Fate of Georgia nuclear reactor project lies with state commission
BRADENTON, Fla. – Georgia’s Public Service Commission holds the power to decide whether to complete the two nuclear reactors at Plant Vogtle.
The PSC began a series of pivotal hearings this week, with a slew of supporters and opponents testifying about their opinion concerning the fate of the project, for which $4.35 billion of municipal bonds have been issued.
The commission is expected to make a final decision by Feb. 27.
“The owners are unified in our recommendation to move forward with construction and believe we have identified the risks upfront and provided the information necessary to support the recommendation,” Georgia Power Co. President Paul Bowers told the commission Monday, the first of four hearing days.
Bowers spoke to the PSC on behalf of Georgia Power, the lead agency for the nuclear expansion project, and the public power owners - the Municipal Electric Authority of Georgia, Oglethorpe Power, and Dalton Utilities.
Combined, MEAG has issued $2.85 billion of taxable and tax exempt bonds to fund a portion of its 22.7% share of the cost, while Oglethorpe has issued $1.5 billion of debt for its 30% share. Dalton Utilities owns 1.6% of the project, which it is self-funding.
“We also understand that this is a complex and difficult decision and it is ultimately the commission's decision on whether or not we will move forward with this project,” Bowers said.
Although the public power owners are not governed by the PSC, their joint ownership agreement inextricably intertwines them to approvals that Georgia Power must obtain from the PSC for the construction of nuclear reactors 3 and 4 at Plant Vogtle.
One requirement hinges on Georgia Power obtaining the PSC’s approval of a revised construction schedule and new completion cost estimate, as well as approval of $542 million in expenses incurred between Jan. 1 and June 30. The new reactors are now expected to begin operations in November 2021 and November 2022.
In a construction monitoring report in September, Georgia Power as the majority owner with a 45.7% share told the PSC that the owners planned to complete the project.
The recommendation was based on a comprehensive schedule, cost-to-complete and cancellation assessment prompted by the bankruptcy on March 29 of Westinghouse, the prime contractor.
To shed billions of debt in bankruptcy, Westinghouse rejected the fixed-price contracts it agreed to for Georgia’s project, as well as a similar twin nuclear reactor project in South Carolina whose owners decided to terminate.
Westinghouse’s owner, Japan’s financially troubled Toshiba Corp., agreed to parental guarantees for the Georgia and South Carolina projects. Toshiba promised to make $3.68 billion in payments to Vogtle’s owners.
The first payment of $300 million was received Oct. 2, and $77.5 million was paid Nov. 1, Bowers told the PSC. “This is a positive indication that Toshiba intends to fulfill its commitments to our customers by paying the $3.686 billion parent guarantee,” he said.
The decision to continue the Vogtle project at a new cost estimate of about $25 billion set the stage for the long approval process before the Georgia Public Service Commission, giving intervenors a chance to weigh in.
Georgia Power is asking the PSC to approve as “reasonable” a price tag that is nearly double what was originally projected, according to the Southern Environmental Law Center, which intervened in this week’s proceedings on behalf of Georgia Interfaith Power and Light and the Partnership for Southern Equity.
“If Georgia Power wants to continue down this risky path, it should not be allowed to shift risk away from its shareholders and make customers bear the entire burden of this boondoggle,” said SELC Senior Attorney Kurt Ebersbach. “The prudent way forward is to cancel, or at least pause, this risky project - and to invest in energy saving programs and local solar power that will lower bills for Georgians.”
Ebersbach said approving the project under the current circumstances would force customers to pick up the tab for the increased costs. He argued that under state law and past orders of the commission, “Georgia Power must bear the risk” that it may be unable to recover its cost overruns if and when the units are completed.
MEAG Power, a wholesale supplier for 49 municipalities and one county, also intervened in the case but said in its filing that it may present testimony after hearing other parties.
JEA, the municipal electric authority for Jacksonville, Fla., intervened in the Georgia PSC proceeding because it entered a power purchase agreement to buy 206 megawatts of energy from MEAG’s share of the Vogtle project over 20 years.
“JEA has the responsibility to pay for this capacity and energy under a ‘take or pay’ contract, and under the terms of the agreement, JEA carries a proportionate share of ownership risk through MEAG,” the utility said in its petition. Intervening will protect JEA’s interest in the project, the petition said.
Several nuclear industry businesses and unions, supporting continued construction of the project, have also intervened in the PSC case.
Nearly 4,000 workers have been hired by Vogtle’s contractor, more than 2,500 of whom are residents of Georgia, according to North America’s Building Trades Union, which also filed a petition to intervene. Some 6,500 workers will be on site when employment levels peak in September 2018.
On Tuesday, investor-owned Georgia Power and its parent, Southern Co., filed unscheduled material event reports with the Securities and Exchange Commission notifying regulators about a recent amendment to the joint ownership agreement with the public power owners.
The amendment provides additional adverse conditions that will require at least 90% of the Vogtle owners to approve continuing with the project.
The events requiring a vote include the bankruptcy of Toshiba or a material breach by Toshiba of the guarantee settlement agreement, or the termination or rejection in bankruptcy of certain agreements, including the contract with Bechtel Corp. as the main construction contractor.
A vote of 90% of the owners will be required to continue the project if the Georgia PSC or Georgia Power determines that any of Georgia Power's costs relating to the construction will not be recovered in retail rates because such costs are deemed “unreasonable or imprudent,” or there is an increase in the construction budget of more than $1 billion, or there is an extension of the project’s completion schedule by more than a year.
A 90% vote of the owners also will be necessary to approve a change of the primary construction contractor, while a vote of 67% is required for material amendments to the services agreement or agreements with Southern Nuclear as manager of the project.
The two new nuclear reactors at Plant Vogtle were the first to be licensed and begin construction in the United States in more than three decades. Both reactors are based on a new AP 1000 design by Westinghouse, which has agreed to continue the design work.
MEAG Power has said it will need $1.4 billion in additional financing to complete its share of the reactors. About $985.3 million will be financed in the public capital markets, the agency said in a notice on the Municipal Securities Rulemaking Board's EMMA website.
In late September, the U.S. Department of Energy conditionally approved up to $3.7 billion in additional loan guarantees for the Vogtle owners.
Georgia Power will receive $1.67 billion, the electric cooperative Oglethorpe Power will get $1.6 billion, and MEAG will get $415 million when contractual obligations are finalized.
All three previously received a total of $8.26 billion in federal loan guarantees for the project.