WASHINGTON, D.C. – May 11, 2012 – Even though the Vogtle reactor project got its federal license just three months ago, the controversial nuclear reactors are already in trouble.  The latest problem:   A cost overrun of nearly $1 billion in 2011 dollars, according to groups that warned in February that the Vogtle expansion effort is a boondoggle that could hurt ratepayers and (depending on the status of a pending Solyndra-style federal loan guarantee) U.S. taxpayers.

Southern Co. publicly acknowledged its share of the cost overrun in a filing this week with the U.S. Securities and Exchange Commission (SEC) at
http://investor.southerncompany.com/secfiling.cfm?filingID=92122-12-76&CIK=092122. The new admission about problems at Vogtle follow recent reports about grading issues under the reactor’s foundation, improperly installed rebar that has slowed the project, and dozens of amendments requested to the federal license for the two new Vogtle reactors.

Given all of the partners involved in Vogtle project, the cost overrun would break down as follows: Georgia Power ($400 million); Oglethorpe ($263 million); MEAG Power ($199 million); and the City of Dalton ($14 million). The $875 million in 2008 dollars would be worth $913 million in 2011 dollars.

Southern Co.’s SEC filing warns that more cost overruns could be in the works.    In its SEC filing, Southern Co. notes on page 139:  “Additional claims by the Consortium and [Georgia Power] (on behalf of the owners) are expected to arise throughout the construction of Vogtle 3 and 4.”  However, no details are provided on how far losses could mount over and above the current nearly $1 billion cost overrun total.

On February 15, 2012, nine groups — Friends of the Earth, Southern Alliance for Clean Energy, Blue Ridge Environmental Defense League, Center for a Sustainable Coast, Citizens Allied for Safe Energy, Georgia Women’s Action for New Directions, NC WARN, Nuclear Information and Resource Service, and Nuclear Watch South  — held a news conference to warn that Southern Company is deliberately keeping ratepayers and U.S. taxpayers in the dark by covering up the details of 12 sizeable construction “change order” requests that are expected to add major delays and cost overruns to the controversial reactor project. See http://www.cleanenergy.org/index.php?/Press-Update.html?form_id=8&item_id=278.

Mindy Goldstein, director, Turner Environmental Law Clinic, said:  “In an appeal filed with the DC Circuit Court of Appeals earlier this year, nine environmental groups asked the court to require the Nuclear Regulatory Commission to consider the true cost of constructing and operating Plant Vogtle Units 3 and 4.  In its environmental impact statement, the Commission previously concluded that the new nuclear reactors were more cost effective than certain energy alternatives.  In light of the design changes that will very likely be required to incorporate lessons learned from the Fukushima Daiichi nuclear disaster, this conclusion must be revisited.  And now, knowing that the project is already suffering from a $900 million cost overrun, an accurate assessment of the costs is even more important.”

Dr. Arjun Makhijani, president, Institute for Energy and Environmental Research, said:  “Southern Company rushed into this project, as evidenced by the many requests for modifications of the license and early technical difficulties and problems including failure of ‘some details’ of early construction to conform to the Design Control Document, according to Georgia Power’s filing with the Securities and Exchange Commission.  Indeed, a part of the cost increase of $900 million appears to be attributable to overcoming delays and rushing the project again despite construction non-compliance.  The cost increase should not be a surprise; rather it is déjà vu all over again.  Rushing nuclear power reactors is not prudent and stockholders and/or the vendors, not ratepayers, should bear the burden of such costs.  It would be much better if construction were suspended until all design issues were resolved.”

The groups will continue to press their case today by filing a brief with the U.S. Court of Appeals for the D.C. Circuit.

MEDIA CONTACT:  Leslie Anderson Maloy, (703) 276-3256 or landerson@hastingsgroup.com

Even more disturbing is that both Duke Energy and Progress Energy will likely push for the Annual Rate Hike Bill in May, a bill that will allow them to avoid the rate hearings through which the public has been so effective at holding them accountable. This bill would allow the utilities to saddle rate payers for nuclear power plant construction costs before plants are built. Nuclear plants are infamous for cost overruns, delays and often times cancellation of projects midway through — rate payers will be forced to take the risk of financing what Wall Street will not touch. Duke and Progress will be given a virtual blank check that will put us on a path towards doubled rates. Florida is already experiencing the effects of such legislation.

That is why we are organizing. The Annual Rate Hike Training Workshop will happen at Page-Walker Arts & History Center (119 Ambassador Loop, Cary, NC 27513) on Thursday, May 10th, from 6:30PM – 8:30 PM. At this informational and training event we will learn about the Annual Rate Hike Bill and what we need to do now to prevent it from happening. The workshop will be facilitated by NC WARN and co-sponsored by the North Carolina Interfaith Power & Light. At the workshop we will learn about (1) The rate process and how the system works, (2) How to develop a convincing message, and (3) How to connect with one another to take effective action.

Please RSVP to confirm your availability or contact Tania at (919)-783-8650 for more information. Please forward this invitation to others that you know that might want to attend a meeting on this important issue.

Legal challenge filed against expansionist business model that gives huge breaks to “No jobs” Apple and Facebook by driving up rates on small customers for years to come

DURHAM, NC – A watchdog group says Duke Energy is fueling demand for expensive new power plants by offering rock-bottom rates and other subsidies to energy gobbling data centers while shifting costs onto North Carolina’s small businesses and families – in violation of well-established case law. Following two controversial rate hikes since early 2010, and with three utility rate cases planned this year, NC WARN today called for state regulators to abolish Duke’s unfair rate system.

The group says Duke Energy is harming the state economy by causing small businesses to pay three times more per kilowatt hour, excluding fuel costs, than Apple, Google and other “server farms” being drawn into North Carolina. And they say the problem is poised to get much worse.

NC WARN today released a report called On the Backs of Families and Small Businesses: Duke Energy Carolinas Justifies New Power Plants by Giving Breaks to the World’s Richest Corporations. Attorney John Runkle filed the report as part of a petition calling for the NC Utilities Commission to conduct a rulemaking process that will “replace the unfair and outmoded” Summer Coincident Peak cost allocation method “with one that is fairer to all ratepayers.”

The watchdogs’ analysis found that Duke Energy justifies its highest rates for small businesses – and lowest rates for the biggest users – by allocating all costs related to generation of power based only on the single hottest hour of the year, when homes and small businesses are running air conditioning. No consideration is given to the high power usage year-round by the data processing and storage centers, which use up to 80,000 times more electricity than the average home.

Even worse, most big customers reduce their electric load during that hottest hour – on cue from Duke – shifting even more costs to households and small businesses, according to utility documents analyzed by NC WARN. In addition, Duke assigns millions of distribution and overhead dollars by the mere number of customers in a rate class – regardless of how much electricity the customer uses. So Apple and Google pay the same dollar amount of those costs as a retired apartment renter or small retailer.

“Duke Energy is selling out its home state with this new scheme to boost sales and build expensive power plants on the backs of small businesses,” said NC WARN director Jim Warren today. “CEO Jim Rogers has apparently promised Apple it won’t have to share the risk of building giant nuclear plants, and that Duke will keep its giant coal-burning fleet going for decades despite our rapidly heating planet.”

If Duke is required to adopt a balanced allocation method, it could be a major blow to the utility’s aggressive practice of recruiting high-using customers into the Carolinas, and of going far outside its service area to sign up entire blocks of power users.

NC WARN says the largest data centers create only 10 jobs per average work shift, so “this so-called economic development is harming our state economy by driving up the price of every product and service that relies on electricity, without even producing jobs,” added Warren.

The report asserts that “State law strictly prohibits such discriminatory rate structures,” that the Utilities Commission twice rejected the method Duke is using – in rulings standing for 20 years, and that the Commission’s Public Staff firmly opposes it. Also, Attorney General Roy Cooper’s utility expert made clear in a 2009 rate case that Duke’s method “does not consider, in any way, the extent to which customers use these facilities during the other 8,759 hours of the year …”

But Duke continues using the Summer Peak method because its rate cases in 2009 and 2011 were settled with the Public Staff prior to full-blown evidentiary hearings, thus the Commission did not revisit its 20-year rejection of Summer Peak.

That’s why attorney John Runkle today said the Commission must address the allocation method in a separate proceeding. “After our intervention in the last Duke rate case, we became even more convinced that the only way to get fair rates is to reform the way the rates are set.”

The report says “Duke’s rate method will impose most of the costs of building $20 billion-plus in new power plants on Duke’s captive residential and small-business customers, whose needs could be met more cheaply with energy efficiency, cogeneration and renewable energy.” Also, increasingly extreme summer temperatures exacerbate the unfairness of Duke’s method, as does Duke’s promise of more “peak shaving” and special deals for large customers, forcing more and more costs to homes and small businesses.

Warren added today: “North Carolinians hope Apple and the others will genuinely be good corporate citizens – although they have no allegiance here – and not join Duke Energy in exploiting our other fine businesses and families.”

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NOTE: This rate allocation controversy is separate from the equally controversial “annual rate hikes” bill where Duke seeks to shift nuclear power construction risks to the ratepayers.

See the report: On the Backs of Families and Small Businesses: Duke Energy Carolinas Justifies New Power Plants by Giving Breaks to the World’s Richest
Legal Motion for Allocation Method
Report Summary

Durham, NC – Less than two months after receiving a nuclear construction license for new reactors at its Vogtle site in eastern Georgia, Southern Company is already requesting a license amendment to allow changes to the foundation on which the reactor building would be built.  A request which the company aimed to file by last Friday seeks to relax standards for the concrete foundation due to Southern’s miscalculation of soil compaction, and the company is pressing regulators for swift approval to avoid what it calls “an additional delay in the construction of the nuclear island basemat structure and subsequent construction activities …”.

In a letter to the NRC dated March 30, 2012, Southern Company admits that construction of the reactor base has not yet begun and that construction will begin in mid-June – if NRC quickly approves the licensing change.  It had been thought that pouring of so-called “nuclear concrete” would begin immediately on issuance of the construction license in February, but the letter confirms the long delay.

Friday’s expected License Amendment Request (LAR) is not yet available to the public, but Southern Company’s preliminary notice* about the forthcoming amendment request describes  how recent surveys determined that a level foundation for three “nuclear island” buildings cannot be obtained unless the previously allowed one-inch variation in the “mudmat” substrate is increased to four inches.  The nuclear island foundation supports the weight of the buildings and equipment and is vital in protecting the plant against earthquakes and other loads.

Southern told NRC that the increased tolerance should not impact earlier analyses or require additional testing, and it warned that the unforeseen need for the foundation change could cause serious delays to numerous parts of the project.  But public interest groups pointed out today that foundational concrete is central to the entire project, and that any relaxing of requirements could have serious safety and cost implications.

“Southern Company clearly miscalculated soil compaction in the holes excavated for both reactors at the Vogtle site, which could be an omen about the path forward,” said Jim Warren of NC WARN today.  “The NRC simply cannot skip any steps in reviewing this fundamental safety issue just to accommodate the construction schedule, and a public hearing on the design change is warranted.” 

32 AMENDMENT REQUESTS = MORE DELAYS?

Additionally, Southern Company has already identified 32 License Amendment Requests it will seek by 2014.  The list of LARs** contains little mention of impacts on construction schedule or cost.  Nor is it clear how the list of proposed changes might impact a federal lawsuit that is seeking to stop construction at Vogtle.

NC WARN and the Alliance for Nuclear Accountability believe that the changes being sought via the LARs could add millions to cost overruns already documented at Vogtle and lead to other construction delays.

The public interest groups noted today that each LAR proceeding normally takes up to one year or longer, and that one or more of the nine nonprofits contesting the Vogtle project might choose to intervene in any of the 32 license amendments being sought.  Regardless of interventions, the NRC’s ability to handle so many license amendment reviews is in question.

Also, it is not clear whether Georgia utility law allows Southern to continue construction without the NRC’s full approval of LARs – while pre-charging ratepayers for the plant.  And the problems could further complicate a pending and highly controversial $8.3 federal taxpayer loan guarantee.

Tom Clements of the Alliance for Nuclear Accountability said today, “The foundation problem raises questions about quality control and highlight concern about slippages in the construction schedule.  The foundation problem and the long list of scheduled license amendments show that other changes and unexpected hurdles are ahead for the Vogtle project.”

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*Southern Company’s Preliminary License Amendment – Foundation

**List of 32 License Amendment Requests Planned for Plant Vogtle

Visit the Full Fram Film Festival website for more information

Please act today: Tell President Obama to stop nuclear loans for good.

It’s a 20-SECOND PHONE CALL: (202) 456-1111

HERE’S THE BACKGROUND, FROM OUR FRIENDS AT NIRS:

According to an article Friday from the industry publication Platt’s, the nuclear industry is worried that the White House’s Office of Management and Budget (OMB) will not give final approval for the Vogtle loan. That’s because the nuclear industry wants a sweetheart deal–one where Southern Company puts up virtually none of its own money and where all financial risk for the loan is laid squarely on the shoulder of federal taxpayers (and state ratepayers).

But both OMB and the Dept. of Energy have come under scathing criticism, especially from Congressional Republicans, over the failure of the Solyndra solar company loan granted by the Administration.

And the proposed Vogtle loan would be 15 times larger (and far riskier) than the one given to Solyndra.

And the Vogtle project is already suffering $100′s of millions in cost overruns.

Thus, the Administration is being more cautious over the Vogtle loan than it would have been when first agreed to more than two years ago. And the more public scrutiny the Administration receives–and the more contacts to the president–the more likely that caution will lead to a cancellation of this loan.

Our actions now matter–a lot.

A big step in more public scrutiny was obtained Thursday, as our friends at Southern Alliance for Clean Energy won a court victory against the Department of Energy that will force DOE to disclose at least some of the terms of the Vogtle loan.

MORE BACKGROUND:

Another big blow to the economics of the Vogtle project, and thus the financial viability of the loan, was delivered yesterday by John Rowe, the recently-retired Chairman of the Exelon Corporation, the nation’s largest nuclear utility. He said unequivocally that new nuclear reactors “don’t make any sense right now.” Rowe was a major contributor and campaign “bundler” to the 2008 Obama campaign, and his words carry a lot of weight at the White House.

Don’t forget there is precedence: the only other loan for new reactor construction offered by the Obama Adminstration was for the proposed Calvert Cliffs-3 reactor in Maryland. The terms of that loan were rejected by Constellation Energy, helping lead to Constellation’s withdrawal from the project.

In Vogtle’s case, Georgia ratepayers are already paying for the Vogtle reactors through the state’s early cost recovery law. But an Obama Administration assessment that the taxpayer loan is too economically risky could also cause re-examination of that state law.

We need to assure that the Administration feels public pressure to protect taxpayers and avoid another Solyndra, and to reject the sweetheart deal that Southern Company wants.

The strength of our actions now could determine the fate of new nuclear power in the U.S. Please act, please encourage everyone else to act too.

SEE MORE FROM OUR FRIENDS AT NIRS: www.nirs.org

Attorney General Roy Cooper said Wednesday he will appeal the 7 percent N.C. rate hike Duke Energy won in January.

Cooper called the rate hike, Duke’s second in the state since 2009, “wrong for N.C. consumers and businesses” in tough economic times. The appeal will go to the N.C. Court of Appeals.

“The economic realities faced by N.C. consumers must be put before company profits,” Cooper said in a statement. “Hundreds of people have contacted my office to let us know they can’t afford to pay much more for electricity in these tough times.”

Rates will go up about $7 a month for most of Duke’s residential customers. The utility has 1.8 million customers statewide.

Duke, which initially sought a 15 percent rate hike, said it is disappointed in the appeal.

Spokeswoman Betsy Conway said the settlement with the commission’s Public Staff, which represents consumers, balanced Duke’s need to recover $4.8 billion in capital spending with economic hardships faced by customers.

“We understand that the timing was challenging,” Conway said. Duke agreed in the rate settlement to donate $11 million to help low-income customers with energy costs.

Cooper’s appeal does not challenge Duke’s spending on power plants and pollution-control upgrades. It focuses instead on the 10.5 percent return on equity, or investor profit, the utilities commission approved.

It claims there’s not enough evidence in the commission’s findings that such a return is reasonable. The filing does not say what rate of return the attorney general would accept.

State law says the commission should approve a rate of return “considering changing economic conditions and other factors” such as construction projects by the utility.

“The rate of return testimony should balance the rate of return investors expect against the economic conditions and returns that Duke’s customers are experiencing,” the filing said. None of the expert witnesses who testified on the rate of return discussed the economic conditions customers face, it added.

Most members of the public who spoke at commission hearings protested the rate hike.

“The commission essentially backed into its finding … by noting that the stipulated return on equity falls between the parties’ negotiating positions and further noting that none of the (return) witnesses objected to the stipulated figure,” Cooper’s appeal said.

The attorney general’s staff was among several formal parties to the rate case, including representatives of large customers, advocacy groups and consumer groups. While most of those parties signed settlement agreements, or did not oppose the agreements, the attorney general did not.

See the full article

NC WARN strongly supports Attorney General Cooper’s appeal of the Duke Energy rate increase — the 10.5% rate of return is far too high in a struggling economy, when most residential and commercial customers are struggling to pay electric bills.

Intervenors from the rate case have 20 days to join the appeal. Co-intervenors NC WARN, NC Justice Center and the NC Housing Coalition are considering such action.

Statement from NC WARN Director Jim Warren:

This Friday, the NRC is expected to approve a Construction and Operating License for two Westinghouse AP1000 reactors at the VC Summer nuclear plant in South Carolina.  The project, being developed by South Carolina Electric & Gas, is likely to hinge on Duke Energy and/or Progress Energy buying into it after a COL is issued.

This would require approval by the NORTH Carolina Utilities Commission, based on necessity and economic sense – a case the utilities simply cannot win.  (70 percent of Duke’s and Progress’s Carolinas customers are in North Carolina.)

The Summer construction schedule will be impacted by a huge, year-long fight at the NC commission, which industrials and other consumer and environmental groups are likely to win for several reasons, including the new revelation that Duke Energy is now using natural gas for baseload demand.  Also because Duke already has a large surplus of baseload supply that sits idle for much of each year.

SCE&G, state-owned Santee Cooper and SC politicians are reportedly pressing Duke Energy and/or Progress Energy to buy into the Summer project.  (SCE&G and Santee are widely deemed too financially weak to attempt the complex project without a big utility as partner).

The Summer AP1000 project has already suffered delays and $380 million in cost overruns, with a certainty of more to come based on inherent complexities, changes required by Fukushima, and in accord with SCE&G’s own report in late February.

This is why even Wall Street gamblers won’t invest in new nuclear projects unless state electricity customers and/or federal taxpayers get stuck with the lion’s share of financial risks.

Delays and massive cost overruns at all three U.S. nuclear construction projects underway (including a TVA project that was partially completed in the 1980s), and at Progress Energy’s Levy project – where the price estimate quadrupled years before a license is expected – are exactly why utilities demand their political cronies saddle customers with the risks.

Also, Summer is impacted by the federal lawsuit against the AP1000 design, filed last month by NC WARN and eight other public interest groups.  This month’s independent report on Fukushima bolsters a main premise of our suit: that the NRC has not analyzed the enormous risks posed by multiple units located near each other.

North Carolina ratepayers will not become suckers for a nuclear project that’s mired in massive cost problems while still in the cradle.

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That’s why I’d like to invite you to a special meeting and training event to learn what we need to do now to prevent this from happening. Connie Harris and Tania Duran-Eyre, NC WARN organizers from Durham, will be facilitating the training program which will include (1) Understanding the rate process, (2) How the system works, (3) How to develop a convincing message, and (4) How to take effective action.

The meeting will take place Thursday, March 29, from 6:30 to 8:80 PM at the Carole Hoefener Community Services Center, 610 East 7th Street, Charlotte, NC 28204. Parking is free and food and refreshments will be provided between 6:30 and 7:00 PM.

Please RSVP to Bill@consumersagainstratehikes.org to confirm your availability or contact me at (704) 367-0068 for more information. Please forward this invitation to others that you know that might want to attend a meeting on this important issue.