Settlement Rewards Utility, Contractors for Years of Mistakes
Contact: Jennifer Rennicks, SACE, 865.235.1448
Atlanta, Ga. (December 20, 2016) ///PRESS RELEASE/// Today the Georgia Public Service Commissioners unanimously approved a controversial settlement agreement that fails to provide substantial protections to Georgia Power customers for billions of dollars in increased costs associated with the likely 45-month delayed nuclear reactors under construction at Plant Vogtle in Burke County along the Savannah River.
Below are statements from the Southern Alliance for Clean Energy’s High Risk Energy Choices Program Director Sara Barczak and Robert “Bobby” Baker, an attorney representing the Southern Alliance for Clean Energy (SACE) and a former member of the Georgia Public Service Commission (PSC) for 18 years. SACE was an intervening party in the Vogtle Supplemental Information Review process, which the clean energy organization criticized as a limited, expedited and non-transparent proceeding.
From Sara Barczak:
“Approval of the Vogtle settlement creates the largest rate impact for Georgia Power customers based on the least public review in PSC history. With today’s decision the Georgia Public Service Commissioners have wrongly rewarded Georgia Power, its partners and shareholders and lead Contractor Westinghouse for years of mistakes that will cost utility customers billions of additional dollars. The still under-construction nuclear reactors at Plant Vogtle are now a confirmed boondoggle and it’s likely to get even worse as more schedule delays are highly likely, which will add even more to the price tag.”
From Robert “Bobby” Baker:
“The Commission’s decision to approve the Vogtle settlement with limited Staff review and a single hearing sets a dangerous precedent that drastically undermines the chances that a full prudency review for both units will ever be done. The Vogtle settlement review process for billions of dollars in costs was unorthodox and not transparent because no reports or audits were produced by the Commission Staff and the witness panel had a limited understanding of the reports produced by Georgia Power.”
As outlined in SACE’s final brief, what started as a request from Georgia Power Company earlier this year to review the $350 million in litigation settlement costs with lead Contractor Westinghouse was quickly transformed into a de facto expedited prudency review that increased the current certified cost agreed to in 2009 for the Vogtle Project from $6.113 billion to approximately $8 billion. Only a one-day public hearing was held with limited testimony from a combined panel consisting of just two Commission witnesses and two Company witnesses, who were not fully familiar with the expert witness testimony filed in April by the Company. This limited proceeding paled in comparison to the prudency review for the original Vogtle Units 1 and 2, which took weeks of public hearings, contained extensive testimony from senior Georgia Power Company officials, consultants and accounting experts and created an enormous public record on which the Commission based its decision.
Some concerns identified in SACE’s final brief as a result of the Commission’s approval today of the settlement include:
- The claimed $325 million in cost savings to customers over the next four years does not represent complete cost savings—the real reduction is approximately $115 million or $29 million per year. This represents a creative manipulation and reinterpretation of a reduction to the return on equity level used on the Project’s financing and a short-term deferral of financing costs that eventually will be paid by ratepayers.
- According to the panel testimony, of the $325 million in projected savings to customers over the next four years “approximately $185 million will never be paid by any customers” but approximately $70 million of this amount is based on taxes the Company will never pay because of the reduction to shareholder earnings. The real reduction for customers is therefore approximately $115 million, but even that amount is not agreed upon by the Commission Staff.
- In comparison, even with the approved settlement, customers will pay $385 million in financing costs in 2017 alone through the Nuclear Construction Cost Recovery tariff.
- A total of $1.552 billion in additional Project costs caused by the Company acknowledged 39-month construction delay was permanently waived or conceded by the Commission and will never be subject to any possible prudency review in the future.
- By approving the settlement, the Commission waived any future review of $700 million in additional financing costs incurred due to the Company acknowledged 39-month construction delay, the $350 million in Georgia Power’s share of the litigation settlement costs with its Contractor and the $502 million in additional fuel costs incurred by the 39-month construction delay.
- Vogtle’s forecasted capital project cost will increase by $1.262 billion to $5.680 billion and that includes $2.380 billion in yet-to-be-spent capital costs that have now been deemed “prudent and reasonable” in advance of those costs being spent.
- This is a bad deal for ratepayers because the burden of proof has shifted from the Company to justify the higher cost for the two new nuclear units onto either the Commission Staff or some third-party that might challenge the prudency of the higher costs in the future.
- A de facto extension of the construction schedule from the Company acknowledged 39-month delay to 45 months with the likelihood of further delays, with no guarantee of significant penalties for the Company if additional delays occur.
- This despite testimony from the PSC Staff and expert consultants in the 15th semi-annual Vogtle Construction Monitoring (VCM) proceeding that was extremely critical of the lack of progress being made on the project, including extreme skepticism that even the 45-month delayed commercial operation dates may met. Further delays will cause additional, significant cost increases.
Originally Vogtle reactor Unit 3 was scheduled to come online April 1, 2016 and Unit 4 one year later. Georgia Power’s 15th VCM report had schedule estimates of June 2019 and June 2020 respectively, a 39-month delay, with their estimated share of the project cost as $7.862 billion. However, the now-approved settlement refers to the whole Project commercial operation as December 31, 2020, which represents a 45-month delay. The current certified cost for Georgia Power’s share of the project is approximately $6.113 billion, which represented an original $4.418 billion for capital costs. 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 financing costs represent the largest share of the project’s cost overruns. The original approximately $14.1 billion Vogtle project is now estimated to cost well over $20 billion. Georgia Power is 45.7% owner in the project (remaining utility partners are Oglethorpe Power (30%), MEAG (22.7%) and the City of Dalton (1.6%)).
Find more information about Plant Vogtle’s supplemental review proceeding here.
Founded in 1985, the Southern Alliance for Clean Energy promotes responsible energy choices that work to address the impacts of Global Climate Change and ensure clean, safe, and healthy communities throughout the Southeast. Learn more at www.cleanenergy.org.