As Vogtle’s costs rise, changes near for reviewing project’s run-away expenses

By: - August 17, 2021 1:00 am

Georgia Power will continue to report its progress at Plant Vogtle to state regulators. But under a new proposal, the state would not have to determine whether the expenses are reasonable until the project is finished. John McCosh/Georgia Recorder

This story was updated at 10 a.m. Tuesday.

State regulators will consider signing off Tuesday on a plan marking a significant shift in how cost overruns are handled for Georgia Power’s Plant Vogtle expansion, which is already billions of dollars over budget and years behind schedule. 

An agreement negotiated by the state Public Service Commission staff and Georgia Power proposes that regulators will continue reviewing semi-annual progress reports on the nuclear project south of Augusta moving forward. However, the commission will now wait until the final two reactors are up and running before deciding if Georgia Power’s expenses are reasonable.

The new agreement, known officially as a stipulation order, is in response to Vogtle’s capital costs surpassing a $7.3 billion cap put in place in 2017 as concerns persisted about the long-term viability of the project and its burden on ratepayers. At the time, the five-member elected commission agreed to let construction move ahead under a revised budget to go along with the periodic review of Georgia Power’s construction and expense reports for the additional two reactors.

In late July, Georgia Power reported that its share of the capital project cost had jumped to $9.2 billion – as executives conceded missing deadlines of at least several more months. The new completion date is set for early 2023.

Georgia Power and commission staff began working on the agreement to provide staff and commissioners more clarity on how the process will play out.

Commissioners backed the new plan Tuesday morning and approved $670 million in expenses at Plant Vogtle incurred during the final half of 2020. 

Already, utility customers have been paying financing costs for the project, leaving state regulators to eventually determine how much construction costs to add to ratepayers’ utility bills and how much shareholders should absorb.

“This stipulation in no way limits or prohibits Georgia Power from bringing expenditures above $7.3 billion to the commission for verification approval or for inclusion in (customer) rate base at a later time,” the agreement said.

The significance of the agreement is that Georgia Power will likely avoid a replay of 2017 and the circumstances that led to several years of commissioners approving costs each time a report is filed, said Kurt Ebersbach, senior attorney for the Southern Environmental Law Center.

Overall costs have doubled from initial projects of $14 billion to about $27 billion. Each additional month of delays adds $90 million to the construction bottom line. 

“Had they done that, that would have implications for ratepayers because when the commission approves a new budget, it shifts the presumption against ratepayers,” Ebersbach said. “It doesn’t make it automatic that the company recovers those new cost overruns, but it starts to stack the deck against the ratepayers.

“If they want to make ratepayers pay for these incredible cost overruns, they should be prepared to meet their burden of proof as to why that should be the case,” Ebersbach said. 

This summer, Georgia Power’s parent company, the Southern Company, reported to shareholders that the companies will take on more of Vogtle’s costs, including $460 million out of a $1 billion increase, and that there’s more uncertainty about how much regulators will allow Vogtle’s owners to recover.

Southern estimates that it could miss out on more than $600 million because of PSC penalties for construction delays.

Initially scheduled to be ready in 2016 and 2017, Georgia Power now targets the second quarter of 2022 for the third unit’s completion, followed by the fourth reactor in early 2023.

Georgia Power attorney Steve Hewitson said the new agreement sets guidelines for how the company will continue to file reports but won’t request verification on spending until the reactors are generating energy. 

The utility has already said it won’t seek to recoup the first $700 million in expenditures above the $7.3 billion in capital costs. 

Southern and Georgia Power have faced strong criticism from public service staff, project analysts, and consumer and environmental watchdog organizations over Vogtle’s mismanagement.

The findings have not been released from a federal Nuclear Regulatory Commission investigation into Southern’s response to problems with the electrical cable system used as a safety mechanism at Vogtle.

Vogtle also faced significant setbacks when contractor Westinghouse Electric went bankrupt in 2017 and, more recently, due to worker shortages and other challenges during the pandemic. 

Georgia Power officials and other backers say customers will find the long road to expanded nuclear power capacity worth the wait once the new units provide an energy source for the next 60 to 80 years.

Among those also supporting the new agreement is the Southern Alliance for Clean Energy.

“SACE has not contributed to that stipulation but, particularly because the company has undoubtedly exceeded the $7.3 billion already in 2021, SACE supports the premise that this needs to be resolved,” solar program director Bryan Jacob said.

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Stanley Dunlap
Stanley Dunlap

Stanley Dunlap has covered government and politics for news outlets in Georgia and Tennessee for the past decade. At The (Macon) Telegraph he told readers about Macon-Bibb County’s challenges implementing its recent consolidation, with a focus on ways the state Legislature determines the fate of local communities. He used open records requests to break a story of a $400 million pension sweetheart deal a county manager steered to a friendly consultant. The Georgia Associated Press Managing Editors named Stanley a finalist for best deadline reporting for his story on the death of Gregg Allman and best beat reporting for explanatory articles on the 2018 Macon-Bibb County budget deliberations. The Tennessee Press Association honored him for his reporting on the disappearance of Holly Bobo, which became a sensational murder case that generated national headlines.

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