Robert BakerThe construction cost of Plant Vogtle Units 3 and 4 (“Project”) has increased from $14 billion to $15.6 billion and more cost increases are coming. Georgia Power Company (“Company” or “GPC”) filed its Eighth Semi-Annual Construction Monitoring Report (“8th CMR”) last week with the Georgia Public Service Commission (“PSC”), and there were several major disclosures buried in the report.

 

Tucked away in the 8th CMR were several significant facts that the Company didn’t emphasize. First, Georgia Power lowered by $1 billion its “value to customers” projection from its last report filed 6 months ago. Second, while the Company is asking the PSC to increase the certified capital cost of the Project by $381 million, its own numbers scattered throughout the 8th CMR, indicate their share of the total Project costs have increased by $737 million. Third, the Company recognizes the Project is 18 months behind schedule. Finally, what isn’t mentioned, but is very important, is any claim or assertion that module fabrication has begun again at the Project site. Ratepayers should be very concerned considering all of these factors.

The newspaper reports last week focused on the Vogtle construction project being over budget and behind schedule, yet they didn’t report on some other major disclosures that were less obvious to detect. Georgia Power has consistently touted the long-term benefits of building the new nuclear units and asserted that customers would receive $5 billion worth of benefits over the life of the project. The $5 billion number itself isn’t important, because it is based on regulatory and accounting smoke and mirrors. What environmental and climate change regulations might be passed in the next 60 years? Who knows. How much will fuel cost in 2057 and what will demand be in 2069? (See p. 45) But what is important in the 8th CMR is the reduction of the $5 billion figure to $4 billion, because the Company recognizes the cost overruns and delays have eroded their estimate of value by $1 billion. (p. 7)

The “official” cost of the Vogtle Units 3 and 4 construction project is $14 billion, and Georgia Power’s share of the project costs is currently $6.113 billion. The certified capital construction cost and the total facility investments are two different, but very important numbers. Georgia Power Company is asking the PSC to officially increase their share of the certified capital construction cost of the Vogtle Project by $381 million, which would increase the total facility investment cost from $6.113 billion to $6.494 billion (p. 4), yet the most important number is the total amount spent, not just a portion of the investment. The Company repeatedly states that the total facility investment cost of the Project has increased by $737 million (p. 35, see also Tables 1.1, 1.1a and 8.1), which means the total cost of Georgia Power’s share of the project is $6.850 billion not $6.494 billion, and the total project cost has increased from $14 billion to $15.6 billion.

As of January 2013, the Company’s official position regarding the commercial operation dates for Units 3 and 4 were April 2016 and April 2017 for the respective units, although they did concede in the 7th CMR they were moving their unofficial estimates to November 2016 and November 2017. The Company now assumes the approximate commercial operation dates for Units 3 and 4 are the fourth quarter of 2017 and 2018 respectively. (p. 30) Technically, they aren’t asking for a change in the official commercial operation dates for the units, but in reality they are acknowledging the April 2016 and April 2017 dates can’t be met. Construction delays translate into higher costs that are passed along to ratepayers: the longer the delays, the higher the costs. Construction delays must be addressed now.

One of the greatest problems plaguing the Vogtle construction project has been the fabrication of the sub-modules and modules. All fabrication work stopped in August 2012, and there is no indication in the 8th CMR that work has resumed. Dr. William R. Jacobs, the Project Independent Monitor testified in the last review proceeding that a critical sub-module had been completed in April 2012, but had “not been shipped to the Vogtle site due to paperwork deficiencies.” That eight month delay is now an 11 month delay. When asked how long the paperwork problem had existed Dr. Jacobs said, “since day one.”

Paperwork problems with module fabrication should not take 11 months or even eight or four months to resolve, especially now almost three years into the construction schedule. Allowing this type of construction problem to fester for so long is inexcusable and means higher costs to all Georgia Power, EMC and municipal customers.

The $14 billion project is now a $15.6 billion project, and probably will end up being an $18 billion project. Several more years of heavy construction remain before the new units are completed in 2018 or 2019. Unless consumers hold the utility company owners accountable now for construction delays and budget overruns, they are guaranteed to get an $18 billion bill when the project is complete.

Bobby Baker is a former Georgia Public Service Commissioner and currently has a legal practice that focuses is on providing strategic and regulatory advice to private companies and local governments, with an emphasis on energy, transportation and technology issues. This email address is being protected from spambots. You need JavaScript enabled to view it. .