The cooling towers for Plant Vogtle reactors Nos. 3 and 4. Special/Georgia Power

Behind the Great Plant Vogtle Rebellion of 2018

The Great Plant Vogtle Rebellion of 2018 is over, settled last week after a secretive tussle that ended with a peace treaty agreed to by Georgia Power and its parental unit, the Southern Co.

The state’s most powerful commercial and political behemoth had been successfully brought to the negotiating table by Oglethorpe Power, one of its three current-generating partners in the snake-bit effort to bring two new nuclear reactors online.

Concessions were made. New lines were drawn. And the reactors live on, to be completed another day — perhaps four years from now.

There is a bit of David and Goliath in this tale. Oglethorpe, which has a 30 percent stake in the two Vogtle reactors, provides power to 38 electrical membership corporations. It boasts $11 billion in assets.

The Southern Co., which has a 45.7 percent stake in the reactors, has $111 billion in assets. It also had Gov. Nathan Deal and the entire federal government in its corner.

But the real import of the Vogtle rebellion may be the fact that certain members of the state Legislature, who in the past had given Southern Co. carte blanche when it came to the reactors, declared their collective patience to be limited.

Not exhausted, but at least finite.

”We’ve always been supportive of the project,” said state Rep. Robert Dickey, R-Musella. “But whether it was planned this way, or whether it just fell this way, I don’t know. I don’t want to make any accusations. But the way it was going — it wasn’t fair.”

The rebellion, appropriately enough, began deep in rural Georgia. But first, the background: This summer, we found out that the costs of the two reactors, already well behind schedule, had increased by $2.3 billion. This was above the $25 billion price tag attached to the project when it was green-lighted by the state Public Service Commission in December — after the reactors’ lead contractor, Westinghouse Electric, had declared bankruptcy.

A few days after the latest cost increase was announced, Southern Co. declared that its shareholders would eat its $1.1 billion share of the additional burden. Georgia Power ratepayers would not be molested.

Great news, right? Yes, and no. And this is where the topic gets more complicated. Oglethorpe began knocking on doors in the state Capitol to explain.

Southern Co. is a publicly traded firm ultimately responsible to its shareholders. Oglethorpe is a collective of cost-sharing EMCs, which pass on all increases directly to their rate-payers. The two other Vogtle partners, Municipal Electric Authority of Georgia and Dalton Utilities, operate under similar restraints.

The sky-rocketing costs of Vogtle greatly exacerbated a structural flaw in Vogtle’s ownership relationship. By laying the burden of cost increases on shareholders, Georgia Power is able to keep its customer rates lower than Oglethorpe, MEAG and Dalton.

So as costs spike, Georgia Power actually gains a competitive advantage, Oglethorpe argued to state lawmakers. “Georgia Power has the ability to grow out of this hole. The others don’t,” said state Rep. Jay Powell, R-Camilla, who chairs the House Ways and Means Committee.

The $2.3 billion cost increase triggered a contract clause that required the four Vogtle partners to reaffirm their commitment to the construction of the reactors by Sept. 24 — or the project and its 7,000 jobs would be abandoned. Oglethorpe intended to use this deadline as leverage.

So two weeks ago, Powell took the power company’s case to Statesboro, where dozens of state lawmakers had gathered for a meeting of the House Rural Development Council.

EMCs are sacred things in rural Georgia, a region that — as you may have noticed — already feels put upon. Powell began passing around a letter that called the situation “unfair and anti-competitive,” and called for “a cost cap…that protects all Georgia electric rate payers from this and future overruns.”

It was dangerous stuff. As he sought signatures, Powell also cautioned his colleagues. ”I told them, ‘You need to read it before you sign it,’” Powell said. Ultimately 20 lawmakers signed on — though a few would have second thoughts and withdraw, including state Rep. Terry Rogers, R-Clarkesville, one of the governor’s floor leaders.

In essence, the letter endorsed Oglethorpe’s bargaining position. The first two signatures on the Sept. 19 letter belonged to Powell and state Rep. Terry England, R-Auburn. As we mentioned, Powell chairs the House committee that oversees taxation in Georgia. England chairs the House Appropriations Committee, which has great say over the state’s $26 billion annual budget.

The pair have clout, to say the least. Another signature on the letter belonged to House Speaker pro tem Jan Jones, R-Milton, a sign that the two chairmen weren’t free-lancing.

That Sept. 19 letter became something Oglethorpe could hang onto, especially once the big-footing started. In a Sept. 21 letter, a nice fellow from the U.S. Department of Energy sent word that continued construction of the Vogtle reactors, the only nuclear construction underway in the U.S., was a matter of national security. And that billions in loan guarantees could be withheld, or immediately called in, if the right things didn’t happen.

MEAG and Dalton abandoned the field, and Governor Deal congratulated them. “I also call upon Oglethorpe Power Company to reconsider its decision before walking away from 7,000 Georgia jobs,” Deal said in a statement issued on the evening of Sept. 24, the deadline day.

For two more days, that deadline was extended. A deal was finally announced last Wednesday.

Again, it’s complicated. A limit was placed on future costs for Oglethorpe and the smaller power partners, but as Southern Co. and its affiliates absorb more of those costs, their share of the ownership increases.

I was particularly impressed by Section D of the agreement, which tells us that KPMG was brought in last July 24 as an independent numbers cruncher. The independent auditing firm will be retained — a sign that perhaps other partners didn’t trust the figures Southern Co. had been generating.

I mentioned this to state Sen. Lindsey Tippins, R-Marietta, another lawmaker who signed onto the Oglethorpe letter. An outside auditor, I said, sounds like something our state Public Service Commission should be doing.

Tippins didn’t disagree. He’s been uncomfortable with the Vogtle situation for some time. Last year, he introduced legislation to free local school systems from the advance financing costs for Vogtle — a surcharge approved by the Legislature in 2009. Tippins bill didn’t go anywhere.

But about that auditing function. “If you go back to the fall of the year, the PSC staff thoroughly researched this topic, and testified and put out information that this plant was not viable,” Tippins said. “Their own people did that, but the people on the PSC said they were going to go forward with it.

“They ought to rely on their staff. If the staff is faulty, they need to get different staff. But when you’ve got a staff that digs into this thing, and crunches the numbers and says, ‘This dog ain’t going to hunt,’ you don’t keep buying dog food for that dog,” Tippins said.

That may sound quaint, but in the General Assembly, that’s the language of rebellion.

About the Author

Jim Galloway
Jim Galloway
Jim Galloway is a three-decade veteran of The Atlanta Journal-Constitution who writes the Political Insider blog and column.

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