it will be paid regardless of CWIP. Without CWIP, an additional $300 million would have to be raised from investors, which would actually make more money for investors.

Finally, Georgia Watch says it is not fair to start charging for a service some may never use. Under that logic, we should not plan for the future. No more new roads, water systems, schools or anything that benefits our residents in the near or long-term.

The Legislature and the PSC took the responsible course to finance an asset that will serve our state for years. In doing so, we will avoid rate shock, provide jobs, reduce our dependency on fossil fuels and meet our energy needs.

• Stan Wise is a member of the Georgia Public Service Commission.

No: Customers pay $2 billion now, 75% of it is utility’s profit

By ANGELA SPEIR PHELPS

The phrase “a chicken in every pot” was a slogan used during President Hoover’s campaign in 1928. During these trying times, if we are going to have a chicken in every pot, then we need to make sure we don’t have the fox guarding the hen house.

This comes to mind when I think of the Public Service commissioners who voted last week to commit $6.4 billion of consumer’s money to Georgia Power without implementing the safeguards recommended by their own staff.

The Public Service Commission had the opportunity to act in the best interest of the ratepayer and the utility but turned their nose up at the recommendation by the advisory staff and public interest advocacy staff to deny the company’s request for 100 percent CWIP, or Construction Work in Progress, which is the prepayment of the construction financing costs for two new nuclear units at Plant Vogtle.

The Legislature directed the PSC to implement CWIP but gave it the authority to put safeguards in place. The PSC’s decision allows Georgia Power to start charging ratepayers in 2011 for the costs of the plants, even though they would not be operational until 2017.

This results in the prepayment of $2 billion to Georgia Power; 75 percent of that money goes to profit for the company and taxes on the profit six years before the nuclear units produce a single kilowatt of power or we ever benefit from the service.

The PSC public interest advocacy staff, which is charged with balancing the interest of the ratepayer and the utility, advocated against the CWIP, stating, “There can be no serious question that CWIP is harmful to ratepayers. It will cost ratepayers more, deprive ratepayers of the use of their money during the construction period, and create intergenerational inequities.”

The staff wanted the commission to hold off until they have more information about the company’s finances in next year’s rate case before making a decision about how to proceed. The staff advised that the commission could implement a less oppressive form of CWIP later, which would have been a better alternative for ratepayers.

But four commissioners decided to go against the advice. Commissioner Stan Wise made the motion to give Georgia Power what they asked for and stated “CWIP saves the ratepayers money — I can’t say that enough.”

He can say it all he wants but it doesn’t make it true. In fact, even Georgia Power, in sworn testimony, stated that CWIP does not save ratepayers money on a net present value basis.

Wise also said “we stand on guard for the people and their money.” In my opinion, if Wise is guarding Georgians’ money there should be a changing of the guard because he’s certainly not looking out for the best interest of the ratepayer.

Commissioner Robert Baker stood up for the people of Georgia and did the right thing when no other commissioner could find the moral capacity or courage to do so.

A chicken in every pot in these economic times? Not likely when foxes are guarding the henhouse.

• Angela Speir Phelps, formerly with the PSC, is with Georgia Watch.