Plant Vogtle co-owner alleges Florida utility in breach of contract

Rising construction costs related to the expansion of nuclear Plant Vogtle have led to frayed relations between two key players who filed competing federal lawsuits this week that further threaten the future of the $27 billion project.

Municipal Electric Authority of Georgia (MEAG), a co-owner of the South Georgia nuclear plant, sits on one side of the dispute while the Jacksonville Electric Authority (JEA) is on the other. MEAG in its federal lawsuit filed Tuesday claims JEA, the Florida-based company, is trying to renege on a 2008 agreement to purchase power from the Georgia-based operator.

The agreement called for the Jacksonville company to cover 41 percent of MEAG’s share of construction costs at the Vogtle expansion for 20 years in exchange for power to service its residential customers in Florida and Georgia.

MEAG claimed in the suit filed in the Northern District of Georgia in Atlanta that the Florida entity was “undermining the process by claiming that it does not have to abide by its contractual agreement.” The lawsuit says JEA became “irreversibly obligated” when the company entered into the agreement to purchase power once Vogtle Units 3 and 4 open for commercial operation. The power purchase agreement obligates JEA to pay its share regardless of “whether or not the project is completed or is operating or operable,” the lawsuit claims.

MEAG says the Florida company’s actions are premature and will damage the project in Burke County as well as MEAG’s ability to meet its obligations and secure financing.

“This was not an action we wanted to take, but we filed this lawsuit to protect the interests of the participant communities that we serve,” said MEAG Power President and CEO, Jim Fuller.

The legal dispute is the latest complication for a project that sits at a crossroads in the face of signficant delays and cost overruns. When the expansion launched in 2009, the power units were scheduled to be operating by 2016. But the completion date has been set back with a current target completion of November 2022.

Consumer groups want investigations into Vogtle before DOE issues additional $3.2 billion in federal loans to nuclear plant owners. GEORGIA POWER

icon to expand image

Costs have nearly doubled over the past nine years, earning outrage from consumer advocates who claim gross mismanagement that will ultimately cost ratepayers on their power bills. Last month, Georgia Power announced an additional cost overrun of $2.3 billion. That concerned JEA executives and set off demands for MEAG to pull out of its ownership obligation of the project.

A complex ownership structure involving four co-owners that are expected to decide in a Sept. 24 vote whether to cease construction because of the problems. The group includes Georgia Power (45.7%), Oglethorpe Power Corp. (30%), MEAG (22.7) and Dalton Utilities (1.6%).

MEAG said it is “evaluating it’s decision” on the nuclear project ahead of the vote.

A 90 percent vote for the project is required for Vogtle construction to continue. Georgia Power, which has the largest stake, has not wavered in its support for the project.

In its effort to get out of the contract, JEA filed its own lawsuit on Tuesday in Florida seeking to have the contract voided. The thrust of its legal argument is that the community-owned power authority did not have the right to enter the contract 10 years ago because it was not approved by the Jacksonville City Council. Under Florida law, their argument says, the council needed to sign-off on the debt.

“There appears to be no end in sight to the ever-increasing cost and delays plaguing the construction of the additional units,” JEA said in the complaint.

MEAG however argued in its lawsuit that the contract did not need city council approval as it was not considered debt, but an expense the Florida entity was obligated to pay.

Daniel Aschenbach, a lead analyst at Moody’s Investor Services said the unfolding legal challenges threaten the health of the project’s bonds which bond holders thought were stable because they viewed the agreement as valid and binding.

If JEA defaults from their portion of the contract, said Aschenbach, neither MEAG nor its 49 participating communities in Georgia that use its power would be required to take on JEA’s obligation.

“It is not clear how they would work it out other than it would be a quandary at that point of how to replace that part of the financing,” said Aschenbach. “If the suit has some judicial merit, that would be a credit negative for the bonds.”