In October, the staff and Georgia Power cut a deal, which the PSC is supposed to consider for approval soon.
Emails indicate the settlement ladles far more costs on customers than what the staff sought. While Georgia Power also gave up ground from its early position, it moved far less in terms of actual dollars. And the final deal – one that “pleased” the state’s Big Brother of Light and Air Conditioning — was heavily influenced by elected commissioners.
What consumers are getting is a shotgun marriage.
Under the proposal, all Georgia Power’s bloated costs will be covered by its customers. (Heck, it got an OK to INCREASE project costs by another $240 million.)
It won’t suffer the indignity of having its top executives grilled under oath about missteps that sent the project haywire and delayed it by more than three years.
Profits of its parent, Southern Company, will be nicked in the gentlest way so that it won’t look like it’s being scolded. Seriously. Far steeper profit cuts could kick in, but only if the project is delayed well beyond the latest schedule.
A Georgia Power spokesman emailed me a statement that read in part: “We are pleased with the settlement agreement as it fairly balances the company’s contribution with customer benefits ….”
Contributions? Benefits? That sure sounds positive.
The candy cane, you’ll be told, is that customers will pay something like $325 million less in the next few years as a result of the deal.
That’s an exaggeration. Much of that cost will still be paid by customers, just later, and that delay had been agreed to years ago. The hit for Southern Company shareholders would be $115 million spread over four years. (That’s a flea for a company that generated $2.4 billion in profits last year.)
Georgia Power customers ultimately will pay about $185 million less than they would have if 100 percent of the costs overruns had been dumped on them.
But in this shell game, focus on the ball, not the shells.
“Every customer is going to be paying more money if this stipulation is approved,” said Sara Barczak of the Southern Alliance for Clean Energy, a group that has fought the Vogtle expansion. The company, she said, is “still earning profit on mistakes.”
Nuclear power has benefits. It doesn’t emit carbon that’s blamed for worsening climate change. Operating costs are relatively stable. The plants run a long time. But it’s got downsides, too, including steep upfront costs.
On Tuesday, the PSC holds its only scheduled hearing about whether to sign off on the billions of dollars in overall Vogtle expansion costs. The elected commissioners — Stan Wise, Doug Everett, Chuck Eaton, Bubba McDonald and Tim Echols — are expected to vote on the issue Dec. 20, when lots of Georgians are more focused on wrapping presents than the future of their power bills.
PSC consultants and staff have documented widespread quality control issues, lapses in oversight, problems with contractors and vendors, design delays and — “counter to any prudent project management” — a years-long delay in producing a thorough project schedule.
Georgia Power said every penny was prudently spent and consumers should pick up the tab.
That’s like a roofer who tells you he’ll install new shingles on your house for $6,000 and assures you he can handle it. Then, with the job taking far longer than expected, he demands that you agree to pay $8,000 because, well, the shingles he picked out didn’t meet standards, the contractors he hired didn’t work out so well, his idea for pre-arranging shingles off-site was a mistake and he was slow in getting the work on track.
Earlier this year, the PSC directed its staff to review whether the nuclear project’s costs were reasonable and prudent and should be paid by customers. It also pushed staff to negotiate a potential settlement for the PSC to consider.
Critics warned that the unusual quickie process on such a mammoth project would put an overworked staff – and Georgia consumers – at a disadvantage.
In fact, emails show the state’s staff engaged in negotiations with Georgia Power before completing its review of project costs.
Georgia Power and Southern, which often boasts about its deep regard for customers as well as shareholders, started with an offer to swallow $29 million as long as customers were forced to pick up something like 99 percent of what PSC staff claimed were $2.5 billion in overruns and related costs.
The staff countered for the company to pay $425 million.
“We are going to the low end of our current disallowance range and then cutting it in half,” wrote Tom Bond, the PSC’s director of utilities and primary negotiator. (He wrote that staff “has tentatively identified disallowances in the range of $800 million to $1 billion.”)
Still too much, Georgia Power said.
Kevin Greene, an attorney representing the company, emailed Bond that they would only agree to a deal “if we and the investment community view the amount of shareholder contribution to be fair and not punitive.”
“We are certainly not trying to be punitive to the Company,” Bond replied. “That said, we also do not want to be punitive to ratepayers.”
A deadline set by the PSC loomed. In an email, PSC commissioner Stan Wise pressed his colleagues to urge staff to make a deal along parameters he laid out.
Focus on helping current ratepayers, more than getting the company to pick up costs. Give the company leeway to increase costs 5 percent beyond current overruns. Don’t squeeze Georgia Power’s profits too much so “we do not risk the perception of a punitive decision, which could harm future nuclear deployment or lead to a higher borrowing/equity costs for consumers due to a credit hit from a write-down.”
I talked to Wise about his thinking. The deal offers “a significant give-up by the company,” he said.
Reaching a settlement, he assured me, is in the best interest of ratepayers and is good for the health of nuclear power.
As for Georgia Power’s actions on the delayed project, he said, “I don’t know what they could have or should have done differently.”
When the Vogtle expansion was first approved, the PSC (including Wise) chose not adopt some protections against overruns that were suggested by staff and consultants.
“I wonder,” Wise mused to me, “if some of that should have been more seriously considered at the time.”
“Lessons learned there,” he said.