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Georgia Power to finish two nuclear units after PSC vote

Georgia Power will complete two partly finished nuclear reactors at its Vogtle plant in Waynesboro after receiving state regulatory approval Thursday to spend billions more than planned on the delayed project.

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The Georgia Public Service Commission Thursday morning unanimously approved a revised cost and schedule for the project that would bring the units online in 2020 and 2021, four years later than initially scheduled, but curb profits the company could collect.

The company immediately said it would accept the PSC conditions and complete the two nuclear units, which are the only reactors under construction in the US. "The Georgia Public Service Commission has shown leadership in making this complex and difficult decision," Georgia Power CEO Paul Bowers said in a statement.

The fate of the units had been in limbo since the bankruptcy filing in March of main contractor Westinghouse, which had provided a fixed-price contract for the reactors, but faltered under mounting delays and cost overruns.



The PSC ignored the recommendations of both the public interest advocacy staff, which represents ratepayers, and its own advisory staff, which recommended that many costs be shifted from ratepayers to company shareholders.

The PSC, on a motion by Commissioner Tim Echols, reduced the profits Georgia Power could collect in addition to costs by 25% starting in 2020, but permitted the company to fold some costs into rates earlier than previously agreed and with a higher profit rate.

Commissioner Lauren McDonald said the reduction in profits would only reduce returns to the company under the state's nuclear cost recovery provisions by $100 million, and the earlier recovery of capital costs in the Echols motion would offset half or more of that reduction. McDonald proposed cutting Georgia Power profits twice as much, but the motion failed for lack of a second. He voted for the motion, however, saying he had "done his best."

Georgia Power said the changes the PSC approved Thursday would cost its shareholders about $750 million through 2022, and the company could see further costs it cannot recover from ratepayers should the schedule slip beyond the approved dates.

Opponents said the approval fails to protect ratepayers and amounts to a reward for what they said was Georgia Power's mismanagement of the project.

"We agree that Georgia Power got a bad deal when Westinghouse filed for bankruptcy, but it's not a bad deal that should be passed on to ratepayers," said Erin Glynn of the group Nuclear Watch South, which opposes new nuclear projects in the region, during the PSC meeting.

The motion the PSC approved would reduce the amount of return Georgia Power can recover from ratepayers above costs to 8.3%, from a statutory level of 10%, effective January 1, 2020. The rate would fall further a year later to either 5.3% or the company's cost for long-term debt, whichever is lower.

The reduced profits were slightly earlier and deeper than had been agreed under a stipulation resolving previous delays and overruns, which reduced the profit to 7% January 1, 2021.

The reduction in the return on equity that Georgia Power can collect "may amount to a minor reduction in company profit," the Southern Alliance for Clean Energy said in a statement.

The nuclear industry, however, welcomed the move as an important shot in the arm for an energy source that has seen plants int he US shut for economic reasons and the cancellation of the similar project to add two Westinghouse reactors at South Carolina Electric & Gas' Summer station in July.

Maria Korsnick, the president and CEO of the Nuclear Energy Institute, said "demonstrating we can build and complete new nuclear plants here in America will help us regain our leadership in a technology we invented." The US is seeking to export nuclear reactors, likely Westinghouse AP1000 units of the type being built at Vogtle, to countries including India and Saudi Arabia.

The PSC proceeding was held to determine whether $542 million in expenditures on the project in the first half of the year should be approved by the PSC for potential future recovery. The PSC approved those costs for potential future recovery, rejecting the recommendation of PSC staff that only about $45 million should be approved.

But Georgia Power also has asked the PSC to approve a revised $12.1 billion cost estimate for its share of the project, a delayed schedule for completion and a revised project structure in which Westinghouse is no longer the main contractor.

Management of the project would rest with Southern Nuclear Operating Co. Southern Nuclear, like Georgia Power, is a subsidiary of Southern Company.

The PSC approved those changes.

Georgia Power is the 45.7% owner of the Vogtle expansion. Three public power companies not regulated by the PSC hold the remaining equity.

Delays and cost overruns on the Vogtle project and the effort to add two units at SCE&G's Summer station in Jenkinsville, South Carolina, pushed Westinghouse, which had provided a fixed-price contract for both projects, into bankruptcy reorganization in March.

SCE&G and co-owner Santee Cooper elected to abandon the project after spending about $9 billion, saying the risks from completing them without the guarantees were too great.

Under the newly approved schedule, the first new Vogtle unit would enter service in November 2020, with the second one to follow a year later, a delay of more than three years. The costs, not including financing for the project, would total $9.45 billion, it said.

--William Freebairn, william.freebairn@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com