Plant Vogtle decision nears as calls to cancel grow

Critics: Time to cut losses on 'uneconomic' new reactors

Mary Landers
Plant Vogtle’s units 3 and 4 employ nearly 6,000 construction workers. Georgia Public Service Commissioners on Thursday will decide if Georgia Power and the plant’s co-owners will be able to finish the controversial and long-delayed project. (Special/Georgia Power)

Experts including a former member of the Nuclear Regulatory Commission and a former U.S. Justice Department antitrust attorney gave reason after reason this week why the Plant Vogtle expansion should not continue if ratepayers have to pay for all of it.

The Public Service Commission's own staff analysts agree.

But throughout three days of testimony, the five-member regulatory board repeatedly signaled its support for the budget-busting, delay-plagued project.

Among them was PSC vice chairman Tim Echols, who has made his pro-nuclear stance clear for months, including in an opinion piece he wrote for the Wall Street Journal in August. At the Vogtle hearing Tuesday, he allowed that public opinion seemed opposed to the project.

"I probably received about 120 emails that I've responded to with constituents asking us to cancel the plant, maybe six that have said move forward on the plant," he said.

But his focus in questioning one of the few pro-Vogtle witnesses, Mary G. Korsnick, CEO and president of the Nuclear Energy Institute, was how to sway the anti-Vogtle contingent.

"So what do I say to my constituents regarding the patriotic - the patriotic duty that we have?" Echols asked. "Is there a patriotic duty that you - you live in Washington - that you see Georgia as having an opportunity to keep alive an industry that is struggling, for whatever reason, whether it's Fukushima or low natural gas prices or Westinghouse bankruptcy? What do I say to my constituents in terms of our patriotic opportunity?"

Uneconomic

Patriotism aside, the Public Service Commission staff calls the new reactors "uneconomic" to complete. Staff made clear that finishing Vogtle as Georgia Power has recommended, with ratepayers shouldering the financial risks, will increase the company's profit to $5.2 billion, while ratepayers pay an additional $14 billion. And for the first time in 17 semi-annual monitoring reports they recommend against passing costs on to ratepayers for work already completed, to the tune of $489 million.

That's far from the assessment Georgia Power CEO Paul Bowers gave in the first round of hearings last month.

"Based on all the factors considered, completing both units represents the best economic choice for customers and preserves the benefits of a carbon-free baseload generation for the state of Georgia," he said.

But the total project costs have doubled and timeline stretched by five years to 2022 since the expansion was first approved. Meanwhile, the PSC's decision-making schedule shortened, with the panel agreeing to provide a decision on Vogtle's future on Thursday instead of the original February date to preserve $150 million in tax advantages if the federal tax package is passed and the project is canceled.

Westinghouse, the main contractor on the site, declared bankruptcy in the spring and Georgia Power, which owns 45.7 percent of the Vogtle project, has taken over its role. The total cost of the two new reactors is estimated at $25 billion. Adding to concerns about Vogtle is the situation at a defunct sister project in South Carolina also managed by Westinghouse, where utilities have abandoned the work and ratepayers are seeking compensation for what they've already paid.

More negative news came Tuesday with the Jacksonville Electric Authority announcing it supports canceling Vogtle. The utility has a contract to buy electricity from Vogtle 3 and 4 through one of the plant's co-owners, the Municipal Electric Authority of Georgia. The Florida utility called for cancellation after credit-rating agency Moody's cited the utility's financial obligations of more than $1.7 billion to the struggling nuclear power project as a reason for lowering its financial outlook from "stable" to "negative," the Florida Times-Union reported.

Georgia Power's 2.5 million ratepayers have been paying in advance for the reactors here. A typical homeowner pays about $100 a year in "nuclear cost recovery fees." Schools and municipalities pay heavily, too. But an analysis by the Southern Alliance for Clean Energy showed industrial customers are protected from the nuclear fee.

"The average residential customer, using 1,081 kWh per month, has paid $484 toward the cost of Plant Vogtle through September 2017," SACE's John D. Wilson wrote in a blog at www.cleanenergy.org. "Of that total, residential customers have paid about $153 per household to provide industrial customers with $319 million in rate savings."

Georgia Power and some commissioners celebrated on Thursday when Toshiba, the parent company of Westinghouse, made good on its final parental guarantee payment to Georgia Power and the other Vogtle co-owners. But the commission staff had already included in its calculations the $1.47 billion share that goes to Georgia Power and still found the project wanting. Getting the guarantee just avoids making it even worse, they noted.

Toshiba made the payment after its subsidiary Westinghouse went bankrupt, voiding its contract to to oversee construction. In November's hearings, Georgia Power representatives repeatedly blamed Westinghouse for previous delays and cost overruns. Now Southern Nuclear, the Southern Company subsidiary which operates the existing two units at Plant Vogtle, is managing the project with San Francisco-based engineering and construction giant Bechtel as the construction contractor. The company says the project course has been corrected.

"We are aligned," said Southern Nuclear Vice President Mark David Rauckhorst. "Bechtel's alignment and goals are the same as ours."

On Friday, though, Bloomberg reported another potential setback: The federal tax bill making its way through Congress doesn't include an extension past 2021 of the nuclear power credit that Southern Co. has been expecting for Vogtle. Georgia Power had requested the Commission not reduce the amount of investment the company is otherwise allowed to collect if the tax credits aren't extended. Staff frowned on the request, saying, "The company's failure to qualify for tax benefits is the result of ineffective management of the project by the company."

Vogtle critics say it's time to cut the public's losses.

"The reality that Georgia Power and the Public Service Commissioners face, which the PSC Staff clearly stated during this week's hearing, is that the Vogtle nuclear expansion is uneconomic for customers to continue paying for," said Sara Barczak, high risk energy choices program director with the Southern Alliance for Clean Energy. "Even with the changes in management structure that have been put into place, it's too little too late for the company. They had many years to identify and then fix the problems and they couldn't. Customers should not have to bear the billions in cost overruns because Georgia Power didn't do enough earlier to prevent the disaster that has now unfolded."

Experts alarmed

As a former state regulator in Maine and New York and a former Nuclear Regulatory Commission member, expert witness Peter Bradford has been in the PSC's shoes. He offered empathy about the difficulty of their decision but nevertheless urged cancellation rather than accepting Georgia Power's terms.

"My own experience licensing and regulating two dozen nuclear units (and extricating my home state from two that had become uneconomic through massive cost overruns) tells me that Georgia Power's record to date and the fact that the units have a long way to go suggest a high probability of further cost overruns and delays," said Bradford, who testified on behalf of the Southern Alliance for Clean Energy. "The search for what Wall Street calls 'the dumb money,' that is the investor who takes an inordinate share of the risk in return for a nominal share in whatever returns may be realized, now aims inexorably at Georgia Power's customers."

The project could be mothballed, suggested Matt Cox, an expert in energy modeling at The Greenlink Group in Atlanta who testified on behalf of Georgia Interfaith Power and Light and the Partnership for Southern Equity.

Pointing to Georgia Power's previous errors in predicting demand, Cox said Vogtle 3 and 4 aren't needed.

"In 2007, Georgia Power projected a 2016 peak demand that was almost 5000 megawatts higher than the actual peak demand in 2016," he testified Wednesday. "That's about the same as five Vogtle units, and roughly a 30 percent error in the projection."

Deferring the project and relying on energy efficiency, solar, and power purchase agreements to meet the demand is more cost-effective for customers, he said. In evaluating alternatives to finishing Vogtle, Georgia Power looked only at the costly prospect of replacing the nuclear expansion with natural gas. That's unrealistic, said Bradford, who noted that more than 100 nuclear plants have been canceled in the U.S. since the 1970s, including about 20 this century.

"In comparing Vogtle solely to a standalone gas alternative, (Georgia Power) has ignored the very type of combinations of alternatives that have in fact replaced all of our many cancelled plants without causing a single power outage anywhere, any time," Bradford said.

Continuing Vogtle is harmful to all Georgia Power ratepayers, Cox said, but especially low-income customers "who feel the burden of paying their electric bill most sharply."

"Bringing both units online would increase the energy burden of the average household in Atlanta's low-income communities by an additional $110 per year from today's levels," he said. "Conversely, deferring the units and relying on efficiency, solar, and power purchase agreements would decrease this burden by $127."

Lots of Georgia families would suffer, said Kurt Ebersbach, senior attorney at the Southern Environmental Law Center, which represented Georgia Interfaith Power & Light and Partnership for Southern Equity.

"Given its poor track record at Plant Vogtle, Georgia Power doesn't deserve a big Christmas bonus that a vote to continue the project would amount to," he said after the hearings. "To even consider rewarding Georgia Power's failure is concerning enough, but rushing a decision of this magnitude is a slap in the face to struggling families who will suffer under the burden of this boondoggle for years to come."

Anti-trust twist

A recent agreement among Georgia Power and its partners could put the PSC in a difficult position regarding federal anti-trust law, attorney Jeff Berhold told the commission. The agreement states that if the commission disallows costs on the expansion, any of the partners - MEAG, Oglethorpe Power or Dalton Utilities - can unilaterally cancel the project. Of the Vogtle partners, the PSC regulates only Georgia Power, the only one with shareholders. While the companies don't compete for retail customers they do compete on large load customers, or what Berhold calls the "customer choice market."

"The parties have agreed that Georgia Power will raise its retail rates, including retail rates in the customer choice market, by insisting that the commission assure Georgia Power full recovery of the additional investment and financing costs for the Vogtle project," Berhold said. "(The agreement) requires Georgia Power to raise retail rates by mandating that the company pass its entire investment and financing costs to customers in retail rates. Such an agreement has the intent and effect of raising all prices, regulated and unregulated, in the customer choice market."

Berhold, who testified on behalf of the Georgia Interfaith Power & Light and Partnership for Southern Equity, is a former U.S. Department of Justice attorney who worked on more than 100 antitrust cases in his six years there.

Commissioner Lauren "Bubba" McDonald asked him if the agreement put handcuffs on the commission. It did, Berhold said.

"Part of the problem with (the co-owner agreement) is that it can be read as a threat, as a - essentially a boycott among the members of the agreement that, we're not going to - we're not going to build Vogtle 3 and 4 unless you do what we want, as far as these costs and passing them on into the rate base and the prices."

The agreement between competitors "puts a cloud" over the decision in the case, even if the commission ostensibly ignores it and makes the decision based purely on whether costs are reasonable or unreasonable, Berhold said.

PSC Chairman Stan Wise, who has already announced he'll be leaving the PSC once the Vogtle decision is made, seemed unworried by Berhold's testimony, saying it's "outside, I think, the jurisdiction of this commission."

The commission will reconvene Thursday to decide Vogtle's fate.

In the meantime, it declined to invoke its usual rule that prohibits parties, including Georgia Power, from communicating with commissioners after hearings have ended and before a decision is made. SELC attorneys objected in a letter Friday saying the rule was adopted in 2007 to restore "the public's confidence that the Commission's decisions are fairly decided and are based on what was said in the open hearing room-not behind closed doors."

"We are following the commission's rules based on the new schedule," they wrote. "We respectfully urge the commission to do the same."

Georgia Power remains confident its recommendation to move forward with construction is the "best choice for customers while preserving the benefits of a new carbon-free energy source for our state, said spokesman John Kraft.

"We also understand that this is a complex and difficult decision and it is ultimately the decision of the Georgia PSC on whether or not we will move forward with the Vogtle project," he said.