Fluor Out, Bechtel In at Georgia Power's Troubled Nuclear Project
The owner has revised its schedule for when the project Vogtle nuclear units will be online
Georgia Power wants five more years to complete its Plant Vogtle nuclear expansion project and has replaced Fluor Corp. with Bechtel to oversee construction. The utility estimates the cost to complete the project at $9.45 billion, according to its Aug. 31 filing to the Georgia Public Service Commission. That would put the total for the two-reactor project at $19 billion.
"Completing the Vogtle 3 & 4 expansion will enable us to continue delivering clean, safe, affordable and reliable energy to millions of Georgians, both today and in the future," Paul Bowers, CEO of Georgia Power, said in a statement. The utility’s schedule estimate extends, by 29 months, the current commercial operation dates of Units 3 and 4 to Nov. 2021 and Nov. 2022.
“This is a critically important project for the nation and we’re honored to be chosen,” Barbara Rusinko, president of Bechtel’s government services and commercial nuclear power business, said in a statement. Bechtel added that it “will assume responsibility for a broad range of activities including day-to-day construction through completion of the project under the management of Southern Nuclear.”
Fluor, which has taken some financial hits recently—including from the cancellation of the V.C. Summer nuclear project in South Carolina—had hoped to continue in its role as primary construction manager, according to its statement.
“We are disappointed in Southern Company’s decision to move forward with another construction company for the nuclear power units at Plant Vogtle,” Fluor’s statement read. “We will work with Southern Company to support an orderly project transition.”
Fluor had been brought in to the two disastrously over-budget and late nuclear power projects in late 2016 by Westinghouse, the prime contractor, which filed for bankruptcy protection from creditors earlier this year. But the hoped-for improvements in progress failed to materialize.
Westinghouse continues to work on the Vogtle project under an amended agreement.
Under the terms of Fluor's contract, the company had no completion or cost risk. It isn't clear what risks if any are in Bechtel's contract and the company declined to discuss them, referring questions to Georgia Power.
Steve Kuczynski, CEO of Southern Nuclear, told ENR that the utility decided that Bechtel—which has been managing Vogtle’s nuclear island construction activities via a staff of about 220—provides the “best complete package” as prime constructor. Bechtel will transition as the “sole, main contractor” over “the next number of months,” Kuczynski added.
““We will disperse the leadership team [working on nuclear island] across the project and bring in a team to complete the work,” says Ty Troutman, Bechtel’s project manager. That team will initially consist of Bechtel’s existing resources, additional resources from throughout the company and resources from Southern Company, Troutman told ENR. He added: “We will not be rolling over everyone that’s there.”
“We're excited about the project,” he commented. “I think it's important for the country, it’s important for the nuclear business and it's important for the region.”
Construction productivity has increased notably over the last three or four months, Kuczynski added, noting to ENR: “That’s given us confidence that we can meet this revised cost and schedule that we put together through our estimate-to-complete activities.” Since Southern Nuclear took over project management in July, the company has focused on eliminating management deficiencies that it saw under Westinghouse’s leadership.
“We’re focused on construction activities, whereas Westinghouse, due to contractual obligations, may have focused a little differently (and) that ended up not being the most efficient,” Kuczynski says. “We are closing the gaps that were evident to us but we did not have the ability to close under the EPC.”
Big Increase in Georgia Power's 'Investment'
Completing the project will increase Georgia Power’s capital cost “investment,” from the $4.3 billion the utility has incurred through June 2017, to an estimated $8.8 billion, the company stated. Georgia Power owns 45.7% of the project, with the remainder split between co-owners Oglethorpe Power (30%), MEAG Power (22.7%) and Dalton Utilities (1.6%). Georgia Power reported “the total estimated capital cost forecast for 100% of the project” at approximately $19 billion.
Despite the high cost of completing the project, the utility stated: “Based on all factors considered, completing both units represents the most economic choice for customers and preserves the benefits of carbon-free, baseload generation.” In its Aug. 31 filing to the PSC, the company included cost, schedule and risk analyses performed by numerous firms, including Bechtel, Black & Veatch and Pegasus.
The utility noted that it evaluated various alternatives, including abandoning one or both units or converting the units to gas-fired generation; as well as project risks such as future payments from Toshiba (now undergoing bankruptcy proceedings); availability of production tax credits and extension of loan guarantees from the Dept. of Energy.
A major change since Westinghouse’s bankruptcy is the shift in risk, Georgia Power noted in its filing of the 17th Vogtle Construction Monitoring (VCM) report. Whereas Westinghouse previously bore financial responsibility for cost overruns—the main factor for its bankruptcy—ratepayers now bear the future risk.
Georgia Power stated. “The risks that WEC bore have been shifted to Georgians,” Georgia Power stated in the VCM’s executive summary. “Nevertheless, continuing the project is the better course and in the best interests of Georgia and its citizens.”
Utility: Ratepayers Must Foot Nuclear Project's Costs
In its recommendation to the PSC to proceed with construction, Georgia Power noted a significant caveat—the ability to charge costs to ratepayers. Specifically, while the PSC does not regulate the rates of Oglethorpe and MEAG, those utilities don’t want to face the prospects of passing along costs to their customers that have been deemed unreasonable or imprudent for Georgia Power customers to bear.
“Georgia Power and the non-Georgia Power Owners have agreed as a specific condition to going forward, that any of the Owners have the right to abandon the Project and not go forward if the revised cost estimate or the revised construction schedule is not approved by the Commission, or if there is a determination by the GPSC during the VCM 17 Report review, or at any time thereafter, that any of Georgia Power’s share of the total Project investment or Georgia Power’s associated financing costs … will not be recovered in Georgia Power’s retail rates because they are deemed by the Commission to be unreasonable or imprudent or for any other reason, or that such investment or associated financing costs will be presumed to be unreasonable or imprudent or unrecoverable.”
The utility added: “The reason for this condition is simple: the non-Georgia Power owners are not willing to pass on to their customers costs that the Commission determined were unreasonable or imprudent to pass on to Georgia Power’s customers. In such an event, Georgia Power and the non-Georgia Power owners could not continue to support a project that would lead to that result.”
Essentially, “We want to ensure that prudently accrued costs are collectible,” Georgia Power’s Bowers told ENR. “We’re requesting a change in costs and an increase in schedule and asking for the commission to determine that reasonable.” If costs escalate further by 5% or more, Bowers says the utility would have to file for approval from the PSC.
However, he said, “Let me make this clear: We do not anticipate that. We have done an extensive review of the estimate to complete, and looking at cost and schedule, to ensure that what we present in front of the Commission today is reasonable. And we have a high degree of confidence we’ll be able to execute.”
Added Kuczynski: “We fully believe this is a solid cost and schedule, and our goal is to match our execution to meet that new cost and schedule timeline.”