Pro & Con: Can Georgia Power contain costs of Plant Vogtle reactors?

YES: Standardized plans and modular components keep costs in line.

By Buzz Miller

While it has been a generation since U.S. utilities last broke ground on new nuclear power plants, it is important to note the rest of the world never stopped building American-designed nuclear power plants — and that experience is good news for our customers.

The old way of building — slowly, onsite, in sequence — is gone forever.

The new process features multiple activities under way in parallel.

Structures that used to be created onsite are now built offsite in factories as modular pieces and shipped to the site for assembly.

The lessons learned at home and abroad have paved the way for a new generation of U.S. nuclear power plants that feature advanced designs, refined construction techniques, early engagement by state public service commissions, and a licensing process geared to a mature technology.

Georgia remains among the fastest-growing states in the nation, with as many as 4 million new residents expected by 2030.

This rapid growth is expected to continue and the U.S. Department of Energy projects the nation will need 28 percent more electricity by 2035.

To meet future electricity needs, Georgia Power Co. and the Georgia Public Service Commission evaluate and plan for how those needs will be met over a 20-year, forward-looking period.

In 2008, Georgia Power proposed building two new units at Plant Vogtle.

The PSC evaluated and approved the need by granting approval in 2009 to build Vogtle 3 and 4 as the best-cost alternative to other options, including energy efficiency, renewable sources and coal and natural gas.

Today, regulators are involved from the beginning in a comprehensive state energy planning process that provides for thorough review and approval before construction begins.

Similarly, the Nuclear Regulatory Commission established a new, more efficient process for licensing nuclear plants which provides for certification of standardized designs, early site approval and combined construction and operating licenses.

In other words, today’s process requires approval of an operating license before any safety-related construction, eliminating the risk of costly and time-consuming modifications to the plant.

Consumers expect the lights to come on when they flip the switch.

They want reliable, affordable electricity — and nuclear power is an essential part of a strategy for delivering on those expectations.

In addition to coal and natural gas, uranium is readily available.

These fuels, along with renewables and energy efficiency initiatives, provide the diversity that buffers customers from price spikes in any one fuel or resource.

Plant Vogtle will result in an estimated average annual increase in customer rates of 1.2 percent between 2011 and 2015.

Paying for financing costs during construction will save customers $300 million during the construction period alone, and reduces the plant’s in-service cost by $2 billion.

The work force at Plant Vogtle 3 and 4 has grown to 1,300.

Plant components, such as the containment vessel, are arriving on site now and the construction work force will increase to 3,500.

Ultimately, the two new units will employ 800 permanent employees.

The new Vogtle units are scheduled to begin commercial operation in 2016 and 2017.

We are well on our way.

Our goal is to set the standard for excellence and execution by which all other new nuclear plants will be measured.

Buzz Miller is executive vice president of nuclear development at Georgia Power.

NO: History shows costs spiral and fuel savings can’t recoup capital outlays.

By Steven C. Prenovitz

Nuclear construction costs were not, and are not, controllable. This is why there have not been any new reactors built in the U.S. for more than 30 years.

In a 2008 interview with Georgia Tend, Georgia Power Co. CEO Mike Garrett said that “the [new] plants will be — should be — less expensive than the ones we have built in the past.” But by 2009, the new plants were projected to cost more than $14 billion, $5 billion more than Vogtle 1 and 2 and the most expensive built in the U.S.

If the problems of the past have been resolved, the new reactors should cost much less than the old, not 60 percent more. Why can’t the industry successfully control costs?

The original promise of nuclear power was to provide safe, reliable energy — at low cost. From the 1930s through the mid-1960s, the utility industry consistently lowered fixed costs, and thus lowered customer rates. This did not happen with nuclear power.

Plant Vogtle 1 and 2 has a painful history. I was there in the 1980s, and testified before the Public Service Commission and questioned Georgia Power and PSC witnesses on Vogtle’s epic cost overruns and delays.

From the 1970s to 1989 the cost of Vogtle escalated from $660 million to $8.9 billion, a 1,200 percent cost overrun. On a per kilowatt basis, Vogtle’s cost increased from $284 to $3,836 per kilowatt.

The overall industry experience with nuclear construction was so dismal that Forbes, the respected business magazine, declared in 1985 that: “The failure of the nuclear power program ranks as the largest managerial disaster in business history. ... Only the biased or the blind can now think the money has been well spent.”

Georgia Power blamed Vogtle’s $8 billion cost overrun on inflation and excessive regulation. In truth, a flawed strategy and imprudent management was the primary cause.

In 1972, a feasibility study prepared by Georgia Power vice president H.H. Strozier cautioned that building nuclear reactors required more lead time, and offered little control over costs and schedules. He concluded that the projected savings from cheaper nuclear fuel could not overcome high capital and operating costs and called nuclear’s promised benefits “questionable economics.”

Today, Vogtle’s construction costs escalated to an astronomical $6,300 per kilowatt, a 2,100 percent increase over its original budget. Yet, the company continues to promote the myth that nuclear fuel savings will offset capital costs.

Georgia Power’s primary strategy is to shift all present and future project costs and risks to the ratepayer, through intense political, regulatory and PR efforts. Being a monopoly, there is little incentive to control costs, present or future. Sadly, the regulatory response has been that of public apathy and company appeasement.

In 2009, Georgia Power persuaded the Legislature and PSC to allow charging customers for reactors under construction, equivalent to a 9 percent rate increase. In 2010, the company participated in five separate cases before the PSC, potentially costing ratepayers billions of dollars. The two new Vogtle reactors will make it worse.

Despite the hype, construction costs are not stable. Even the celebrated French nuclear program is faltering. A recent $1.3 billion (25 percent) cost overrun on a project in Flamanville, France, has delayed construction of reactors there. And Georgia Power has just experienced a bond rating downgrade, which will impact its financing costs.

The financial risks and harmful impact of nuclear’s revival on Georgia’s fragile economy is intolerable. Forty years later, Strozier’s recommendation on building new reactors remains compelling: “Until we can get some sense in the nuclear program, we should stop.”

Steven C. Prenovitz, a Norcross consultant, specializes in financial and strategic implementation.

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