Georgia Power argues for ability to spend money on possible new nuclear plant

Georgia Power said in a June 29 brief filed at the Georgia Public Service Commission that it should be approved to spend money on advanced planning for a possible new nuclear power plant in Stewart County, Georgia.

This Southern Co. (NYSE: SO) subsidiary is already building two new nuclear units at its existing Vogtle plant. The June 29 brief was filed in a case opened early this year covering a review of the utility’s 2016 Integrated Resource Plan (IRP) and related matters. Georgia Power and the commission’s Public Interest Advocacy (PIA) staff recently worked out a stipulated agreement that resolves issues in the IRP case.

Said the Georgia Power brief: “Nuclear generation is a low variable cost, emissions-free, dispatchable, baseload resource and will play a pivotal role in allowing the Company to maintain diversity in its supply-side resources. In light of the value of nuclear generation, the Company has requested in this IRP that the Commission approve the expenditure of up to $174.5 million to investigate the option of pursuing new nuclear generation as a potential future base-load option at a site in Stewart County, Georgia. This work involves those actions that are necessary to seek and obtain a Combined Operating License (‘COL’) from the United States Nuclear Regulatory Commission (‘NRC’). 

“The only party to this proceeding that has filed testimony opposing the Company’s request is PIA Staff and, under the terms of the Stipulation, the Company and Staff have agreed that this is a policy decision for the Commission. While agreeing that new nuclear generation may be an economic generation resource at some point in the future, PIA Staff has asserted that the Company does not need to begin pursuing the option of new nuclear at this time but, instead, that the Company should wait until 2019 when it has more information on the costs of Plant Vogtle Units 3 and 4.

“As detailed by the Company and explained further below, delaying action until 2019 could place the Company in a position where it is unable to deploy nuclear in a timely manner should it be later identified as the most cost-effective resource for customers. Furthermore, the Company’s proposed actions will, at a reasonable cost, provide benefit to customers even if nuclear generation is not selected as a generation resource until sometime beyond 2019. Taking these actions now to preserve the option for timely deployment of nuclear generation proactively positions the Company to be able to select the resource that is in the best interest of all customers.

“The lead time needed to investigate, permit and construct a generation facility is a primary consideration when the Company determines the most cost-effective generation resource for customers. Generally speaking, the Company will select the most cost-effective resource to meet an identified capacity resource need, but that is only possible when the need date is compatible with the lead time for the identified generation resource. Where the lead time for a particular generation resource would not permit completion prior to the need date, such resource will not be available to be selected and the Company could be forced to select a less cost-effective generation resource.  

“Nuclear generation is a unique resource in many ways, including the fact that it has a lead time that is significantly longer than that of other generation resources. The Company currently estimates that nuclear generation has a 17-year lead time, which includes seven years needed to obtain approval of a COL. The work required during this initial seven year period includes detailed site evaluation, site and regional infrastructure planning, site design and preparation, preliminary resource evaluation, preliminary design and development of commercial scope of work, and finally, NRC licensing.

“As described in more detail below, there are a number of circumstances that could cause the need year for new generation to move forward in time to a point within the 17-year window.  In such a circumstance, nuclear generation would not be an available resource for customers should it be selected as the most cost-effective generation resource. 

“However, through the investment of approximately only 1.5% of the total projected cost of two nuclear units now, the Company would be able to reduce the lead time of new nuclear generation by 40%. More specifically, by investing the $174.5 million now, the Company can cut the lead time for nuclear generation by seven years (down to ten years), thus permitting nuclear generation to be considered on a more level playing field against other generation resource alternatives in terms of deployment time.

“While Staff has acknowledged that new nuclear generation may be needed as soon as 20 years from now, there are a number of circumstances that could pull forward the need for new nuclear generation to a point inside the projected 17-year lead time. For instance, in the event that new regulations are imposed on natural gas fracking, leading to a significant increase in natural gas prices, the need year for nuclear generation could be pulled forward significantly as projected natural gas generation life-cycle costs increase. Similarly, future environmental regulations could pull forward the need for nuclear generation, particularly in the event of any environmental regulations that require incremental retirements of a significant amount of the Company’s generation assets. In such instances, delaying these activities until 2019 may place the Company in a position where it is forced to select alternative, less cost-effective generation because it lacks the sufficient time to pursue nuclear generation.

“Outside of the need to ensure the availability of nuclear generation for timely deployment, there are other benefits to customers if the Company is authorized to take action at this time. First, by commencing work now the Company can capitalize on the existing pool of technical experts at both the Company and the NRC that were involved in the licensing of Plant Vogtle Units 3 & 4. Delaying action would create the potential for loss of such accumulated expertise. 

“Second, granting the Company’s request at this time would also make it likely that the Company would be able to reference the current AP 1000 Design Control Document (‘DCD’) Revision 19 if the AP 1000 design is ultimately selected for the COL. The current DCD expires on February 2021 and failure to submit the Combined Operating License Application (‘COLA’) before such date would risk forcing the Company to base its COLA on a revised DCD. The benefit of using the current DCD used to construct the Vogtle units is that the Company will already have experience with the design and construction requirements from its construction of Plant Vogtle Units 3 and 4 and can avoid many of the first-of-a-kind challenges encountered when constructing with a new design basis. Consistency in the licensing and design basis is beneficial so that the Company can fully leverage the lessons learned from the construction of Plant Vogtle Units 3 and 4. While an Early Site Permit (‘ESP’) is an option that permits an applicant to obtain approval for a potential nuclear reactor site, an ESP is not tied to a specific certified design and thus, would not mitigate the risk associated with the expiration of the current Westinghouse AP 1000 DCD and would also prolong the process, ultimately making it more costly for customers.

“Third, taking the steps now to preserve the option of new nuclear mitigates a number of future risks, including reduction in the Company’s overall nuclear generation mix due to the aging of the existing nuclear fleet and the uncertainty of a subsequent license renewal request to extend the operating license for Plant Hatch Unit 1, currently expiring in 2034, for an additional 20 years.

“PIA Staff recommended delaying a decision until 2019 when the final capital costs for Plant Vogtle Units 3 and 4 are known. However, while the Company agrees that the capital cost of new nuclear is an important component of the overall economics, many other factors can have an even greater influence on the overall economics of nuclear generation, including natural gas forecasts, load forecasts, environmental regulations (specifically as they relate to carbon emissions or natural gas fracking), potential impacts to other forms of baseload generation and changes in the projected cost of other resource options. For example, an increase in the price of natural gas forecasts over the 60-year life of the facility could have a much more significant impact on the timing of when nuclear is selected than modest changes in the capital cost. It is also important to remember that the Company is only asking for costs related to the development and application for a COL and that those projections are based on the Company’s licensing experience for Plant Vogtle Units 3 and 4, for which the cost is known.

“Staff also asserts that the lack of co-owner involvement in the Company’s investigation of new nuclear at the Stewart County site suggests a lack of support for new nuclear generation. In making its assertion, Staff fails to recognize the structure of the agreement between the Vogtle co-owners required co-owner consent to allow the preliminary site investigation and licensing work for Plant Vogtle Units 3 and 4. At the time the Vogtle co-owners provided their consent, they also secured, and later exercised, options giving them the right to participate in the project.  No such consent requirement exists in the case of the land purchased in Stewart County.  Moreover, it is worth noting that the Company both acquired the property and applied for the licenses for both Plant Hatch Units 1 and 2 and the Plant Vogtle Units 1 and 2 without co-owners. The absence of co-owner involvement in the preliminary investigation of the Stewart County land should not be interpreted as evidence of lack of support for new nuclear generation.   

“Staff implied during its cross examination of Company witnesses that a smaller subset of the Company’s proposed actions could be considered as a possible solution at a significantly reduced cost. While it is certainly true that less cost would be incurred in such a scenario, the benefit of such actions would be greatly reduced as compared with the Company’s proposed course of action. Specifically, such a limited scope of action would not allow the Company to submit the COLA in a timely manner to allow the Company to reference the current DCD. Furthermore, such limited actions would not allow the Company to fully leverage the resource knowledge of the NRC resources and Company personnel with prior experience who would be useful in developing the COLA.

“In Docket No. 29849, the Company submitted a legal opinion by former Georgia Supreme Court Justice Norman Fletcher regarding the prudence standard under the IRP Act. The Fletcher Expert Report notes that Senate Bill 31 does not provide for the treatment of financing costs collected on construction costs that are ‘disallowed’ by the Commission. Staff interprets this report as stating that it is the Company’s position that the Commission lacks authority to disallow increased financing costs related to a delay of construction on a nuclear plant even if those costs were found by the Commission to be imprudently incurred. Therefore, Staff argues that the Company’s interpretation creates uncertainty and adds additional risk to the nuclear generation profile and must be considered in assessing the nuclear option to model the cost of new nuclear properly.

“However, as the Company’s counsel stated at the rebuttal hearing, the Company’s position is that ‘this Commission has the ability to disallow costs that it finds to be imprudent, period.’ Furthermore, Staff’s position appears to suggest that some amount of imprudent costs should be assumed for purposes of modeling. However, that approach has never been taken by the Company or required by the Commission and is not appropriate for modeling.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.