It’s time for the next round in the debate over who would pay for potential cost overruns for two nuclear reactors at Plant Vogtle.
The staff of the Georgia Public Service Commission wants to tie the reactors’ budget to Georgia Power’s profits. If the budget is busted by a certain amount, the company pays in the form of a lesser rate of return.
Georgia Power argues the project already has enough financial backstops to stay on schedule and on budget. Any additional cost-containment measures could jeopardize safety as well as the financial health of the company, its image on Wall Street and, eventually, customers in the form of higher bills, the utility said.
“There are other risk-sharing mechanisms in place; we don’t think this one is necessary,” Georgia Power spokesman Jeff Wilson said.
Officials from Georgia Power and the PSC staff will argue their points in a hearing before regulators Wednesday. A vote is scheduled for August.
Georgia Power is the largest stakeholder in a partnership with the state’s city-owned power companies and electric co-ops to build two new reactors at Vogtle. The utility’s portion of the $14 billion project is $6.1 billion.
The project is being watched closely by state and federal regulators, consumer groups and an independent construction monitor for two key reasons: the planned reactors are the first to be built in almost 20 years. Also, the reactors previously built at Vogtle ran over budget by more than $8 billion and took 16 years to build.
Customers already are paying the project’s financing costs. An additional $3.73 was added to a typical monthly bill this year. The fee will go up incrementally through 2015.
Customers will pay for construction costs once the reactors are finished in 2016 and 2017. The amount has not been set and would include cost overruns, if approved by the PSC. Consumer advocates say not having an additional system to keep costs under control is a financial break in favor of the utility.
“The fact that Georgia Power won’t even allow a modest penalty so that they are motivated to stay on schedule and on budget is unacceptable,” said Steven Smith, executive director of the Southern Alliance for Clean Energy.
A contract between Georgia Power and the other participating utilities stipulates who pays for what changes to the project. Some of those costs may be spread out to each utility on a proportional basis. If Georgia Power is responsible for any cost increases, the utility can petition the PSC to recover those costs through customer utility bills.
The PSC staff’s proposal would cut into the utility’s allowed profit margin if the project runs more than $300 million over budget. Profits would get a boost if the reactors come in under budget by the same amount.
There are exceptions. Georgia Power would not be responsible for paying for cost overruns stemming from safety, efficiency or regulatory changes. The company still could ask the PSC to have approved construction costs paid for through customer bills.
In documents filed with the PSC, Georgia Power officials said the PSC staff’s plan would have the company “focus on minimizing capital costs at every turn.”
What’s more, cost overruns that are $300 million or more could result in the company making a one-time write off of a capital investment, which eventually would hurt its credit rating, Georgia Power’s Wilson said.
The issue has come before the PSC four times in two years, and each time commissioners have put off making a decision. The most recent delay, at an April meeting, came after the utility raised new accounting issues.
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