Schedule delays at Vogtle have not affected ratepayer impact, utility says

Schedule delays on the two new nuclear units being built by Southern (NYSE:SO) utility Georgia Power and its partners have not increased the impact on ratepayers, company officials said in June 2 testimony before the Georgia Public Service Commission.

The purpose of the testimony was to support the 12th Vogtle Construction Monitoring (VCM) Report and to provide Georgia Power’s justification of why the PSC should verify and approve the company’s “actual expenditures” invested in the construction of Vogtle Units 3 and 4.

The three officials who testified include Georgia Power’s Director of Resource Policy and Planning Alison R. Chiock, Nuclear Development Director David J. Clem and Southern Nuclear Operating Vice President of Nuclear Development Vogtle 3 and 4, David L. McKinney. Southern Nuclear is non-utility subsidiary of Southern.

The officials said that Georgia Power still expects that electric rates will increase only 6% to 8% due to construction of the new units, which is actually less than originally predicted a few years ago.

The 12th Vogtle Construction Monitoring Report covers the period between July 1, 2014, and Dec. 31, 2014.

Georgia Power had invested $2.96bn in cumulative construction and capital costs in the facility through the close of the reporting period.

The project has “faced numerous challenges to the execution of the schedule related to engineering design, design changes, major equipment fabrication and deliveries, module fabrication and deliveries, and field construction performance,” according to the company testimony.

In January 2015, the contractor team reported that these schedule challenges could not be overcome and submitted a fully Integrated Project Schedule (IPS) that forecasts an extension to fuel load and substantial completion dates by 18 months. 

Delays connected with shield building installation and inside containment installation are among the primary reasons, according to the company testimony.

The company’s forecast total construction and capital costs are now $5.045bn, which is $246m higher than the forecast in the 11th VCM Report. This is Georgia Power’s portion of the total owner’s cost. Georgia Power is the largest shareholder in the new Vogtle units. Other owners include Oglethorpe Power; MEAG Power, and Dalton Utilities.

Delaying the commercial operation date does not change the expected customer rate impact, the Southern subsidiary said. The company continues to predict a “peak rate impact” of 6% to 8%. This is primarily due to fuel savings, lower-cost financing, and other benefits the company has proactively pursued like Department of Energy (DOE) loan guarantees, and production tax credits.

Units expected online in 2019 and 2020; progress cited on transmission 

This forecast is based on the current target in-service dates of June 2019 and June 2020 for Units 3 and 4, respectively. 

The utility and its chief contractors, Chicago Bridge & Iron (NYSE:CBI) and Westinghouse Electric continue to be engaged in a dispute over “cost risks” associated with certain contract issues.

Despite the delays and contractor squabble, the new Vogtle nuclear units continue to be a good deal for ratepayers, the utility said.

“Moreover, evolving and increasingly stringent federal environmental regulations on the use of fossil fuels add to the value of a non-fossil source of generation that is dispatchable throughout the 24 hours of the day in all weather conditions and throughout the year,” Southern said in the filing.

The Southern utility also offered a defense of the cost and scope of the nuclear project.

“The facility is one of the largest and most capital-intensive infrastructure projects currently underway in the United States, and it represents over 60 years or more of investment in Georgia’s critical energy infrastructure,” according to the utility.   

“The facility is creating over 5,000 jobs on the Vogtle site today as well as many indirect jobs,” the utility said, “the facility has increased the tax base of Burke County as well as the state of Georgia and will continue to do so by creating over 800 full-time, highly skilled and highly paid careers.”

A group called Nuclear Watch South recently petitioned the Georgia PSC seeking to intervene in the case surrounding expenses for the two new reactors. The case involves Docket No. 29849.

In other Vogtle-related news, a first quarter video update on the project said that much progress is being made on electric transmission upgrades.

More than 300 transmission construction workers have been working on the project. That includes a complete rebuild of the Vogtle Units 1 and 2 switchyard, the utility said in the video. Eight miles of new transmission line has been built as of the end of 1Q15 with about 47 miles yet to be built.

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.