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$900 million dispute over Vogtle expansion not unusual

Sunday, May 5, 2013 1:01 PM
Last updated Monday, May 6, 2013 1:39 AM
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ATLANTA -- The outcome of a $900 million dispute over the addition of two nuclear reactors at Plant Vogtle is of interest to more than just the companies involved, but those familiar with large construction projects predict it won’t be soon or very dramatic.

Plant Vogtle near Waynesboro  FILE/STAFF
FILE/STAFF
Plant Vogtle near Waynesboro

And even the company warns that it’s not likely to be the only disagreement that could eventually wind up in court between Georgia Power and Vogtle’s other utility owners against contractors the Shaw Group and Westinghouse Electric.

“Additional claims by the contractor or Georgia Power (on behalf of the owners) are also likely to arise throughout construction,” Southern Company wrote Feb. 28 in its annual report. “These claims may be resolved through formal and informal dispute-resolution procedures under the Vogtle 3 and 4 agreement, but also may be resolved through litigation.”

Regulators, electricity customers and special-interest groups are also watching because of what the results could mean to them.

If the utilities that own Vogtle wind up owing all or some part of the disputed sum, then electricity customers or shareholders could be on the hook as well. The Public Service Commission would have to decide how to split Georgia Power’s 46 percent portion between its customers across the state and the shareholders of its parent, Southern Company.

Advocacy groups see the dispute as evidence of mismanagement, and those opposed to all uses of nuclear energy argue it’s reason enough to scrap the whole $14 billion project altogether.

“There is a huge lack of oversight and the project is managed very poorly,” said Courtney Hanson, spokeswoman for Georgia Women’s Action for New Directions, an anti-nuclear group that wants the project ended.


Contract conflicts

Lawyers who specialize in large construction projects say such disagreements happen all of the time because the hundreds of contracts for the various vendors and subcontractors simply can’t anticipate every situation that could arise. Sometimes multiple contract provisions touch on an issue with different results depending on which is applied.

Usually, there are hundreds of claims by the contractor and hundreds of counter claims by the owners in multimillion-dollar projects, according to Scott Cahalan, an author, speaker and adjunct professor on construction contracts as well as an attorney with Smith Gambrell & Russell in Atlanta.

Different from legal clashes most people are familiar with where the question is who’s to blame based on the facts around a solitary event like an accident, construction projects continue while the first disputes are hashed out and new ones pop up.

“It’s not like a car wreck where there’s a single incident. It’s like a car wreck every day for three years,” he said.

Typically, each side wins some and loses some, which is why they generally don’t develop personal grudges during the process like many individuals do when they’re sued, Cahalan said.

The complexity means cases often take years to sort out, whether they’re settled through mediated negotiation, binding arbitration or court. The last resort is court because, besides the expense of a trial, there are few jurors who can read a blueprint, and most judges were prosecutors rather than construction specialists before joining the bench.

Both sides

The Vogtle dispute came to light last year when Southern Company mentioned it in a financial filing with the Securities and Exchange Commission. Soon, three lawsuits were filed in federal courts in Atlanta and Washington by lawyers for the Vogtle contractors and owners.

The main lawyers are all nationally prominent, veteran construction specialists rather than experts on energy. All are highly rated by Chambers & Partners, an international service that ranks attorneys.

The procession of documents they filed in the suits provided the public with a stream of fresh details in the unfolding drama until the end of January when both sides asked the judges to pause the proceedings so negotiations could resume.

The judges hadn’t even decided which court would hear the issue.

The Shaw Group refused Friday to comment on pending litigation, but Georgia Power spokesman Mark Williams said the company expects negotiations to continue.

“There is no timetable. We will continue to do what is in the best interests of our customers,” he said.

Mediation failed

When the dispute arose over delays getting federal permission and changes required for added safety, Georgia Power and Shaw started out negotiating on their own. Then they used a mediator to bring them together, Virginia attorney David G. Lane, a one-time NASA engineer with a construction-mediation practice.

Lane, named a Super Lawyer since 2008 and listed as a top attorney in the region by Best Lawyers, met with executives from both sides separately prior to the Oct. 11-12 mediation session. The private meetings allowed them to share confidential information so that he could know when to nudge each side toward agreement without needing costly lawsuits, a strategy that works eight out of 10 times, according to experts.

“It is not unusual for mediation to continue late into the night or continue day-to-day with little time for sleep as momentum towards a settlement increases,” wrote Robert Peckar, a construction attorney, in the 2010 edition of Who’s Who Legal.

“It is also not unusual for the mediation to be postponed after the parties have exchanged information, discovery (of evidence) has occurred, or the parties have reassessed their positions and interests. The passage of time can be used to facilitate settlement,” added Peckar, whose firm is now representing the Shaw Group.

Lane did extend the mediation period repeatedly. He finally set the ending at 8 p.m., Nov. 1 so that courthouses would be closed and the only way either side could file suit would be electronically.

However, Georgia Power’s attorney’s convinced the federal court in Augusta to open that night just to accept a paper version of the owners’ lawsuit, meaning there is no electronic record of the moment the suit was filed. Meanwhile, the contractors’ attorney’s shot theirs out precisely at 8 and received receipt of it one second later.

Whichever one filed first has a strong argument for which court should hear the lawsuit, even though their contract specified that suits would be filed in Washington.

Before the lawyers finished filing a flurry of motions arguing over which court to try the suit in, they all agreed in January to a pause for more negotiations.

“We oftentimes try mediation early, but when mediation fails we try litigation and then go to arbitration,” said Cahalan, who has no connection to the Vogtle case.

Where the dispute is finally resolved isn’t yet known. And how big the next one is remains a mystery, too.

What is almost certain, industry insiders say, is that there will be more disagreements before the reactors begin generating power in 2017.

In the meantime, construction continues.

“The litigation and negotiations have not interfered with the relations between the sides, and both the owners and the contractors remain dedicated to completing the project in a safe and cost-effective manner which will benefit our customers for generations to come,” said Georgia Power’s Williams.

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Bodhisattva
5621
Points
Bodhisattva 05/06/13 - 05:59 am
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Of course it won't be the

Of course it won't be the shareholders. They don't ever have anything on the line. It cost a lot to built, pass it on to the rate payers (this time let them pay for it before it gets built). It costs less than planned, bigger dividends. It costs more than planned, pass it on to the ratepayers. It melts down and goes China Syndrome, shareholders will nail their portfolio on their doorposts and it will pass them over and seek out the ratepayers.

Little Lamb
43901
Points
Little Lamb 05/06/13 - 08:48 am
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Shareholders

If what you say were true, Bodhisattva, that would be a good reason to buy shares in Southern Co. today!

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