A worker on the Alvin W. Vogtle Nuclear Plant unit 3 shield building wall. Source: Georgia Power Co. |
Georgia regulators should only certify less than a 10th of the costs Georgia Power Co. spent on the Vogtle nuclear plant expansion in the first half of 2017, a state analyst and outside consultants say.
In written testimony filed Dec. 4, Georgia Public Service Commission staff and two consultants recommended that regulators classify $498 million in liens and prepetition amounts owed to former project manager Westinghouse Electric Co. LLC and its subcontractors as unreasonable, or not eligible for cost recovery.
Those analysts also criticized the Southern Co. subsidiary for not completing an integrated project schedule and asserted that the utility's estimate to complete two new reactors does not provide necessary certainty for the PSC as it weighs whether to allow continued construction.
Georgia Power has requested a full recovery of $542 million for its Vogtle expenses from January through June, but three officials monitoring Vogtle construction say $498 million in Westinghouse fees should be subtracted from that petitioned amount, leaving $44 million for the utility to recover from customers.
The officials noted that the commissioners could even decide to reject recovery of that $44 million. A PSC modification of company costs, they explained, represents an effort to properly assign the risk for incurring certain expenses onto Georgia Power, not its ratepayers. Modification "also maintains the burden on the Company to show that the costs were both reasonable and prudent," they wrote.
The Dec. 4 testimony — provided by Steven Roetger, lead Vogtle analyst at the PSC; William Jacobs, an executive consultant at GDS Associates; and Ralph Smith, a senior regulatory consultant at Larkin & Associates — tracks with the recommendations of another PSC panel, which said Dec. 1 that the Vogtle project continues to be uneconomic and that certain costs should be shouldered by Georgia Power and its shareholders.
"Given all of the concerns regarding Company and Contractor performance to date, including cost overruns and the inability to meet previously submitted schedules for commercial operation, Staff believes it is not appropriate to allocate all of the Company's forecast cost increase to ratepayers," Roetger, Jacobs and Smith wrote. "Staff recommends that a portion of such costs should be found to be unreasonable, and that certain costs should be 'modified' from the Company's request."
The Roetger, Jacobs and Smith analysis differs from their June Vogtle construction monitoring testimony, in which they recommended approval for full recovery of Georgia Power costs in the second half of 2016. The PSC in August voted unanimously to certify that $222 million.
What changed from 2016 to 2017, however, was Westinghouse declaring bankruptcy in March, which prompted the project cost and schedule to be called into question. Already years behind schedule and billions of dollars over budget, Vogtle's owners have pledged to stick with construction if certain conditions are met. But those assumptions are subject to PSC approval, with commissioners expected to render a ruling in February 2018.
Roetger, Jacobs and Smith did recommend continuation of the project, but only under the conditions set forth by the Dec. 1 panel calling for Georgia Power to take on more risk, and reduce the exposure of customers to further overruns and delays. Otherwise, the Vogtle expansion should be abandoned, they said.
Continued uncertainty
The three experts said construction progress has continued relatively uninterrupted since Westinghouse's bankruptcy, and that monthly progress goals have generally been met. Productivity has also improved under the new project structure, in which Westinghouse, a unit of Toshiba Corp., transferred management to Southern affiliate Southern Nuclear Operating Co.
But uncertainty persists surrounding how the expansion will play out, Roetger, Jacobs and Smith said. As of early December, PSC staff said it is unaware of Georgia Power completing an integrated project schedule. They also noted Georgia Power could have developed an estimate to complete prior to Westinghouse's bankruptcy.
Georgia Power, in response to PSC staff questions, acknowledged that it possessed adequate information to develop its own estimate to complete and integrated project schedule but said Westinghouse limited the utility's ability to make those calculations. Since Westinghouse has backed out of a key Vogtle agreement and handed control to Southern Nuclear, Georgia Power said it can now fully monitor project progress.

