Two years ago, when state regulators approved Georgia Power’s plans for two new nuclear reactors, they left a key question hanging.
Who pays if the multibillion project busts its budget?
To critics of the Plant Vogtle nuclear project in east Georgia, the question is more pressing than ever with the nuclear disaster unfolding in Japan. Utilities, including Georgia Power, blamed construction cost overruns at the nation’s first generation of reactors on the regulatory climate after Three Mile Island.
Those critics — and the state Public Service Commission staff — want Georgia Power parent Southern Co., not just customers, to bear some of the overrun risk. Otherwise, said Stephen Smith, director of the Southern Alliance for Clean Energy, “Southern has no skin in the game.”
Since 2009, the PSC has delayed voting on a staff proposal to require Southern and its shareholders to share the pain if the project runs too far over its target $6.1 billion budget. The reactors will cost more than twice that, but electric co-ops and city power companies are funding the rest.
Georgia Power customers began paying for the project’s financing costs as part of a billing increase that took effect in January. That levy will be replaced by another to pay for actual construction after the reactors are finished in 2017.
At issue, essentially, is whether the total cost should be rolled into the future rate hike to pay for construction — no matter what the final bill —or if some portion should be borne by Southern if it goes too far over budget.
The staff wants to cut Georgia Power’s allowed profit margin on the reactors if cost overruns get too big, and to raise that margin if it spends less than anticipated. The staff says that would encourage the company to meet budget.
Under the plan, a 50 percent, $3 billion cost overrun would cut the company’s profits on the reactors from $10 billion to $8.8 billion over 30 years. Customers would pay $1.2 billion less than they otherwise would have.
Georgia Power is pushing back. It says the proposal could punish Southern shareholders for costs that aren’t the company’s fault.
The company says its construction partners are responsible for some potential overruns. It also says regulators can bar the company now from charging customers for costs they rule were imprudently or fraudulently incurred.
The five PSC members have so far avoided a decision, repeatedly telling staff and the company to work out a risk-sharing agreement. Commissioner Lauren “Bubba” McDonald, who suggested the latest round of negotiations last month, said he has yet to make up his mind on the issue and hopes the two sides can make a deal by late March.
So far, Georgia Power has spent $1.3 billion on what could be the first new U.S. nuclear reactors in decades. The site has two, 40-foot-deep, 21-acre-wide holes and some concrete plants. The heaviest work won’t begin until after the Nuclear Regulatory Commission approves a construction license, now expected in November.
The project is under budget, but PSC construction monitor Bill Jacobs recently said “several known issues” are on the horizon that “could have a significant cost impact on the project.” They include several change orders with “potential high dollar costs.”
Jacobs commended Georgia Power for aggressively tackling obstacles, but said the project has already consumed four months of the “float” built into its schedule, giving the team less flexibility when heavy construction begins.
With heavy construction getting closer, the PSC tried to speed up action on a risk-sharing plan last summer. It ordered its staff and the company to each submit a plan by Dec. 31. Georgia Power did not. Critics call it a deliberate strategy of delay, while the company says it misunderstood the directive.
“It’s true, we don’t have a plan yet,” attorney Kevin Greene told the PSC in February. “I don’t think that takes away any of the flaws in the staff’s plan. ... We have done a very good job of shifting most of the risk of this project to other people, not customers. We’re now down into the weeds of ‘what more can we do?’
“The company is willing to sit down with staff,” Greene added. “But I’m not going to tell the commission that we’re going to come up with something.”
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