The five members of the Georgia Public Service Commission voted unanimously on December 20 to approve a settlement (Docket No. 29849) with Georgia Power that will save the utility’s 2.5 million customers about $325 million over the next four years for cost overruns at the much-delayed Nuclear Plant Vogtle Construction Project.
The nuclear power plant expansion currently is at least three years behind schedule and $3 billion over budget, according to a December 21 report by Engineering News Record.
Indeed, estimates for what was originally supposed to be a $14 billion project are up to between $16 billion and $22 billion, depending upon the source.
Terms of the Settlement
Under the terms of the new settlement, current customers will see a reduction of approximately $325 million in rates through 2020, as a result of a cut in Georgia Power’s allowed return on equity (ROE) associated with its Nuclear Construction Cost Recovery tariff; as well as the deferral of the cash recovery of certain other related financing costs.
The Commission approved a zero ($0) increase for 2017 in the NCCR tariff. As a condition of the agreement, Georgia Power withdrew a request to increase the surcharge next year – which usually adds about $80 annually to residential customers’ bills.
The impact of reducing the allowed ROE on project financing costs reduces shareholder earnings by about $115 million over the same time period. If the project is not in commercial operation by December 31, 2020, additional reductions in ROE are provided for in the settlement agreement.
The PSC also approved a motion by Commission Vice Chair Lauren McDonald to require Georgia Power to show the estimated amount customers will save in a message box on future bills, beginning in the first quarter of 2017. This order will remain in effect as long as the NCCR tariff is in place.
Commissioner Stan Wise, who will become the Commission Chair in 2017, said, “This agreement is an extraordinary balance of interests among all the parties. It delivers $325 million in savings to current customers. The agreement also provides significant back-end reductions through reductions in the company’s ROE, should construction costs exceed the $5.68 billion or the project is delayed beyond December 31, 2020.”
“Today’s vote means savings for consumers now and in the future. It also gives the company powerful incentives to make sure this project stays on schedule,” said Commission Vice-Chair Lauren McDonald. “Plant Vogtle is an important economic engine for this state to keep rates low and affordable.”
Intervenors Inveigh Against Plan
However, advocates for Georgia’s ratepayers who intervened in the case were not so sure. According to a December 20 report by The Atlanta Journal-Constitution, critics said that the PSC had accepted a deal that provided scant up-front savings to customers compared to the project’s billions of dollars in cost overruns they will eventually have to absorb.
The agreement “creates the largest revenue requirement imposed on Georgia Power ratepayers based on the least amount of public review by the commission in its history,” said the Southern Alliance for Clean Energy, in a filing.
The group opined that the proposed deal “short-circuited” the agency’s chances to disallow almost $1.6 billion for Georgia Power’s share of the cost overruns under a previously planned “prudency hearing” that would have been held after the project was finished.
In addition, the group said the “de facto” prudency hearing effectively gives the go-ahead for customers eventually to be billed $8 billion for Georgia Power’s share of the project, rather than the currently certified $6.1 billion.
Coming down even harder on the plan, The Concerned Ratepayers of Georgia told the Commission in its filing, “The Stipulation process is a complete “sell-out” for all Georgia Power customers, and should be rejected.”
In the end, when the project is fully operational, Units Three and Four now under construction will produce 2,200 MW of electricity – enough to power about 500,000 homes. Plant Vogtle Units One and Two have been in commercial operation since 1987 and 1989, respectively.
Meanwhile, customers’ future rates still are expected to go up once the Vogtle expansion is completed. They just won’t go up as as much. In the hearing on the settlement earlier this month, Commissioner Stan Wise noted that the Vogtle project is now expected to result in a 6 percent to 8 percent increase in customers’ rates once the project is done – well below the 12 percent increase that was originally projected.
About 4.5 percent of that increase is already included in customers’ bills through the financing surcharges, according to Georgia Power.
The agreement doesn’t give “either party everything it wanted (but) is in the public interest and provides (Georgia Power) a clear way forward to complete construction,” the company and PSC said in a joint filing, according to the report of the Atlanta Journal-Constitution..
Georgia Power owns 45.7 per cent of Plant Vogtle with its partners, Oglethorpe Power Corporation, Municipal Electric Authority of Georgia, and the City of Dalton Utilities.