Georgia Power Takes on More Risk For Future Vogtle Cost Increases
Georgia Power has agreed to shoulder greater financial responsibility for future cost increases at the under-construction Vogtle nuclear plant expansion. The agreement came Sept. 26 after Oglethorpe Power Co., one of the owners of the $27-billion project, demanded a cap on future costs as a condition of its approval for continuing construction.
"We are all pleased to have reached an agreement and to move forward with the construction of Vogtle Units 3 and 4," the four owners said in a joint statement. "While there have been and will be challenges throughout this process, we remain committed to a constructive relationship with each other and are focused on reducing project risk and fulfilling our commitment to our member-consumers.”
Georgia Power—a division of Southern Co.—owns 45.7% of the project, while Oglethorpe’s stake is 30%. The Municipal Electric Authority of Georgia (MEAG) owns 22.7% of the project, with the remaining 1.6% share held by Dalton Utilities. Only Oglethorpe Power Co. (OPC) had held out for a cap on costs. MEAG and Dalton had approved continuing construction without new conditions.
The recent owner votes on whether to proceed with construction came after Georgia Power announced in August that project costs had increased $2.3 billion. Concerns over further cost increases for ratepayers of OPC and MEAG—customer owned electric cooperatives—led Georgia state legislators on Sept. 19 to write a letter to project owners urging a cost cap.
With roughly four years of construction remaining, OPC sought to “hold Southern Company accountable for its newly revised budget and let their owners be responsible for any additional amounts beyond this level.," according to a statement issued by OPC on Sept. 24. OPC estimates its share of project costs has grown from an initial estimated $4.2 billion to roughly $7.25 billion.
The agreement announced Sept. 26 puts an incrementally greater financial burden on Georgia Power for future cost increases.
Using the estimated cost at completion included in the August 2018 Vogtle Construction Monitoring (VCM) report as a baseline, the new agreement enacts a sliding scale of added costs for Georgia Power should the project have future cost increases of more than $800 million.
According to Southern Co.’s Sept. 26 8-K filing, if costs increase by between $800 million and $1.6 billion, Georgia Power will see its financial responsibility rise to 55.7% of construction costs. Added costs of between $1.6 billion and $2.1 billion would raise Georgia Power’s responsibility to 65.7%.
If the current EAC jumps by more $2.1 billion, Georgia Power will offer to take on 100% of these additional costs. In this situation, Southern’s 8-K states: “Each of the other Vogtle owners would have a one-time option to tender a portion of its ownership interest to Georgia Power in exchange for Georgia Power’s agreement to pay 100% of such Vogtle Owner’s remaining share of construction costs.”
Additionally, the filing states: “In this event, Georgia Power would have the option of canceling the project in lieu of purchasing a portion of the ownership interest of any other Vogtle Owner.”
The agreement effectively eliminates any future votes by project owners over whether or not to continue construction.
The Southern Alliance for Clean Energy quickly weighed in on the decision. “We're very concerned about today's announcement because it's clear the Plant Vogtle nuclear project is in serious trouble if this much arm twisting is necessary to keep all four partners at the table,” stated Stephen Smith, SACE executive director.