Georgia Power has reached agreements with key contractors on its Plant Vogtle expansion that help clear the path forward for the troubled nuclear project.
The project to build two new reactors at the complex near Augusta has been under a cloud since Westinghouse Electric, the main contractor, entered bankruptcy proceedings in late March.
Under the new deal, Westinghouse and parent Toshiba Corp. will still make good on guarantees to cover nearly $3.7 billion in previous overruns — money that will eventually reduce the effect on ratepayers.
Even with the payments, however, some experts have told the Georgia Public Service Commission the expansion may no longer be viable because disruptions from Westinghouse’s bankruptcy are expected to add years of delays and billions in additional cost overruns.
The expansion is already more than $3 billion over budget and over three years behind schedule.
Still, officials at Georgia Power and its Atlanta parent, Southern Company, painted the deals with Westinghouse and Toshiba as a bridge to improved execution of the project.
“We are happy to have Toshiba’s cooperation in connection with this agreement which provides a strong foundation for the future of these nuclear power plants,” Tom Fanning, Chief Executive of Southern Company, said in a statement.
According to the utilities, Tokyo-based Toshiba agreed to make good on guarantees from the original construction contract. The company committed to pay $3.68 billion in a series of cash payments starting in October, through 2021, according to a company filing.
A second agreement allows Georgia Power and Southern’s nuclear arm, Southern Nuclear, to continue using Westinghouse’s nuclear reactor designs and to rely on the company’s help on the project.
The bankruptcy court is expected to tear up the companies’ original contracts as part of Westinghouse’ Chapter 11 restructuring, and the deal is aimed at easing the transition to a new project manager.
Georgia Power and its partners, Oglethorpe Power, MEAG Power and Dalton Utilities, are evaluating what to do with the project once Westinghouse is out as primary contractor.
Georgia Power and Southern Nuclear could take over primary management or find a new contractor. The partners also could decide to shut down the project or convert all or part of it to other fuels.
The PSC will have to sign off on any option.
Experts said that while the new agreements are a boost to the project’s survival, much remains uncertain.
Toshiba’s promised guarantee payments are “better than nothing,” said Bobby Baker, an Atlanta attorney and former commissioner on the Georgia PSC.
Baker added Toshiba could eventually file bankruptcy itself because of heavy losses from Westinghouse’s work on the Vogtle expansion and a similar nuclear plant it was building in South Carolina for SCANA Corp. If that happened, Toshiba might still renege on its promised payments to Georgia Power, Baker said.
“If they don’t have that (agreement), the ratepayers are going to have to bear 100 percent” of Vogtle’s costs, Baker predicted.
However, Toshiba stock jumped nearly 10 percent on Monday on news of the deal, which is seen as capping the giant company’s exposure on the Georgia nuclear project.
Meanwhile, PSC consultants told the commission in a periodic update last week that the Vogtle project is most likely to cost more long-term than alternatives such as building natural gas-fired power plants. They cited cheaper natural gas prices and disruptions from Westinghouse's bankruptcy.
The consultants, who assumed the bankruptcy-related problems will add three more years and $3 billion in additional costs to the project, said Vogtle “is not economic under those assumptions.”
Even with Toshiba’s guarantees, the consultants estimated the Vogtle project will cost ratepayers $1.1 billion more than the new reactors are worth compared to more economical alternatives. Without the guarantees, Georgia Power customers will be about $2.4 billion in the hole, the consultants estimated.
A Georgia Power spokesman said the company is reviewing the PSC staff’s testimony.
