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Georgia Power defends Vogtle nuclear project costs as reasonable

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Georgia Power defends Vogtle nuclear project costs as reasonable

Thedifficulties that have led to delays and cost overruns at the Vogtle nuclearplant in Georgia are in great part a result of the project's burden of havingto "restart" the entire U.S. nuclear construction industry afterdecades of dormancy, Southern Co.utility Georgia Power Co.told state regulators April 5.

April2016 was supposed to be the month that the first of the two reactors under constructionat Vogtle, the first new nuclear generation in the U.S. in decades, cameonline. Instead, Georgia Power is defending its role in the delay of the startdates: June 2019 for the first reactor and June 2020 for the second.

Inthe April 5 filing with the Georgia Public Service Commission, the utility saidthat despite the construction problems, every key decision made by the utilityin pursuing the project meets the standard of "prudent and reasonable"because they were made based on the best information available at the time. Thefiling comes as part of the PSC's prudency review, by the commissioners in Februaryin light of the fact that Georgia Power's $7.8 billion for the final costs of itsshare to the project have long outstripped the $6.1 billion estimate the PSCapproved in 2009 before construction began.

ThePSC's finding that spending by Georgia Power on the project was "prudently"incurred is important for the utility's ability to recover the costs of theproject from its customers."This latest information continues to demonstrate that costs forthe Vogtle expansion to date have been prudently invested, that the currentcost and schedule forecast for the first new nuclear units in 30 years isreasonable and that a recent settlement agreement with the project's contractoris in the best interest of the state's electric customers," the utilitysaid in a statement.

Georgia Power included in its submission to the PSC lettersof support for the project from Georgia Gov. Nathan Deal and U.S. Sen. SaxbyChambliss, R-Ga.

Atthe time that Georgia Power was taking the first steps to pursue the Vogtleproject, around 2006 when it first applied for an early site permit for thereactors, the company expected a "nuclear renaissance" in which theconstruction of reactors across the U.S. would bloom after a lull since the1980s. But the renaissance never materialized.

Adecline in natural gas prices contributed to the decision by many developers ofproposed nuclear plants to cancel their projects. As a result, besides asimilar project under construction in South Carolina, Vogtle is in a lonelyposition. The death of the nuclear renaissance creates snags for the Vogtleproject because additional support for the project, in terms of both supplychain and knowledge about how to build nuclear reactors, ended up not beingavailable, according to the filing.

"Therisks of re-starting the industry coupled with the (first-of-a-kind) challengesof a new design have had an impact on the Project schedule and cost," thefiling said.

There was a shortage of experienced professionals to helpthe project meet strict quality control and documentation requirements. Inaddition, the heralded modular construction technique for the AP1000reactor design used at the plant turned out to have its own problems. Therewere severe delays at industrial facilities that were supposed to fabricatethese submodules. These difficulties were "in part a result of restartingthe nuclear construction industry," Georgia Power said.

PSC monitors for Vogtle have previously out similar issues, like thefact that Vogtle contractors had to pull welders from industries outside thenuclear field, like the shipbuilding industry.

The utility asked the PSC to apply an "objective"standard for determining prudency rather than including subjective judgments.Specifically, the commission should "put itself into the shoes of theproject managers at the time critical decisions were being made, and ask itself'what would a reasonable manager have done and was what the Vogtle Projectmanagers did within an acceptable zone of reasonableness?'" the utilitysaid.

The problems facing the Vogtle project have inspired a roundof "I told you so's" from consumer and environmental groups thatopposed the new reactors and argued they were a bad deal for ratepayers.One of those groups, the Southern Alliance for Clean Energy, pointed out manyof the risks of the project back in 2008 when it was undergoing regulatoryreview, according to Sara Barczak, the group's High Risk Energy Choices programdirector.

"The issues that should be the focus of the commission'sreview are long-standing problems that should have been addressed," formerPSC commissioner Bobby Baker said. Baker is an attorney who also represents theSouthern Alliance.

The PSC has no specific timeline for concluding the prudencyreview, according to a commission spokesman.

GeorgiaPower's share of the costs of Vogtle is based on its 45.7% ownership of thereactors. The other owners are OglethorpePower Corp., the MunicipalElectric Authority of Georgia and the city ofDalton, Ga.