Fate of Southern Company and SCANA New Nuclear Power Projects Unknown as Lead Contractor Westinghouse Files for Bankruptcy
Contact: Sarah Gilliam, SACE, 865.235.1448
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Atlanta, Ga. (March 29, 2017) ///PRESS RELEASE/// At today’s news of Westinghouse Electric Corp. filing for bankruptcy due to massive cost overruns at Southern Company’s Plant Vogtle (subsidiary Georgia Power) in Georgia and SCANA’s (subsidiary SCE&G) V.C. Summer plant in South Carolina, regional clean energy organization Southern Alliance for Clean Energy (SACE) demanded that state regulators finally put the interests of utility customers first as the impacts of this development unfold. Westinghouse, subsidiary of Japanese tech mogul Toshiba, is the designer and builder of the four under construction AP1000 reactors, a design yet to be operational anywhere in the world. The projects are nearly four years delayed and billions of dollars over budget.
Today’s bankruptcy filing follows Toshiba’s announcement last month that Westinghouse would be exiting the nuclear construction business, which affects proposed AP1000 projects in the southeastern U.S. including two at FPL’s Turkey Point facility near Miami, Florida. SACE is calling for remaining AP1000 projects to be cancelled.
“The Southern Alliance for Clean Energy has been closely involved at the state and federal levels for several AP1000 reactor projects in the southeastern U.S. and from the absolute beginning with the nuclear boondoggle that is now Southern Company’s Plant Vogtle. Starting well over a decade ago, we testified with expert witnesses extensively before the Georgia Public Service Commission – warning them and Georgia Power about the high risks of investing in expensive new nuclear power and encouraging investment instead in clean, affordable technologies including energy efficiency. Time and time again, our legitimate concerns and consumer-protecting recommendations were ignored,” said Dr. Stephen A. Smith, director of the Southern Alliance for Clean Energy. “Now there is a lot of wringing of hands and ‘surprise’ by those with the power to protect utility customers claiming that ‘no one could have predicted this.’ The reality is, they shouldn’t have ignored the predictions they were presented over and over again and they should not ignore the predictions now. It is time to correct this regulatory failure, and with new eyes review the viability of these projects. Protect customers’ interests not just the profits of the utilities’ shareholders. There are no easy answers here, but there are answers that protect the majority of customers and stop the financial hemorrhaging.”
As examples, SACE pointed to two recent decisions by the Georgia Public Service Commission (PSC). Most recently was the unanimous approval last month in the 15th semiannual Vogtle Construction Monitoring (VCM) review of an additional $141 million in expenditures for the Vogtle expansion as the Commission has approved all of the Georgia Power’s previous applications for expenditures, now totaling $3.68 billion, despite years of testimony identifying serious, persistent problems. Though construction has been underway since 2009, the project was only 36 percent complete as of September 2016. V.C. Summer is approximately 31 percent complete.
The most notable example was the Commission’s unanimous approval in late December of a controversial settlement agreement that failed to provide substantial protections to Georgia Power customers for billions of dollars in increased costs. The forecasted capital project cost increased by $1.262 billion: from $4.113 billion to $5.680 billion. This represented $2 billion in yet-to-be-spent capital costs that, because of the December decision, were deemed “prudent and reasonable” in advance of those costs even being spent.
Additionally, financing costs have increased substantially: from $1.695 billion to $2.422 billion. With the increased costs of the project, Georgia Power’s share of the project costs is well over $8 billion, a significant increase from the 2009 certified cost of $6.113 billion. Additionally, this financing cost increase only reflects the 39-month delay, despite the settlement’s mention of project completion in December 2020, a 45-month delay. Additional delays result in increased project costs, over $2 million per day just for Georgia Power’s share of the project, as outlined in a data request SACE received in the 15th VCM.
SACE’s final brief in the 15th VCM, beginning on page 14, lists excerpts of PSC Advisory Staff testimony extending back to the 6th VCM in August 2012 that highlighted the ongoing, systemic problems with the Vogtle project, including PSC Staff’s accurate prediction of schedule delays. This excerpt for instance, highlights Staff’s opinion that achieving the 45-month commercial operation dates (CODs) is unlikely:
“The Contractor will have to complete construction at much higher monthly rates than were achieved in 2016 in order to meet current CODs. For the Project to meet the current forecast CODs, the amount of construction work required to be completed each month increases in each subsequent month through September 2017 to a rate over three times the amount that has ever been achieved to date on this Project.”
“Given the lack of productivity improvement and the many unknowns that lie ahead for the Vogtle and Summer projects – full project costs, accurate completion schedules and what entity, if any, is actually going to come in and continue building the reactors makes it pretty clear that stopping the forced draining of customers’ wallets has to occur,” said Sara Barczak, SACE’s high risk energy choices program director. “And for any utilities that somehow still have new nuclear power aspirations, the public and their regulators need to demand cancellation of those proposals. Not another dollar should be spent. A very costly door has closed on the so-called nuclear renaissance.”
Additional Information: All four AP1000 reactor projects were to be commercially operational by April 1, 2017. Originally Vogtle reactor Unit 3 and V.C. Summer Unit 2 were scheduled to come online April 1, 2016 and Vogtle Unit 4 and V.C. Summer Unit 3 one year later. Revised schedules recently provided to the utilities from Westinghouse estimated Vogtle Unit 3 as December 2019 and September 2020 for Unit 4. V.C. Summer Unit 2 was revised to April 2020 and Unit 3 to December 2020.
However, the Georgia PSC-approved settlement from December 2016 refers to the whole Vogtle Project commercial operation as December 31, 2020, which represents a 45-month delay. Georgia Power customers are already paying more than 9.7 percent on their monthly bills in Nuclear Construction Cost Recovery (NCCR) costs and over $1.8 billion in pre-collected financing costs have been charged to ratepayers due to anti-consumer state legislation passed in 2009 to incentivize building new reactors. The original approximately $14.1 billion Vogtle project is now estimated to cost well over $20 billion. Georgia Power is 45.7 percent owner in the project (remaining utility partners are Oglethorpe Power (30 percent), MEAG (22.7 percent) and the City of Dalton (1.6 percent)).
Find more information about Plant Vogtle’s expansion go here. Southern Company’s fourth-quarter 2016 earnings report on February 22, 2017 mentioned the Toshiba situation; a more extensive overview of the Toshiba financial crisis was provided by SCANA in their earnings report on February 16, 2017 and SCANA will host a New Nuclear Project Analyst Call at 3 pm ET today.
V.C. Summer’s owners are SCANA’s SCE&G at 55 percent and Santee Cooper at 45 percent and the project has experienced a 21 percent cost increase. According to the South Carolina Office of Regulatory Staff, “SCE&G’s residential customers, served on Rate 8, using 1,000 kWh are currently paying an average of $147.53 per month. Of that amount, $27.03 or 18.32 percent of the bill is attributable to the Base Load Review Act.” An emergency request for hearing was filed with the South Carolina PSC on March 27, 2017 by SCE&G customer Tom Clements and a docket has been created. |
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