Georgia Power trashes regulatory staff's financial proposal for Vogtle cost overruns

Georgia Power officials told state regulators they never would have started to build a new multi-billion-dollar nuclear power plant if they knew the company might be on the hook for certain potential cost overruns.

The company, they said, would be building a natural gas plant instead.

Georgia Power, which is the largest stakeholder in a partnership building two new reactors at Plant Vogtle, is responsible for $6.1 billion of the $14 billion project. The Georgia Public Service Commission’s staff wants to cut into the utility’s allowed profit margin if the project runs more than $300 million over budget. Profits would similarly get a boost if the reactors come in under budget by the same amount.

At a PSC hearing Wednesday, company executives said the proposal could drive up financing costs of the project, potentially damage the ability to raise capital and eventually increase customer bills.

“As a member of the management team of the company, if this mechanism had been part of the original certification, we very likely would have not proceeded [with the project]," said Ann Daiss, Georgia Power’s comptroller.

Tom Newsome, a member of PSC’s staff, said Georgia Power earns a high profit if the cost of the project increases. The PSC proposal would continue to allow for that but would shield the company’s customers from having to pay for those cost overruns.

Should the costs grow to $7 billion, Georgia Power wouldn’t earn below a 10.25 percent return on its investment from this project. The current rate of return on investment is set at 11.15 percent.

“Even under the most adverse outcomes, the units remain highly profitable with very limited risk for investors,” Newsome said. “We’ve been talking a lot about investors in this hearing and I think we need to be talking about [customers].”

There are exceptions. Georgia Power would not be responsible for paying for overruns stemming from safety, efficiency or regulatory changes.

Newsome, who sparred with a Georgia Power attorney for most of the afternoon, said he thinks the company's construction costs could come in under the "deadband" or threshold set in the proposal.

Still, company executives say that had the PSC staff’s risk-sharing mechanism been part of the plan years ago, Georgia Power would be building a natural gas plant instead.

Pete Ivey, an executive with the nuclear unit of Georgia Power’s parent company, Southern Co., told state regulators that a natural gas plant would have been most cost effective.

Ivey said the PSC’s plans would force the company to look at short-term financial decisions instead of long ones. It could impact maintenance decisions, for example, he said.

The PSC will vote on this issue in August.