Consumers deserve protections from the rising costs of the Vogtle nuclear expansion

This blog was written by Sara Barczak, former Regional Advocacy Director with the Southern Alliance for Clean Energy.

Guest Blog | August 10, 2015 | Energy Policy, Nuclear

In just over a week the Georgia Public Service Commission (PSC) will have an opportunity to provide some protections to shield Georgia Power ratepayers from the increasing costs of building two additional nuclear reactors at Plant Vogtle along the Savannah River. On Tuesday, August 18, the Commissioners will vote on whether to approve $169 million in expenditures during the reporting period for the 12th semi-annual Vogtle Construction Monitoring (VCM) docket. Many billions of dollars have been spent on the project with less than 25% of construction complete after 3 1/2 years, and delays are now likely to extend even further beyond the current estimate of 39-months.

Since the alleged benefits to customers have nearly completely eroded, according to experts that testified on behalf of the PSC staff, SACE provided several recommendations in our final brief filed Friday that, if implemented, could provide some protections to Georgia Power customers and provide more information on proposed environmental mitigation measures impacting the Savannah River. Due to the controversial, anti-consumer state legislation passed in 2009, Georgia’s Nuclear Energy Financing Act (SB31), more than $1.2 billion has been collected in advance from residential and small business customers to pay for the financing costs and taxes via the Nuclear Construction Cost Recovery (NCCR) tariff. Because of the 39-month delay, the project’s costs have soared. Georgia Power’s portion as majority owner (45.7%) has increased 25% to more than $7.5 billion from the certified cost of just over $6.1 billion. This cost increase does not include over $1 billion in outstanding litigation between the project owners and the contractors. More delays will increase the costs further and given testimony of at least an additional 3-month delay along with the reality that significant engineering and construction challenges remain, customers will clearly pay even more.

Because of the 39-month delay, the average Georgia Power residential ratepayer who uses only 1,000 kilowatt hours per month will see a $319.00 or a $6.26 per month increase in their electric bill beginning in April 2016 and continuing to June 2020. The $319.00 increase in rates will be split between $132.00 in higher fuel costs and $187.00 in higher NCCR costs. For the average $6.26 per month increase that will mean an increase of $3.67 for the NCCR tariff charge and $2.59 for increased fuel costs. According to the Georgia PSC’s Georgia Power Bill Calculator a residential ratepayer using 1,000 kilowatt hours currently pays an average of $6.45 per month and this amount will increase an additional $3.67, or a 57% increase.

The dramatic erosion of any claimed benefits reduces the financial viability of the Vogtle expansion and completely undermines the Georgia Power’s arguments regarding the long-term benefits to ratepayers. This situation also makes it more likely that Unit 4 is not needed and serious consideration should be given to analyzing whether construction of Unit 4 should proceed or be delayed. During the June 23 hearing, expert witness for the PSC staff confirmed that the total revenue requirement that could be charged to Georgia Power ratepayers is estimated at a whopping $30 billion, meaning that the full project costs (not including decommissioning, etc.) is a staggering $65 billion (be very wary customers of co-owners Oglethorpe Power, MEAG and Dalton Utilities). Even investors are being warned to run away from Southern Company given the serious setbacks at Vogtle and Kemper, a gasification coal plant under construction in Mississippi.

Our recommendations include:

  • In order to protect ratepayers and help minimize the financial impact of cost overruns the Commission should reduce the Company’s allowed return on equity from the current 10.95% whenever the Company begins accruing any return on equity expenses on its total capital costs. (See AP reporter Ray Henry’s coverage)
  • The Company should not be allowed to over collect financing costs through the Nuclear Construction Cost Recovery tariff above the current certified cost of the Project.
  • The Advocacy Staff and Company should be required to provide a 40-year life expectancy economic evaluation in addition to the current 60-year evaluation.
  • In addition to providing the cost associated with environmental mitigation measures the Company should be directed to provide a description of what environmental mitigation measures are included, the estimated schedule for implementation and/or compliance and the total estimated costs of such requirements.
  • The Staff should be directed to determine a reasonable projected cost at which it is clearly uneconomical for the Vogtle Project to continue, and report it in all subsequent Project reviews.

Let’s hope that the Commission starts protecting today’s customers instead of continuing to kick the regulatory can down the road. There’s just too much at stake and the picture isn’t getting any brighter.

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