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Vogtle nuke upgraded by Ga. regulatory staff to 'slightly economic'

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Vogtle nuke upgraded by Ga. regulatory staff to 'slightly economic'

SNL Image

Unit 3 of the Vogtle nuclear plant expansion in an April 2018 photo.
Source: Georgia Power Co.

Georgia regulatory staffers on June 6 upgraded their overall outlook on the Vogtle nuclear plant expansion but warned the project could again be considered uneconomic if it falls behind schedule by just two months.

Staying on track could prove challenging to lead owner Georgia Power Co., however, with state analysts recommending that the utility hire more workers and boost productivity metrics to head off a possible delay.

Vogtle's prospects improved after several developments, according to Georgia Public Service Commission staff and outside consultants from the firm J. Kennedy and Associates: the granting of another loan from the U.S. Department of Energy, the receipt of a key payment from Toshiba Corp., the passage of federal tax reform and the extension of federal production tax credits.

These drivers, along with some others, raised the economic benefit of building two reactors at Vogtle from negative $1.6 billion in the first half of 2017 to $100 million in the second half of 2017, the most recent reporting period.

"Staff's cost to complete economic analysis indicates it is slightly economic to continue the Project if [Georgia Power] meets its current cost and [commercial operation date] forecasts," a PSC document said. "However, even a minor delay of a few months could result in the Project becoming uneconomic to continue. This is the result of the high cost being incurred by the Company each month for the Project."

Georgia Power, which manages the Vogtle expansion alongside corporate affiliate Southern Nuclear Operating Co., spent $4.96 billion on the venture through the second half of 2017, with $5.4 billion in projected remaining costs before the new units come online in November 2021 and November 2022, respectively.

Vogtle is years behind schedule and billions of dollars over budget, and became the only active new nuclear construction project in the country after a sister venture in South Carolina was abandoned due to similar cost overruns and timetable delays.

Georgia Power is asking commissioners to grant cost recovery of $448 million in Vogtle expenses from the second half of 2017, and PSC staffers recommended that amount be approved. They added, however, that any portion of the $448 million could later be disallowed from recovery.

Staff estimated that Georgia Power will end up recovering at least $3.9 billion before the reactors are finished. But capital costs incurred in 2016 and beyond have not yet been deemed prudent, and thus might not be eligible for recovery, the analysts added. That eventual amount will be determined in PSC hearings after the units reach commercial operation.

'Aggressive schedule'

Going forward, any holdups beyond two months "would result in the Project being uneconomic to continue," staff wrote. Ratepayers "would be harmed further if significant delays were to occur."

"If the Project had been completed without the significant delays and costs overruns, the cost to complete the Project would most likely have continually declined from one [reporting period] to the next," they said, "based on construction progress alone, and correspondingly, the expected benefit on a cost-to-complete economic evaluation basis would most likely have continually increased."

As of April 30, the total project was reported to be 67.5% complete, staff wrote. Georgia Power recently decided to speed up construction in an effort to have the reactors come online in April 2021 and April 2022, over half a year ahead of their current finish dates.

"The Company recognizes that this is an aggressive schedule," staff wrote. "The Company's philosophy for adopting such an aggressive schedule is to provide the impetus to push work harder and earlier in order to preserve eight months of schedule contingency."

PSC analysts, however, are not confident that new timetable can be achieved, unless productivity is increased at least 40% between now and October. The Vogtle expansion is currently earning 85,000 to 100,000 weekly productivity hours, which they say will need to be boosted to 140,000 by the fall.

According to staff, that will require the hiring of 400 more electricians and 700 more pipefitters, especially as the kind of construction now being performed "typically involves a learning curve before achieving a high level of productivity."

Georgia Power and Southern Nuclear, both Southern Co. subsidiaries, had not completed an integrated project schedule as of April, a complaint registered by PSC analysts in the last round of Vogtle hearings. They did acknowledge, however, that "visibility of the [schedule] across organizations has greatly improved" after the companies took the reins from Westinghouse Electric Co. LLC, the original project manager that went bankrupt in March 2017 and prompted concerns about whether Vogtle could be finished.

Staff also recognized that unlike prior reporting periods in which project checkpoints were delayed month after month, Vogtle in the current period "has achieved its major milestones."

Regulators are scheduled to hold hearings on staff testimony June 27-28, and make a decision on the most recent Vogtle spending Aug. 21. (Georgia PSC Docket No. 29849)

Vogtle is co-owned by Georgia Power, Oglethorpe Power Corp., the Municipal Electric Authority of Georgia and Dalton Utilities.