State regulators still to decide if consumers will pay for rising costs
By Matt Kempner
WAYNESBORO — The biggest construction project in Georgia is also becoming one of the biggest budget busters in state history. And nearly every Georgian with a monthly electric bill may end up paying for it.
Despite Georgia Power’s early confidence about staying on track, the massive nuclear expansion of Plant Vogtle south of Augusta is more than three years behind schedule. The company’s share of costs is at least $1.4 billion, or 23 percent, over original projections — enough to build two new Braves stadiums and still have a fortune left over.
The potential hit to Georgians invites questions about whether elected members of the Georgia Public Service Commission adequately weighed warnings from their own staff and experts before approving the project six years ago, making Georgia the first state to bet on new nuclear power in 30 years.
Atlanta Journal-Constitution interviews and a review of more than 1,000 pages of testimony and documents show the PSC approved the massive undertaking without significant room in cost estimates to cover potentially steep overruns. Staff warned increases were likely. Past nuclear projects — including Plant Vogtle’s original construction in the 1980s — soared far over budget. But Georgia Power, which provided the cost estimates the PSC adopted, only disclosed years later that it was unusual on such large projects to leave out padding to handle big overruns.
The omission helped make the project look like a better deal for consumers than alternatives such as building a natural gas plant, a project that PSC staff said would generate far less profit for the company.
PSC chairman Chuck Eaton said he doesn’t think the PSC made any critical mistakes in approving the plant expansion. But that doesn’t mean he’s comfortable that Georgia Power has twice reported sizable delays.
“They are still giving me a lot of assurances,” Eaton said of Georgia Power officials. “But you’ve got two significant delays. Are there going to be delays in the future?”
The PSC eventually will have to decide how much of the overruns can be passed on to Georgia Power customers, adding to the higher bills they already face for years to come under the original financing plan. The PSC can reject any Vogtle costs that it deems imprudent.
PSC members didn’t follow their own experts’ advice to impose a risk-sharing mechanism that would have reduced Georgia Power’s profit if it blew past cost estimates. The company argued such a measure would be unfair and potentially counterproductive.
Before the project’s approval in 2009, Georgia Power officials expressed confidence they could limit the financial risks. One told the PSC there was a slightly better chance of staying under budget than going over.
The tone is different now.
Buzz Miller, Georgia Power’s executive vice president for nuclear development, said recently that the biggest surprise since the expansion started “is that people would be surprised that a project this size is taking a little longer.”
A former PSC commissioner who cast the sole vote against the Vogtle expansion said he suspects the company aimed its cost and timeline estimates more at getting regulatory approval than accuracy.
“I’m suggesting that they low balled their number,” Bobby Baker, an attorney whose cli ents now include an environmental group critical of Vogtle, told the AJC in a recent interview.
Georgia Power residential customers already pay about $8 on a typical summer bill of $159 for financing costs related to the Vogtle expansion, or about $81 a year.
Under PSC plans, the financing charge would end around the time the first of two new reactors is finished, then be replaced by a charge for construction costs. The amount depends on the final cost and how much the PSC decides Georgia Power can pass on to customers. The charge would linger for decades, but at its peak it would average 6.6 percent above what bills would have been without the project, according to company estimates based on the latest delays.
That could add at least another $36 a year to the typical residential bill, for an annual Vogtle total of $117.
Overruns would be higher if not for two big items in customers’ favor: lower-than-expected interest rates and federal guarantees and credits for the project.
Georgia Power said it negotiated a contract that made the risk of other cost increases — such as material, equipment, additional construction labor, etc. — the responsibility of contractors. Those contractors have sued Georgia Power and other owners of the Vogtle project over more than $900 million in costs.
Georgia Power leaders say that even with the delays and rising costs, economic benefits to consumers are massive over what they predict will be the 60-year or longer life of the plant.
They forecast billions in savings versus coal and natural gas plants that have higher fuel costs and produce emissions blamed for worsening climate change. They see big advantages in diversifying the state’s energy mix and avoiding over reliance on natural gas, whose price has been low lately but is prone to big swings.