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Georgia regulators approve cost recovery, extension for delayed Vogtle reactors

Georgia regulators have approved a cost recovery settlement for two delayed reactors at the Alvin W. Vogtle Nuclear Plant that deems "prudent" $3.3 billion of capital costs and incentivizes Georgia Power Co. to finish construction by 2021, when eligibility for federal production tax credits will expire.

The Georgia Public Service Commission unanimously approved the agreement on Dec. 20 in its cost review of the 2,200-MW expansion project at the Vogtle nuclear plant, which is operated by Southern Co. subsidiary Georgia Power near Waynesboro, Ga. Units 3 and 4 at Vogtle are the first new nuclear reactors to be built in the U.S. in the last three decades.

Under the settlement, $3.3 billion in construction costs for the project incurred through the end of 2015 are deemed prudent. Georgia Power, which owns 45.7% of Vogtle, has agreed to an in-service capital cost forecast for its share of $5.680 billion, an increase of $1.262 billion from the original $4.418 billion approved by regulators in 2009. That revised capital cost for Georgia Power includes a $240 million contingency above its current forecast of $5.440 billion in capital costs.

Commission Chairman Chuck Eaton said in a news release that the agreement will give ratepayers "immediate relief" by reducing construction costs over the next four years by approximately $325 million. The cost reductions will come from reducing Georgia Power's allowed ROE associated with its nuclear construction cost recovery tariff from 10.95% to 10%, and by deferring the cash recovery of other related financing costs. In total, the ROE reduction on project financing costs will reduce shareholder earnings by approximately $115 million through 2020.

Commissioner Stan Wise said the settlement will also further reduce Georgia Power's allowed ROE should construction costs exceed an approved increase of $5.68 billion or if the operations of Units 3 and 4 are delayed beyond Dec. 31, 2020. That is the same deadline for eligibility for the plant to receive federal production tax credits of $522 million per reactor.

The first of the new reactors was originally scheduled to come online in April 2016, but construction delays have pushed in-service dates to June 2019 and June 2020. The settlement was struck Oct. 20, with regulatory staff as part of a review of Vogtle's construction costs and schedule started in February over related litigation settlement between Georgia Power and contractors.

John Kraft, a spokesman with Georgia Power, said in a statement that the decision will protect customers while securing Georgia's energy future. The agreement will keep the project's overall projected rate impact to customers at 6% to 8%, he added.

The Southern Alliance for Clean Energy, or SACE, objected to the settlement, saying that it amounts to a waiver of any future review of $1.552 billion in cost overruns incurred by Georgia Power during the 39-month delay and a "de facto extension" of the current 39-month delay by another six months.

"They've spent about $3.3 billion to date in capital costs on the project," said Sara Barczak, a program director with SACE, in an interview. "So you have essentially given them a $2 billion pre-approval for capital costs that were yet to be spent and saying it is prudent and reasonable now."

Robert Baker, an attorney representing SACE and a former Georgia PSC commissioner, said in a news release that the commission's approval, after only one hearing and limited staff review, "sets a dangerous precedent that drastically undermines the chances that a full prudency review for both units will ever be done."