Members of the Georgia Public Service Commission vote Dec. 21 to allow continued construction at the Vogtle nuclear plant.
Source: Georgia Public Service Commission
In voting to allow continued construction at the Vogtle nuclear plant expansion, state regulators gave Georgia Power Co. "both carrots and sticks" to incentivize the completion of two new reactors that are years behind schedule and billions of dollars over budget.
Members of the Georgia Public Service Commission on Dec. 21 voted unanimously to approve the utility's revised cost and schedule estimates for the Vogtle project. But they also moved to decrease its return on equity for the venture and promised to further lower that amount if the units aren't online by certain dates.
Commissioner Tim Echols introduced a 16-part motion setting new terms for Vogtle's future, which he argued would add "both carrots and sticks" after the March bankruptcy of former project manager Westinghouse Electric Co. LLC.
"I want to do everything we can to incent Georgia Power to continue the pace that they've shown over the past six or seven months to finish these units and to bring them into service as safely and quickly as they can," Echols said.
Starting in 2020, the utility's return on equity used to determine its Vogtle cost recovery will be reduced to 8.3% from the current 10% rate. A year later, the ROE will be further lowered to either 5.3% or Georgia Power's average cost of long-term debt, whichever amount is higher.
If unit 3 is not commercially operational by June 1, 2021, the ROE will go down 0.1% every month the reactor isn't online but will not reduce lower than the long-term cost of debt. The same ROE reductions will apply if unit 4 is not up and running by June 1, 2022.
Commissioner Chuck Eaton said the 8.3% rate would equate to a 25% reduction in Georgia Power's Vogtle profits. "I don't believe this is too low to allow the company to attract the capital it needs to finish the plant, but it does allocate the cost away from customers and to the company," he explained.
According to Echols, the utility will see at least $700 million in reduced revenues due to this ROE shift. He added that the Southern Co. subsidiary still needs to attract nearly $1.4 billion in capital to complete the two units, and that he expects investors to "share in a substantial portion of the cost of finishing them."
"I don't think the company should continue to profit at the same levels from this recent delay," Echols said.
He did acknowledge, however, that Georgia Power was able to collect all of a guarantee payment to the Vogtle owners by Westinghouse parent Toshiba Corp. This stands in contrast with Vogtle's sister project in South Carolina, the abandoned Summer plant expansion, where its utility co-owners received 91.5% of their Toshiba guarantee.
Echols said the difference between Vogtle's 100% and Summer's 91.5% means $312 million in additional benefit for Georgians.
"The [Vogtle] owners deserve to have their efforts recognized," Echols said. "They achieved payment in full for that parent guarantee, but they achieved it for the customers' benefit."
Georgia Power has now been instructed to draw from its $1.7 billion guarantee and credit $75 to each of its 2.5 million customer accounts. That still leaves the utility with over $1.5 billion to spare from the Japanese conglomerate.
The project's new capital cost forecast is $7.3 billion, and Georgia Power retains the burden of proving the prudency of any costs above $5.68 billion. A cost cap is not being applied to the utility's spending.
'The most important decision'
The PSC decision marked another chapter in the Vogtle saga, with intervenors on both sides making arguments to sway commissioners just minutes before they cast their votes.
"Today's decision may or may not be the most important decision ever made by this body, but it could certainly be the most impactful depending on how history judges any decision that we make today," PSC Chairman Stan Wise said. "I'm certain that there is not a decision that we would make today that will be or would be universally accepted."
"But there is one prevailing truth, which everyone agrees: capital construction of nuclear generation is inherently risky," he continued. "And it comes as no surprise to anyone listening today. We knew it going in a decade ago."
That was why Congress and the U.S. Department of Energy established measures to encourage the development of nuclear power, Wise said, as no utility had undertaken such a project in over three decades.
"If the utilities are not incentivized, we as a society do not get the benefits of decades of reliable, economic, carbon-free energy that brings energy security and thousands of well-paying jobs — not to mention the furtherance of the industry as a whole," he said. "So now we all recognize the risk event has set in, and we're dealing with that today, and will in the future."