Georgia’s much-delayed, over-budget Plant Vogtle nuclear expansion could face more costs and delays in the wake of a $760 million lawsuit settlement and a move to swap contractors on the project.
Georgia Power and other owners of the Vogtle project recently announced that they settled a three-year-old legal dispute with contractors over cost overruns and delays in building two new reactors. The project will double the number of reactors at the sprawling complex near Augusta, to four.
Georgia Power officials confirmed that the company plans to ask the Georgia Public Services Commission to approve its $350 million portion of the settlement. If the five-member commission deems it a “reasonable and prudent” cost of the project, customers could ultimately shoulder the extra cost.
Customers of the other Georgia utilities that are co-owners of the Vogtle project could also be affected. Oglethorpe Power and the Municipal Electric Authority of Georgia said they are paying about $230 million and $174 million, respectively, in the settlement. The city of Dalton’s utility, the remaining co-owner in the settlement, is paying roughly $6 million, according to experts’ estimates.
A Georgia Power spokesman said the settlement benefits customers because contractors were seeking much higher claims topping $1.5 billion.
Meanwhile, as part of the package deal, Westinghouse, the contractor that designed Vogtle’s new reactors, also agreed to take on a wider role as the lead contractor to complete the plant’s construction.
Westinghouse agreed to buy CB&I Stone & Webster, the contractor responsible for building the new units. Pennsylvania-based Westinghouse also said it is negotiating with Fluor Corp. to hire and manage most of the 5,500 workers at the Vogtle construction site.
This is the third team of contractors to oversee the Vogtle expansion since it was launched in 2009.
Georgia Power, Westinghouse, and other players painted the complex settlement and changeover as a big step forward in completing the $16 billion-plus project, which is $3 billion over budget and more than 3 years behind schedule.
“This settlement is extremely positive for the Vogtle project and now the contractors can focus 100 percent on project execution,” said Buzz Miller, Georgia Power’s executive vice president of nuclear development. He said the package deal resolves all the legal disputes, streamlines the running of the project, and keeps it on pace to be completed by earlier projections.
In competing federal lawsuits, the Vogtle owners and contractors blamed each other for delays and cost overruns in getting the new nuclear plants — the first to be built in the U.S. in 30 years — licensed and built. Changing federal regulations complicated the dispute.
Tangled settlement
In the settlement, the owners are paying Westinghouse. To settle those lawsuits and similar complaints involving a new nuclear plant in South Carolina, Westinghouse agreed to buy the construction unit of another contractor named in the lawsuits, Chicago Bridge & Iron, for $229 million and shield it from any other legal claims. CB&I said it expects to take up to a $1.2 billion loss on the deal.
In the latest update nine months ago on the Vogtle expansion, the contractors and Georgia Power said they expect to complete the first new reactor, Unit 3, by July 1, 2019, and the fourth unit by July 1, 2020.
But critics worry that Georgia’s electricity customers could not only end up footing the bill for the lawsuit settlement, but also for higher project costs if the change in contractor management leads to more delays.
At a regulatory hearing last week on Georgia Power’s ongoing costs for the project, consumer watchdog groups questioned company projections.
“There’s no way that having that lawsuit settled for $350 million and having the contractor bow out is a good thing,” said Glenn Carroll, coordinator for Nuclear Watch South, an Atlanta activist group. “Do I think it’s going to get delayed more? I do.”
Bobby Baker, a former PSC commissioner and lawyer who was representing the Southern Alliance for Clean Energy, said he expects the PSC to order customers to pay “100 percent” of Georgia Power’s settlement costs.
“Based on past experience,” he added, there also could be more delays as Westinghouse takes on new roles at the project.
$2 million a day
Each day the project is delayed adds about $2 million to the Vogtle expansion’s cost, according to PSC estimates. Georgia Power’s customers are already paying for the project’s financing costs up front through monthly surcharges that add about $81 to the typical residential customer’s annual utility bill.
Under a PSC approved plan, the financing charge will eventually drop off and be replaced by charges for construction.
Another worry: If the contractor change leads to more delays, it could endanger the Vogtle plant owners’ chances of taking full advantage of up to $522 million in federal tax credits that they hope will offset some cost overruns. Vogtle’s Unit 4 reactor has to be running by the last day of 2020 — just six months from its projected completion date — to get the credits.
When Georgia Power officials testified at a PSC hearing last week, shortly after the settlement and contractor changes were announced, the first thing the regulator’s staff wanted to know is how Westinghouse’s new role will affect the Vogtle project’s schedule.
“I don’t see any change at this point,” said David McKinney, vice president of nuclear development with a unit of Southern Co., Georgia Power’s owner.
In sworn testimony before the PSC panel, McKinney said the project is expected to meet the 2019 and 2020 deadlines because most of the previous contractor’s employees are expected to keep working at the Vogtle site as Westinghouse or Fluor workers. Some of the project’s suppliers are also expanding production capacity to eliminate construction bottlenecks, he said.
There are “challenges” to meeting the deadlines, said McKinney, but “we think it’s achievable.”
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