PSC staff says cancel Vogtle if project remains ‘uneconomic’

  • Anastaciah Ondieki
  • The Atlanta Journal-Constitution
6:07 p.m Monday, Dec. 4, 2017 Local
Brant Sanderlin/The Atlanta Journal-Constitution
Work to expand nuclear power at Plant Vogtle has fallen years behind schedule. The Georgia Public Service Commission will decide whether to stick with the Georgia Power project now that consumers face significantly more risk and billions of dollars in new costs after the bankruptcy of the project’s main contractor, Westinghouse. BRANT SANDERLIN / BSANDERLIN@AJC.COM

Analysts appointed by the Georgia Public Service Commission to evaluate progress at plant Vogtle in Augusta say the project should be cancelled as Georgia Power failed to manage it in a “reasonable manner.”

“Completion of the project is no longer economic given the additional costs and schedule delays,” the analysts said in written testimony to commissioners.

They recommended that a reasonable Total Project Cost be set at $8.3 billion, $3.9 billion less than what Georgia Power estimates for project completion.

Georgia Power currently spends $50 million per month on the project. In March 2017, Vogtle’s lead contractor, Westinghouse Electric, filed for bankruptcy. The project was already three years behind schedule and more than $3 billion over budget. Georgia Power’s Paul Bowers argues the project presents “long-term benefits to customers.” Critics have fought against Vogtle's expansion for years, citing cost and safety concerns. Cost and schedule estimates presented by Georgia Power may determine the project's fate. Plant Vogtle is one of Georgia's two nuclear power plants.

The experts opposed Georgia Power and partner company requests to shift the projects financial risks resulting from contractor’s failures to customers as some costs “incurred by the company were not reasonable to allocate to customers.” Instead, they said Georgia Power and it’s shareholders should shoulder the risk.

The company has not provided justification in its requests to apportion ratepayers 100% of its forecasted costs, the analysts said.

Georgia Power through spokesperson John Kraft argued the company shared in the “financial risk of the Vogtle project,” citing “severe consequences for delays in place under an agreement with the Georgia PSC.”

The analysis, based on Georgia Power reports presented during the November commission hearings also showed the company was not “effective on a consistent basis in assuring that all the key project commitments were being met by the Contractor on a timely basis.”

The testimony comes weeks after Georgia Power CEO Paul Bowers’ assertion before commissioners that completing the project presented the best economic option for customers. CEOs of companies parterning with Georga Power — Oglethorpe Power, Municipal Electric Authority of Georgia (MEAG) and Dalton utilities — appealed to commissioners to approve the new project costs and have customers continue funding the project.

In November, Bowers asked commissioners to rule on whether the new estimates by Georgia power and its partners were reasonable, before the company, which owns 45.7 percent of Vogtle continues spending additional dollars on the project.

As of June, Total Project Costs incurred on the project stood at $5.85 billion. Georgia Power estimates Total Project Costs at completion to be $12.2 billion, with completion dates for units 3 and 4 set for November 2021 and 2022 respectively.

Former contractor Westinghouse Electric Company, had “struggled to keep the design” at pace with construction, resulting in frequent design changes and subsequent project delays.

“By March of 2018 the Company and Consortium (Westinghouse) would have worked without an Integrated Project Schedule for 9 years,” the analysts found.

A lack of a project schedule affected the schedule and costs.

Based on the latest analysis, additional delays “would have a significant adverse impact on the economics of the project.”

Project monitors have since since 2012 raised concerns that costs and schedule projections provided by Westinghouse were “severely underestimated” due to a lack of a fully Integrated Project Schedule(IPS).

In his testimony in May, 2012 independent monitor William Jacobs said the status of the project was at the time “unclear” as an agreed upon schedule did not exist.

The monitors argued that had a proper analysis been done, a more accurate picture of the project’s value would have been developed before hundreds of millions of dollars of sunk costs were incurred.

The question of whether to proceed with construction of the two reactors in Augusta continues to be a divisive issue and the fate of the project dependant on a decision in February by the commissioners.

The analysts said failure by the commission to adopt their recommendations and grant Georgia Power’s requests could “preclude the ability” of a future commission to disallow unreasonable costs.

Groups supportive of the project argue the plant will create skilled employment, boost the local economy and provide energy alternatives.

Mary Korsnick of the Nuclear Energy Institute, which supports nuclear energy and technoogy, said the plant would help maintain an energy mix besides ensuring “safe, reliable, clean air electricity.”

Brent Booker of North America’s Building Trades Union sees Vogtle as an opportunity to provide a new crop of highly skilled craft workers in the nuclear field, skills he says are “unique” to the industry.

Peter Bradford of the Southern Alliance for Clean Energy called on commissioners to disallow Georgia Power’s new cost estimates as it’s past forecasts have been “devastatingly wrong to date.” He also called on commissioners to disapprove the new management structure.

The project, marred by cost overruns and schedule delays is now managed by Nuclear Southern, a subsidiary of Georgia Power’s parent company Southern Company, which took over after the March bankruptcy by Westinghouse Electric Company. In August, Bechtel took over construction at the site from Flour Corporation.

Economic prospects for completing Vogtle are diminishing in light of natural gas estimates, which indicate a decrease in natural gas prices. The analysts found Georgia Power’s previous natural gas price estimates “overstated” as they were not indicative of the “accurate view of market consensus.”

Falling demand for nuclear, rising costs, construction delays and Westinghouse’s bankruptcy led to the decision in July for Scana and Santee Cooper to pull the plug on the V.C Summer project in South Carolina. The VC Summer project employed the same technology being used on the Vogtle plant and was estimatedd to cost $14 billion.

Vogtle has been rife with “low productivity,” with reports of “idle time, early quits and late starts remained high,” among workers on the plant. A report in June showed progress had “slipped” and “construction had “not met the completion rate needed to support the project schedule.”

According to Bowers, once complete, the plant, the first to be built from scratch in the USA in 30 years will contribute 21 or 22 percent of Georgia’s electricity. Currently nuclear power contributes 19 to 20 percent of electricity in the state.

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