See if you can work out a deal.
That’s essentially what state employees were urged to do with Georgia Power on the question of who should pay for massive overruns tied to the company’s still unfinished nuclear expansion.
On Oct. 28, staffers for the elected Georgia Public Service Commission are supposed to report whether they found common ground with a company that basically has claimed perfection in leading a project that went way off course.
At stake is whether customers eventually will see their monthly bills rise to pay all the $1.7 billion in overruns for Georgia Power’s share of the Plant Vogtle expansion near Augusta.
The project, which the company lobbied for and confidently predicted it would complete smoothly, is more than three years behind schedule.
The PSC has final say over which costs are reasonable and prudent and therefore can be passed along by Georgia Power to customers. There’s never been any question that appropriate construction costs will eventually be baked into bills. But should customers should get saddled with all of the now-blown budget?
The PSC earlier this year asked staff to come up with an answer and get Georgia Power on board. (The company recently asked officials to extend negotiations to Oct. 28.) If there’s no deal, the commissioners could put off a vote, ask staff to keep negotiating or hold hearings anyway and make a decision on their own.
Already, there are some stark costs now forecast.
Like paying 85 already-hired nuclear operators for years of “busy work” while they await completion of long-delayed reactors, according to a filing by the Southern Alliance for Clean Energy, a critic of the project.
Or Georgia Power making hundreds of millions of dollars in extra profit specifically because the project is going far over budget. (The state lets the company pocket profits based on the cost of what it builds.)
Georgia Power had earlier assured regulators that it could handle the project’s risks. But the company says the potential for problems was known when the state gave it the OK to build one of the first new U.S. nuclear power plants in decades.
The company is essentially claiming it has been faultless on the project.
“The new units could not have been built for less money or in less time than it has taken,” Georgia Power CEO Paul Bowers wrote earlier this year in a letter to the PSC.
State consultants and staffers surely disagree. In past testimony they’ve been critical of a mess of problems, including design delays, years of delays in nailing down a specific, detailed integrated schedule for the project and long-running quality and monitoring issues with fabricating parts of the project off-site, as Georgia Power had insisted.
Georgia Power refers to the big overruns and delays as “cost and schedule adjustments.” Sort of like it’s offering chiropractic assistance to its customers’ collective wallets.
Residential customers already pay an average of about $100 a year just for project financing and Georgia Power’s profits on the financing. And bills are expected to rise as construction costs are rolled in.
I asked Georgia Power a series of questions about the ongoing negotiations and the company’s stance. A spokesman emailed me back one sentence that “We believe all costs to date have been prudently spent …”
Just for context, here’s how things often go with Georgia Power when it appears before the PSC on some projects and rate cases.
A) The power company says it needs a big pot of money.
B) The PSC says “Really?”
C) The power company says, “Absolutely.”
D) The power company gets a bit less than it’s opening request, which allows the PSC to claim it didn’t roll over like a puppy hoping to get its tummy rubbed.
By the way, that’s pretty much what appears to be happening in South Carolina, where another power company launched into the same kind of nuclear expansion and has experienced pretty much the same mess.
In that state, South Carolina Electric & Gas agreed that instead of passing along all of its latest $852 million overrun to customers, it would eat $20.5 million, or a mere 2.4 percent. It also agreed to ease its rate of return ever so slightly.
I’m sure Georgia Power would like that deal. In the past it has urged Georgia to do as South Carolina does.
Stan Wise is a Georgia PSC commissioner who has treated Georgia Power tenderly in the past.
He told me he considers the South Carolina example “a good start.” But he said if a settlement is reached in Georgia “I believe it would lean a little bit more toward ratepayers’” favor.
What are the chances staff will negotiate a deal with Georgia Power?
“Fifty-fifty,” he said.
In the meantime, Wise said, Georgia Power consultants have met privately with him in recent weeks to push their points. (I’m told PSC rules don’t bar commissioners from taking part in such conversations when there have yet to be hearings.)
When its own money is at risk, Georgia Power is good at covering its bases.
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