Southern is one of the biggest power companies in the country and the parent of Georgia Power. It has embarked on exactly two mega construction projects in the last decade or so.
Both — the expansion of Plant Vogtle and the Kemper clean coal/gas plant in Mississippi — have gone billions of dollars over budget and faced years of delays.
As each project struggled, Southern and its subsidiaries continued to underestimate the magnitude of the overruns.
Independent monitors for the Georgia Public Service Commission regularly warned about rising Vogtle costs that were more accurate than Georgia Power’s reassurances about stability.
On Wednesday, Southern offered new preliminary estimates of possible costs to complete Vogtle. Apparently the latest price tag is now nearly double the original estimate of roughly $14 billion.
So I guess now we really know what the project will cost. Right?
Would you make any expensive decision based on the company’s projections?
Southern CEO Tom Fanning, would you bet me a dinner at Waffle House (drinks and tip included) that Southern’s latest estimate falls within $200 million of the actual final total cost? OK, how about $400 million?
It’s like I can already taste those cheese-drenched grits.
Crisis of confidence
If Georgia doesn’t have a crisis in confidence over nuclear cost estimates, it should. (By the way, an average Georgia Power residential customer pays $100 a year toward Vogtle, and they don’t really have a choice because the company has a state-enforced territorial monopoly.)
Georgia Power, I think, already knows it has a credibility issue. It brought in outside consultants to offer up cost projections, too. The supporting cast, I imagine, is supposed to help the power company get its numbers right and convince others they can be trusted. Southern said that later this month it expects to report updated estimates to the PSC and a recommendation on whether to continue the project it, shelve part of it or park the whole thing.
The project’s future was further clouded earlier this year when Westinghouse, Vogtle’s main contractor, filed for bankruptcy protection. That pushed Vogtle costs and uncertainty back on Georgia Power and the project’s smaller co-owners, including Oglethorpe Power (which includes dozens of community electric membership corporations in the state), the Municipal Electric Authority of Georgia (which is owned by city utilities) and the city of Dalton.
Nuclear is an important and prudent part of the energy mix, Oglethorpe CEO Mike Smith wrote. But “a decision to go forward would require our having high-confidence in the estimate to complete – both dollars and time.”
High confidence. Is that possible?
That's not really a knock on Georgia Power. It's more curiosity about whether anyone would have great confidence when it comes to projecting the costs of new nuclear construction in the U.S. In recent days, two South Carolina utilities announced plans to halt a nuclear project that was essentially the twin of Georgia's Vogtle.
In Georgia, the PSC gets say on whether Vogtle’s project can be abandoned or if Georgia Power can charge customers still more for the growing costs.
Tim Echols, who sits on the PSC, emailed that he is “not interested in raising the certified cost or changing the existing stipulation in any way.”
The project can be completed with billions of dollars in promised payouts from Westinghouse’s parent, Toshiba Corp., he wrote. But Toshiba is financially shaky, and if it files for bankruptcy “the math doesn’t work and the Vogtle project probably terminates or gets converted to natural gas.”
Lauren “Bubba” McDonald, who sits on the regulatory Georgia PSC, told me any decision to continue Vogtle should include some kind of “guarantees” from Georgia Power that it can meet the goals.
“They need to have some skin in the game,” McDonald said, adding later, “You can’t run from the responsibility of ownership.”
Will Georgia Power go for that?
Maybe it won’t have much choice. “They are not in a very driving position right now,” McDonald said.
By the way, he sounded chapped about a move by Georgia Power – OK’d by his colleagues last year – to force the company’s customers to pay for work on whether to build yet another nuclear plant. The work was eventually suspended.
“Wasted $50 million,” McDonald said.
Marietta mayor Steve “Thunder” Tumlin, who sits on the board of Vogtle co-owner MEAG, told me Georgia Power has to provide “compelling” evidence for continuing the project. If it did, he said, he expects to back them.
I asked him why he would put his faith in Georgia Power, given the company’s track record on projections.
“They are the best thing we got,” he told me.
“You could look back and see some bad facts,” he said, but “but nobody else besides them had the wherewithal to get us this far along.”
I agree with at least that last point if I can tweak the intent: Georgia Power certainly got us to where we are today.
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