ATLANTA — Georgia Power Company wants regulators to bless its share in more than $900 million in cost overruns incurred so far in building two nuclear reactors at the Plant Vogtle generating facility near Augusta.
The company denies its request amounts to approval of the overruns. At least one regulator said his agency can ignore the request until the reactors are generating electricity. And he estimates the impact of the request to be as high as $2.5 billion in added costs to electricity customers.
Company lawyers filed a formal request Thursday seeking approval by the Public Service Commission of the utility’s contract with the new builders.
Georgia Power, which owns 45.7 percent of Vogtle, and the utilities that own the rest of the plant signed an agreement with Westinghouse and with Chicago Bridge & Iron’s Stone & Webster division to design and build two reactors for $6.8 billion. Various problems led to delays and cost overruns, prompting the owners and the builders to sue each in other in 2013 over who would pay the added costs.
Two years later in last October, both sides agreed to settle outside of court, with neither side getting everything it wanted. One result is Georgia Power agreed to pay CB&I $350 million. Another result was that Westinghouse bought Stone & Webster from CB&I, making them the new builders outright.
Part of the settlement is a boost in the price for the two reactors of $915 million more than the original price. Georgia Power’s share of the higher price would be $418 million, which includes the $350 million it agreed it owed in the settlement plus its share of $150 million in added costs to meet new security requirements.
Georgia Power spokesman Jacob Hawkins said the filing is merely to have the commission finalize the results of the lawsuit settlement.
“We have not requested recertification of this project,” he said.
But Tim Echols, a member of the five-man commission, said Friday that the effect of the request is indeed to get regulatory approval of large overruns.
Former Commissioner Bobby Baker agrees.
“I see it the same way,” he said. “The company is asking the commission to review and approve the settlement agreement which includes an increase of $915 million in the (construction) contract price. This is a de facto increase in the current, certified cost of the project.”
Echols, though, puts a bigger number on the boost.
“Georgia Power’s request would increase the certified cost by $2 billion to $2.5 billion and extend the certified schedule by 39 months,” he said.
Echols and Baker say said that increasing the certified cost now would make it harder for the commission to say later that money spent above the original price wasn’t “prudent.” And state law says any expense the utility prudently incurred may be passed along to electricity customers.
Acting now on the request would require the commission to dig into all of the money spent so far to see which was prudent and which wasn’t.
The company tried once before to get the commission to certify a higher price for the plant even though construction is less than one-third complete, but it finally came around to an agreement with commission staff to wait until the first of the new reactors is operating. That way, if there are additional cost overruns, the commission can tackle all of them at one time.
Echols said Friday that agreement stands and that the commission has no obligation to consider the new request.
Observers say Wall Street is behind the request because investors don’t want to be saddled with the overruns any more than electricity customers do. Utilities have to pay attention to the concerns of investors because they often issue bonds to finance new power lines, pollution controls and other infrastructure, and nervous investors demand to be paid higher interest.
Adding to investor jitters are whopping cost overruns at Georgia Power’s sister company, Mississippi Power, which is building a new type of coal-burning plant designed to greatly minimize emissions. Regulators there forced that company to swallow more than $2 billion in overruns.
Georgia Power argues that even with the higher price tag, the new reactors will be a bargain for their customers.
“Including the settlement, the project’s remaining projected customer rate impact is still approximately 2.5 percent, an average of less than 1 percent per year through the expected completion date of 2020,” notes a company news release. “Once the new units come online, they are expected to put downward pressure on rates and deliver long-term savings for customers.”