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Southern Company unit increases cost estimate for Vogtle nuclear units amid labor shortage


Cost estimate for Georgia Power rises $1.1 billion

Owners must vote whether to continue construction

  • Author
  • Jeffrey Ryser
  • Editor
  • Valarie Jackson
  • Commodity
  • Electric Power

Houston — Southern Company's Georgia Power utility has revised its cost estimate for completing units 3 and 4 at its Vogtle nuclear generating station in Georgia to $8.4 billion from $7.3 billion, with Southern Company's CEO telling analysts Wednesday that a main immediate concern is the shortage of qualified labor at the facility.

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The $1.1 billion cost increase covers just Georgia Power's share of the project. Co-owners of the project face a $1.2 billion cost increase.

Georgia Power, which owns a 45.7% stake in the project, said it will "absorb" $700 million of its $1.1 billion additional cost and not seek recovery from ratepayers when it files its 19th Vogtle Construction Monitoring report with the Georgia Public Service Commission at the end of this month.

Southern Company CEO Tom Fanning told the analysts that a $400 million portion of the increase will be treated as a "contingency cost," which Fanning said the company could seek recovery for at a later date.

In comments to analysts Wednesday, Fanning said that the increased cost forecast "was not news that we welcome, but it is an equitable assessment for stakeholders and shareholders."

He said the company was taking a $1.1 billion pre-tax charge in the second quarter and continues to project construction completion dates of November 2021 for Unit 3 and November 2022 for Unit 4.

In his comments, Fanning encouraged shareholders who will shoulder the increased cost to see it as "short-term pain for long-term gain."


On Wednesday, credit ratings agency Moody's Investors Service downgraded Georgia Power to Baa1 from A3, noting the cost increase has come just eight months after state regulators reviewed and approved a revised cost estimate and construction schedule.

"Although the additional costs will be covered through new equity issuances at the Southern parent, the latest revised cost estimate risks damaging the ongoing support from regulators, given it occurred so soon after they vetted and approved an earlier estimate," said Jeff Cassella, Moody's senior credit officer. LABOR SHORTAGE

The $700 million increase to the base capital cost forecast results from "changed assumptions related to the finalization of contract scopes and management responsibilities for Bechtel and over 60 subcontractors, labor productivity rates and craft labor incentives," the company said in a 10-Q filing Wednesday with the US Securities and Exchange Commission.

The company has said that, under its plan with Bechtel, there have been about 1,100 electricians and pipefitters working on the project, "but we need to add 600 more electricians by November," Fanning said. "It's the crucial issue at the moment."

Fanning told analysts that the company is looking to recruit workers from Canada and possibly from Puerto Rico, as it also "re-segments" workers already on the site.

"We are watching like hawks the amount of hours per month that are worked," Fanning said, "We need to keep the effort on track."


Construction of the first of the two new 1,100 MW nuclear units began in 2013 and was handled by Westinghouse. In July 2017, Georgia Power and Southern Company subsidiary Southern Nuclear took over construction responsibilities after Westinghouse, a division of Toshiba, declared bankruptcy in March.

Georgia Power, which has the largest ownership interest in Vogtle and the two new units, is joined by Oglethorpe Power, with a 30% stake; MEAG Power, with a 22.7% interest; and Dalton Utilities, which owns 1.6%.

Southern Company told the SEC in the 10-Q filing that because of the increase in the total project capital cost forecast, and Georgia Power's decision not to seek rate recovery of the increase in the base capital costs, the holders of at least 90% of the ownership interests in Units 3 and 4 must vote to continue construction.

Southern Company said that the Vogtle owners are expected to conduct that vote at the end of Q3 and added that if the holders of at least 90% of the ownership interests in the units do not vote to continue construction, the Vogtle Joint Ownership Agreement provides that "the project will be canceled and construction will cease."

Southern Company told the SEC that if the two new reactors are canceled and Georgia Power is unable to recover costs it has incurred in connection with the project, its "results of operations, cash flow, and financial condition would be materially impacted."

--Jeffrey Ryser,

--Edited by Valarie Jackson,