In July of last year, you may recall, that construction of the proposed VC Summer AP-1000 nuclear reactors in South Carolina was abandoned after the bankruptcy of Westinghouse – the designer and builder of the reactors. Santee Cooper, a utility partner in the project, balked at a revised cost estimate that put the cost to complete the reactors at over $25 billion. With Santee Cooper out, SCG&E, the other utility partner, abandoned the project as well.
That left the proposed Vogtle 3 & 4 reactors in Georgia as the last game in town on nuclear construction. Without a lead contractor, Southern Company, Georgia Power’s parent company, has taken over the role of building the reactors. Yet, history has a tendency to repeat itself, and the Vogtle reactors are also way over budget and behind schedule. Southern Company just announced another round of cost overruns of over $2 billion dollars – bringing the current projected cost to over $27 billion. That projection is even more costly than the VC Summer reactors – which caused those utilities to fold their hands.
The owners of the Vogtle project include Georgia Power (45.7%), Oglethorpe Power (30%), MEAG (22.7%) and Dalton City (1.6%). There is a vote expected by the partners in late September on whether to continue with the Vogtle project. JEA is demanding that MEAG vote NOT to continue the project. JEA is clearly ready to litigate should MEAG vote to move forward with the project.
You got to know when to walk away, know when to run
On August 17, 2018, JEA sent a letter to MEAG with an independent economic analysis, that stated, in part, the following:
- The announced 2021 in-service date is “questionable” and the units are “economically obsolete.”
- The latest cost overruns add another $10 million to the PPA costs for JEA customers.
- If the project were to be canceled, the savings to JEA customers could be as much as $727 million (present value) according to JEA’s consultants – even after purchasing replacement power.
To its credit, JEA has done its homework on the project. The Vogtle partners would be well advised to do a similar analysis on the impact to their customers. After all, Vogtle’s utility partners shouldn’t be gambling their customers’ hard-earned dollars on a project that has already been deemed economically obsolete.
It’s OK to conclude that you’re holding a bad hand. The smart move is to fold ‘em, and walk away.