Georgia Power recommends completion of Vogtle AP1000 reactors

Nuclear Monitor Issue: 
#850
4676
07/09/2017
Jim Green ‒ Nuclear Monitor editor
Article

Southern Co. subsidiary Georgia Power filed a recommendation on August 31 with the Georgia Public Service Commission (PSC) to complete the two AP1000 reactors under construction at the Vogtle plant.1,2

So Vogtle is the only new-build nuclear project still alive in the US after the abandonment of the two partially-built AP1000 reactors at the VC Summer plant in South Carolina. In several states, utilities and companies hold licenses to build new reactors, but those projects are being abandoned one-by-one and none will proceed in the foreseeable future. In recent weeks Duke Energy has abandoned plans for two AP1000 reactors in South Carolina and two AP1000 reactors in Florida (and in 2013, Duke abandoned plans for two AP1000 reactors in North Carolina).3 In Florida, Duke abandoned the nuclear project in favor of a US$6 billion investment into 700 megawatts of solar PV capacity, 50 megawatts of energy storage, 500 electric-vehicle chargers, and smart meters and grid modernization across the state.4

The recommendation to proceed with the Vogtle project was supported by all owners of the project ‒ Georgia Power (45.7%), Oglethorpe Power (30%), MEAG Power (22.7%) and Dalton city (1.6%). The recommendation will be approved, modified or rejected by the PSC. A decision is expected by the end of February 2018.2

The Vogtle project is 66% complete overall according to Southern Co., and construction is 44% complete.5 Originally, the reactors were expected to go online in April 2016 and April 20176 and the company now hopes that unit 3 will begin commercial operation in November 2021 and unit 4 in November 2022.2

Georgia Power also announced on August 31 that it has contracted Bechtel to manage daily construction work under the direction of Southern Co. subsidiary Southern Nuclear, which operates the existing two reactors at Vogtle. Westinghouse is no longer the lead contractor after its bankruptcy filing in March, but remains on-site providing engineering, procurement and licensing support, as well as access to intellectual property needed for the project.7

Alternatives to Vogtle

Georgia Power said it evaluated alternatives including abandoning one or both of the AP1000 reactors or converting them to gas-fired generation.2

The option of replacing the partially-built reactors with renewables and energy conservation and efficiency seems not to have been considered. A recent analysis by the Greenlink Group in Georgia concluded: "The bottom line is that Plant Vogtle has priced itself out of the market. At this stage it is no longer the most cost-effective way of delivering low-carbon energy to Georgia's grid. Customers are better served by foregoing the project and devoting even a fraction of the ongoing costs toward additional investments in energy efficiency and solar."8

Moody's unimpressed

Bond ratings firm Moody's said on August 31 that Georgia Power's recommendation to continue the Vogtle project is "credit negative" and that Georgia Power's rating outlook therefore remains negative.9,10

Moody's was unimpressed by just about everything to do with the project and the recommendation to proceed, noting that:

  • costs are "open ended" and are likely to exceed the current estimate;
  • the lack of a fixed-price contract (with Westinghouse) is a "key risk";
  • the cost per kw-capacity "is materially higher than alternative sources of generation";
  • efforts to foist further costs onto ratepayers may not be approved;
  • delays beyond the current schedule can be expected;
  • it may not be possible to hold the project-owning consortium together for the duration of the project; and
  • nuclear reactor construction is an activity "well outside" of the "core competency" of Southern Nuclear.

Cost increases

Georgia Power estimates that the capital costs for the two reactors will amount to US$19 billion.7 In addition, financing will cost Georgia Power US$3.4 billion. If other project partners face similar financing costs, the total cost for the reactors will be about $25.4 billion.

In early August, Southern Co. said the cost is likely to exceed US$25 billion dollars and could top US$27 billion.11

An analysis by the Augusta Chronicle found that costs could approach US$30 billion.12

On current projections, the project is likely to cost around twice as much as Southern Co.'s 2008 estimate of US$14 billion6,11, and of course there is plenty of work to be done to complete the project and plenty of scope for further cost overruns and delays.

'Irate payers'

Under a controversial pay-in-advance state law, Georgian ratepayers have already paid around US$2 billion towards the cost of the Vogtle project.13,14

The Augusta Chronicle states that the Vogtle project is currently adding 5% to ratepayers' bills and completing the project will boost that to 10.3% if the project proceeds according to the current schedule.12

Georgia Power recently said that failure to allow it to recover all of its costs from ratepayers would be grounds for project partners to abandon the project.15

Dan Yurman noted on his neutronbytes blog that some of Georgia Power's project partners may not want to pass along rate increases to their customers, which might change overall risk assumptions about the project.15

Paul Gunter from Beyond Nuclear questioned whether 'irate payers' will continue to wear Vogtle's costs: "So the only way that you can revive nuclear power is going to be through socializing its financing through the rate payer and the taxpayer. But at this point, we're seeing the rate payer become the irate payer ‒ when you waste billions and billions of dollars and decades on a predictable outcome."16

The Southern Alliance for Clean Energy and other watchdogs have called for an emergency PSC public hearing to re-open the question of whether spending on the plant has been prudent (a legal requirement for charging ratepayers), and whether the project ought to be scrapped. They point to Southern Co.'s refusal to insist on the use of modern construction management tools, and its persistent lack of candor reporting on progress and likely future construction outcomes.17

Dr Stephen Smith, executive director of the Southern Alliance for Clean Energy, said of the recommendation to proceed with Vogtle: "Southern Company's decision is an anomaly, a very expensive one. Even as every other utility realized the extreme risks to their shareholders and customers and correctly decided to stop the financial bleeding, Southern stubbornly presses forward. It's imperative that Georgia regulators at the Public Service Commission conduct an open and transparent process and protect ratepayers from these unfair financial burdens ‒ ensuring that all additional risks be borne by the Company and its shareholders. Further, the Vogtle project has already benefitted from many billions of dollars in federal taxpayer funded incentives – not one more dollar should be doled out to this project at taxpayers' expense."14

Mark Woodall from the Sierra Club said: "By hiring more than 70 lobbyists and passing Senate Bill 31 in 2009, Georgia Power has now managed to steal over $2 billion in ratepayer money for financing and profit on Vogtle. Their construction process is a tale of greed and incompetence. This must stop. It's time to move forward on a clean energy future of solar, wind and energy efficiency with no more money wasted on the dirty, dangerous, risky boondoggle underway at Vogtle."18

Tax credits

In addition to pay-in-advance ratepayer charges, completion of the Vogtle project also depends on the availability of tax credits, loan guarantees, and Westinghouse's parent company Toshiba making good on its promised payments totaling US$3.68 billion over the next few years to meet contractual obligations arising from Westinghouse's role in the Vogtle fiasco. Georgia Power said in its PSC filing that if any of those three outcomes isn't realized, it may have to revisit its decision to complete the Vogtle reactors.1

Federal tax credit legislation would amount to a subsidy of around US$2 billion but Vogtle won't qualify unless the qualification period is extended. A bill to extend the qualification period was passed in the House in June but it still needs endorsement from the Senate and the White House.19

Loan guarantees

Vogtle partners are also asking the Trump administration to speed up disbursements of US$8.3 billion in federal loan guarantees approved under the previous administration.20 The loan guarantees subsidize the project by reducing the cost of borrowing, and they also put taxpayers on the hook for billions of dollars should the project be abandoned and the owners default on the loans.21

Three of the four project partners ‒ Southern Co., Oglethorpe Power Corp. and MEAG ‒ are seeking additional loan guarantees from the federal government.12,22,23,24

The Department of Energy has been encouraging the companies to apply for additional loan guarantees, Bloomberg reported, but the proposal might meet resistance. Thomas Pyle, head of the right-wing American Energy Alliance and head of Trump's transition team for the Department of Energy, said: "The federal government needs to get out of the business of lending money to private businesses, period. Vogtle is no exception. When will enough be enough?"22

The Trump administration proposed in its fiscal 2018 budget request to cancel the loan guarantee program and to prevent new loans from being offered after September 30. Oglethorpe is seeking an additional US$1.5‒1.6 billion in loan guarantees, on top of the US$3 billion already secured, and hopes to have the new subsidy locked in by the end of September.24

Toshiba payment

Georgia Power chair and CEO Paul Bowers said that while there is a risk that Toshiba may default on its promised payments of US$3.68 billion (of which US$1.7 billion is promised to Georgia Power), the risk is mitigated by a US$920 million line of credit and the claim filed against the sale of assets in the Westinghouse bankruptcy.18 Georgia Power is also seeking permission from the PSC to charge Georgian ratepayers for its share of the Toshiba payment if Toshiba defaults.10

In a filing with the US Securities and Exchange Commission, Oglethorpe Power Corporation said it has doubts "about Toshiba's ability to continue as a going concern" and thus its ability to meet its agreed payments to Vogtle project partners.25 Toshiba itself recently said that there is "substantial doubt about the Company's ability to continue as a going concern".26 That said, Toshiba will likely survive, albeit in a weakened form, after the sale of its memory chip business ‒ its most profitable asset.

Dumped by Trump?

The Vogtle partners are banking on passage of the tax credit extension legislation and more generous support under the loan guarantees program. The project partners are also seeking any other support that might be forthcoming from Washington. "We have asked anybody that would help us achieve the best commercial outcome possible," Southern Co. CEO Tom Fanning said in an August 2 interview.20

A detailed paper by 'Taxpayers for Common Sense' notes that Southern Co. has spent heavily on lobbying federal politicians ‒ US$12.85 million in 2013 alone, or roughly $35,000 a day.27 And Southern Co. has been busy lobbying in recent months ‒ Department of Energy logs obtained under the Freedom of Information Act show Southern Co.'s CEO visiting the Department around six times between February and July 2017, including three visits in June.28

James Lucier, managing director at Capital Alpha Partners, said: "On Vogtle and nukes in general the Trump administration is what the Texans call 'Big Hat and No Cattle'. They don't have any ammo in the gun. You hear them talking such a good game about nuclear power and base load power, but the reality is there isn't a lot they can do." Direct aid would most likely require an act of Congress, and getting that done is uncertain.20

References:

1. Georgia Power Company, 31 Aug 2017, 'Document Filing # 169459' (filing with the Public Service Commission), www.psc.state.ga.us/factsv2/Document.aspx?documentNumber=169459

2. World Nuclear News, 31 Aug 2017, 'Georgia Power recommends Vogtle completion', www.world-nuclear-news.org/NN-Georgia-Power-recommends-Vogtle-completion...

3. Dan Yurman, 26 Aug 2017, 'Spooked by Scana failure, Duke calls it quits on Lee', http://neutronbytes.com/2017/08/26/spooked-by-scana-failure-duke-calls-i...

4. Jeff St. John, 29 Aug 2017, 'Duke Energy Offers $6B for Solar, Batteries and EVs in Order to Scrap Nuclear Plant Plans', www.greentechmedia.com/articles/read/duke-energy-plans-6b-for-solar-batt...

5. Southern Co., 2 Aug 2017, 'Southern Company Earnings Conference Call: Second Quarter 2017', http://s2.q4cdn.com/471677839/files/SO-2Q-2017-EC-Slide-Deck-FINAL.pdf

6. Jim Morekis, 31 Aug 2017, 'Southern Company set to press forward with controversial, overbudget Plant Vogtle nuclear plant expansion', www.connectsavannah.com/NewsFeed/archives/2017/08/31/southern-company-se...

7. Southern Co., 31 Aug 2017, 'Georgia Power files recommendation to complete construction of Vogtle nuclear expansion', https://southerncompany.mediaroom.com/2017-08-31-Georgia-Power-files-rec...

8. Greenlink Group, 2017, 'Plant Vogtle Decision Point: Time to Chart a Different Course', www.thegreenlinkgroup.com/s/Plant-Vogtle-Decision-Point-May-2017.pdf

9. Jim Galloway, 1 Sept 2017, 'Moody's sour view of Georgia Power's vow to keep plugging at Plant Vogtle', http://politics.blog.ajc.com/2017/09/01/moodys-sour-view-of-georgia-powe...

10. Michael Wald, 2 Sept 2017, 'Moody's Warns That Continuing Southern Company's Plant Vogtle Nuclear Project Is Credit Negative', https://seekingalpha.com/article/4103753-moodys-warns-continuing-souther...

11. Gavin Bade, 3 Aug 2017, 'Vogtle nuke cost could top $25B as decision time looms', www.utilitydive.com/news/vogtle-nuke-cost-could-top-25b-as-decision-time...

12. Tom Corwin, 2 Sept 2017, 'Subsidizing new nuclear power such as Vogtle reactors in nation's interest, says expert', http://chronicle.augusta.com/news/2017-09-02/subsidizing-new-nuclear-pow...

13. Molly Samuel, 1 Sept 2017, 'Nuclear Expansion: Plant Vogtle Final Price Tag Doubles', http://news.wabe.org/post/nuclear-expansion-plant-vogtle-final-price-tag...

14. Southern Alliance for Clean Energy, 31 Aug 2017, 'Southern Company Proposes to Continue Plant Vogtle Nuclear Reactor Expansion that Doubled in Cost, Many More Years Delayed', www.cleanenergy.org/2017/08/31/southern-company-proposes-to-continue-pla...

15. Dan Yurman, 4 Sept 2017, 'Georgia Utilities to Finish the Twin Nuclear Reactors at Vogtle', http://neutronbytes.com/2017/09/04/georgia-utilities-to-finish-the-twin-...

16. Bryann Lynn, 14 Aug 2017, 'What Is the Future of US Nuclear Power Industry?', https://learningenglish.voanews.com/a/what-is-the-future-of-the-us-nucle...

17. Dan Zegart, 30 Aug 2017, 'Despite Huge Losses and Its own Bungling, Southern Company Wants to Complete Vogtle Plant', http://climateinvestigations.org/despite-huge-losses-and-its-own-bunglin...

18. 1 Sept 2017, 'Editorial: Nuclear plant construction: Finish the drill', http://savannahnow.com/editorial/opinion/2017-09-01/editorial-nuclear-pl...

19. Tamar Hallerman, 14 Aug 2017, 'Lifeline to Ga. nuclear project stuck in the Senate', www.myajc.com/news/state--regional-govt--politics/lifeline-nuclear-proje...

20. Ari Natter and Mark Chediak, 11 Aug 2017, 'The U.S. Nuclear Industry's Last Hope Seeks Help From Trump', www.bloomberg.com/news/articles/2017-08-11/troubled-georgia-nuclear-proj...

21. 29 Aug 2017, 'Vogtle Owner Asking for $1.6 Billion More in Loan Guarantees', www.taxpayer.net/library/article/vogtle-owner-asking-for-1.6-billion-mor...

22. Mark Chediak, Ari Natter, and Jennifer A. Dlouhy, 18 Aug 2017, 'Southern in Talks on Expanded U.S. Guarantees to Aid Vogtle', www.bloomberg.com/news/articles/2017-08-17/southern-in-talks-on-expanded...

23. World Nuclear News, 25 Aug 2017, 'Oglethorpe seeks funds to complete Vogtle units', www.world-nuclear-news.org/NN-Oglethorpe-seeks-funds-to-complete-Vogtle-...

24. Platts, 24 Aug 2017, 'Partner in US nuclear plant project seeks federal loan guarantee', www.platts.com/latest-news/electric-power/washington/partner-in-us-nucle...

25. Molly Samuel, 10 Aug 2017, 'Future Of Georgia Nuclear Plant Tied To Troubled Toshiba', http://news.wabe.org/post/future-georgia-nuclear-plant-tied-troubled-tos...

26. Toshiba Corporation, 10 Aug 2017, 'Toshiba Announces Consolidated Results for Fiscal Year 2016, to March 31, 2017', www.toshiba.co.jp/about/ir/en/finance/er/er2016/q4/ter2016q4e.pdf

27. Taxpayers for Common Sense, 3 Aug 2017, 'DOE Loan Guarantee Program: Vogtle Reactors 3&4', www.taxpayer.net/library/article/doe-loan-guarantee-program-vogtle-react...

28. Kristi E. Swartz, 25 Aug 2017, 'Vogtle owner asks DOE for $1.6B more to finish project', www.eenews.net/stories/1060059183